Buyer Power and EU Competition Policy
Jun. 24th, 2014 05:09 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutExpect edits.
http://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Fachartikel/Buyer%20Power%20in%20Competition%20Law.pdf
"However, the economic literature has developed some explanations on why, under certain circumstances, buyer power can also have investment incentive effects, and thus positive welfare effects. A large, powerful buyer could thus be prepared to share the high initial investment costs of a product because th
is could also increase his own profit; any free rider behaviour, which smaller buyers might possibly adopt, would be less likely in the case of large buyers. Furthermore, if they are faced with powerful buyers, suppliers might have a greater incentive to invest in the quality and brand of their product in order to increase their bargaining power vis-à-vis these buyers."
That could be considered a straightforward description of the development of kindle.
This seems relevant -- Amazon may dominate under this definition:
"According to the Berlin Higher Regional Court’s fundamental decision in the Coop/Wandmaker case, only actors who can influence the opposite side of the market as a whole can “dominate” the market 10. It therefore remains to be discussed to what extent the partial proof that a greater share of the supplier
depend on one powerful buyer can be used as an element for proving the existence of market dominance."
22% shows up in the next paragraph. Yeep.
The idea that a powerful buyer could be countervailing shows up, but then has problems itself.
Page 9, tho, is startling! "Purchasing agreements with exclusive purchase commitments were considered per se to be anti-competitive. The courts were of the opinion that even when there was no explicit purchase commitment, the freedom to act (and therefore competition) was restricted where a purchasing agreement resulted in a maximum price agreement. This case-law did not differentiate between a restriction of supply or demand competition. Consequently, it envisaged the one type of competition as a mirror image of the other. Accordingly, agreements between buyers on maximum prices and agreements between suppliers on minimum prices were to be assessed alike." Huh! But I don't know if it applies; Amazon is acting alone -- they are not coordinating with other buyers. I had no idea there were issues in Germany with minimum prices set by suppliers?
But then it turns out that buyer agreements aren't really a problem -- The Commission is only worried when a buyer fails to pass the savings along, and that hurts other purchaser competitors. Not what is happening here.
Heh heh on page 12: "Under the aspect of commensurability of advantages, it remains difficult to distinguish an anticompetitive advantage from a merely low price." Wow. Just like here!
I really sort of expected German law to be dramatically different and more protective of suppliers. Guess I was wrong!
"The European Commission pursues a competition policy which is aimed predominantly at maximising consumer welfare. Accordingly, it is distinctly more lenient of restraints of demand competition than it is of those that affect supply competition. With an eye on the end consumer, the Commission focuses in its assessment mainly on the effects in downstream sales markets. ... Detriment to suppliers caused by the exercise of buyer power does not necessarily go hand in hand with detriment caused to end consumers downstream of the relevant market."
Just 'cause some publisher gets harmed, doesn't mean the reader gets harmed, so Amazon is allowed to Behave Badly, for suitable definitions of Behaving Badly.
Wal-Mart shouldn't decide who gets to be a manager based on gender. Amazon should make sure its working conditions don't kill people. But buying it cheap and moving it in job lot is a-ok.\
Altho page 13 would appear to take some of this right back. Confusing.
http://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Fachartikel/Buyer%20Power%20in%20Competition%20Law.pdf
"However, the economic literature has developed some explanations on why, under certain circumstances, buyer power can also have investment incentive effects, and thus positive welfare effects. A large, powerful buyer could thus be prepared to share the high initial investment costs of a product because th
is could also increase his own profit; any free rider behaviour, which smaller buyers might possibly adopt, would be less likely in the case of large buyers. Furthermore, if they are faced with powerful buyers, suppliers might have a greater incentive to invest in the quality and brand of their product in order to increase their bargaining power vis-à-vis these buyers."
That could be considered a straightforward description of the development of kindle.
This seems relevant -- Amazon may dominate under this definition:
"According to the Berlin Higher Regional Court’s fundamental decision in the Coop/Wandmaker case, only actors who can influence the opposite side of the market as a whole can “dominate” the market 10. It therefore remains to be discussed to what extent the partial proof that a greater share of the supplier
depend on one powerful buyer can be used as an element for proving the existence of market dominance."
22% shows up in the next paragraph. Yeep.
The idea that a powerful buyer could be countervailing shows up, but then has problems itself.
Page 9, tho, is startling! "Purchasing agreements with exclusive purchase commitments were considered per se to be anti-competitive. The courts were of the opinion that even when there was no explicit purchase commitment, the freedom to act (and therefore competition) was restricted where a purchasing agreement resulted in a maximum price agreement. This case-law did not differentiate between a restriction of supply or demand competition. Consequently, it envisaged the one type of competition as a mirror image of the other. Accordingly, agreements between buyers on maximum prices and agreements between suppliers on minimum prices were to be assessed alike." Huh! But I don't know if it applies; Amazon is acting alone -- they are not coordinating with other buyers. I had no idea there were issues in Germany with minimum prices set by suppliers?
But then it turns out that buyer agreements aren't really a problem -- The Commission is only worried when a buyer fails to pass the savings along, and that hurts other purchaser competitors. Not what is happening here.
Heh heh on page 12: "Under the aspect of commensurability of advantages, it remains difficult to distinguish an anticompetitive advantage from a merely low price." Wow. Just like here!
I really sort of expected German law to be dramatically different and more protective of suppliers. Guess I was wrong!
"The European Commission pursues a competition policy which is aimed predominantly at maximising consumer welfare. Accordingly, it is distinctly more lenient of restraints of demand competition than it is of those that affect supply competition. With an eye on the end consumer, the Commission focuses in its assessment mainly on the effects in downstream sales markets. ... Detriment to suppliers caused by the exercise of buyer power does not necessarily go hand in hand with detriment caused to end consumers downstream of the relevant market."
Just 'cause some publisher gets harmed, doesn't mean the reader gets harmed, so Amazon is allowed to Behave Badly, for suitable definitions of Behaving Badly.
Wal-Mart shouldn't decide who gets to be a manager based on gender. Amazon should make sure its working conditions don't kill people. But buying it cheap and moving it in job lot is a-ok.\
Altho page 13 would appear to take some of this right back. Confusing.