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OPENING DISCUSSION
Cristina CAFFARRA & Tommaso VALLETTI
As part of the opening discussion, Cristina introduced five consecutive themes: rising profit margins and concentration, the content of the notion of consumer welfare, the importance of innovation for the competitive analysis, the potential evolution of the economist’s ‘toolbox’ and lastly, the effectiveness of remedies. Cristina offered her point of view and inquired about Tommaso’s take on these much-debated issues.
There has been a long-standing debate in the U.S. about rising margins, the structural change in the share of profit against labor and the reduction of new entries on markets in some economic sectors. Equivalent evidence exists in Europe, although to a lesser extent. There is also an on-going debate among the antitrust community about the growth of ‘superstar’ firms such as Google and Amazon. Cristina raised the question of the role played by –potentially ineffective– antitrust enforcement in the development of these factors, as market power increases can also be observed. Although margins are not necessarily correlated to market power, Cristina considered that they are a factor in the analysis: could increased margins mean that policy and enforcement have been too lenient vis-à-vis mergers? Tommaso linked this topic to the debate about markets becoming more concentrated. Firms making more profit often charge well above costs. As regards antitrust, the lingering question is whether enforcement has been ineffective or overly lenient, but little is undertaken to analyze this question thoroughly and reach a clear conclusion. Tommaso suggested that enforcers’ past decisions should be studied objectively (preferably by independent third parties, rather than enforcers themselves), especially regarding global ‘mega-mergers’, so that antitrust authorities can learn from the results achieved by their previous decisions. Enforcers have the responsibility to take into account rising margins in their merger assessments. One explanation for rising margins is the efficiency of ‘superstar’ firms–in relation to technology, high fixed costs and winner-takes-all conditions– but Tommaso was not fully convinced by this explanation, notably because margin increases are observed in B2B markets rather than consumer markets where ‘superstar’ firms operate.