Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Competition for-the-market


Published on

This presentation by Chris Pike, OECD Competition Division, was made during the discussion “Competition for-the-market” held at the 18th meeting of the OECD Global Forum on Competition on 6 December 2019. More papers and presentations on the topic can be found at

  • I purchased your e-book, How to Reverse Diabetes. This is really an amazing life-saving book, it's a blessing beyond words. I've downloaded your program because my dad has been suffering from diabetes for a very long time but now, thanks to your help, his blood sugar level is well within normal range and all his symptoms are gone. I cannot explain in words how much this book has meant to me and my family. I just want to let you know that your program has totally changed my life; you truly are a blessing for humanity. People need to hear your message because it can save many many people’s lives. The world needs more people like you. From the bottom of my heart, thank you thank you thank you! ◆◆◆
    Are you sure you want to  Yes  No
    Your message goes here
  • Be the first to like this

Competition for-the-market

  1. 1. COMPETITION FOR-THE-MARKET Chris Pike Competition Expert, OECD Global Forum on Competition Paris 6 December 2019
  2. 2. Competition for-the-market: When products have characteristics that lead firms to compete to be the supplier of a whole market of products or services, rather than for market share. 1. Natural monopoly – Based on the productive technology generating large economies of scale 2. Publicly funded monopoly – Where the good would otherwise not be provided, and the government as sole purchaser selects to purchase exclusively 3. Legally protected monopoly – Products which lack close substitutes, and which enjoy the benefit of barriers to entry in the form of protected property rights. 4. Platform monopoly – Products which lack close substitutes, and which enjoy the benefit of barriers to entry in the form of direct or indirect network effects. While competition-in-the-market may not be possible, concessions are a key tool for driving at least some competition in categories 1 & 2 4 types of competition for-the-market
  3. 3. Advocacy Challenges Use competitive incentives? Yes In-the-market For-the- market No Direct provision Privatize (& regulate?) Decisions: Regulate? (Regulated?) Concession Before offering a concession consider, and do not underestimate the difficulty & cost of: • Can you write a sufficiently complete contract specification? • Can you enforce the contract? (eg if concessionaire tries to renegotiate) ?
  4. 4. • Are the bidding requirements sufficient to ensure the winner can provide the service? • Are the bidding requirements light enough that they permit a sufficient variety of bidders? • Should you divide the contract into lots or award a single contract? • Do you put caps on the number of lots that can be awarded to a single bidder? • How do you overcome incumbency advantages (e.g. asymmetric information)? • How much transparency, and at what stage? - risk of facilitating bid-rigging? • Do you allow joint bidding? And when? • Does the entity offering the concession have incentives aligned with taxpayers and users on whose behalf they work? • What fall-back options are available in the event of contract default? • Is it possible to use a continuous auction? – Grant a concession that requires the winner to self-assess the value of the concession, and to pay a tax on that self-assessed price. – Include in the contract that the concessionaire must release the concessionary contract to any bidder that pays the self-assessed price. Concession design
  5. 5. • Market definition: Is a concession a relevant market? – Seller (govt.) can’t switch, buyers (users) might, but often cannot. – If the concession is the relevant market then market definition is of little value. • Clustering markets: – It might make sense to cluster the markets that are defined if the same set of firms might credibly bid (but this requires competitive assessment) • Change of control: Is the concession an undertaking, the award of which constitutes a change of control? – E.g. would the concessionaire generate and retain revenue, while taking decisions on the employment of assets to deliver the service, for which it would bear part of the commercial risk? – We should be very sceptical of suggestions that the seller of a concessionary right can retain complete control of the concessionaire offers. Enforcement in concessionary markets
  6. 6. • Competitive assessment: Analytical tools to assess strength of potential competition: – Past bidders: Participation, Win/loss, Winner/runner- up, Margin or Probit analysis. – New bidders: Need to assess the strength of new bidders • Risks of; – anticompetitive remedies, e.g. prohibiting participation – exclusion - e.g. via predatory bidding – exploitation despite the opportunity to prevent it through the terms of the contract? – collusion, see OECD guidance on detecting bid-rigging Enforcement in concessionary markets (2)
  7. 7. Thank you for your attention! Chris Pike 7 rum/competition-for-the-market.htm