Rey, Patrick --- "Collective dominance and the telecommunications industry" [2004] ELECD 53; in Buigues, A. Pierre; Rey, Patrick (eds), "The Economics of Antitrust and Regulation in Telecommunications" (Edward Elgar Publishing, 2004)

Book Title: The Economics of Antitrust and Regulation in Telecommunications

Editor(s): Buigues, A. Pierre; Rey, Patrick

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843765103

Section: Chapter 6

Section Title: Collective dominance and the telecommunications industry

Author(s): Rey, Patrick

Number of pages: 23

Extract:

6. Collective dominance and the
telecommunications industry*
Patrick Rey

1. INTRODUCTION
The development of the concept of collective dominance fills an important gap in European
competition policy, since threats to competition can arise even in the absence of any single
dominant firm. This is particularly the case when firms engage in what economists refer to
as tacit collusion, since their behaviour may then approximate that of a single dominant
firm.
While some practices can involve positive as well as negative aspects, thereby generating
arguably difficult tradeoffs, there is instead a consensus ­ at least in practice ­ that collusion
should be forbidden.1 Unfortunately, it does not suffice to `forbid' collusion, which can be
`implicit' rather than `explicit'. Explicit collusion, where firms engage in written or oral
agreements, organize meetings to design and implement collusive mechanisms, and so forth,
can be caught under Article 81 if the appropriate evidence is recovered. Implicit collusion
instead does not involve any explicit agreement, and arises from the mere repetition of
competitive interactions. The concept of collective dominance provides a basis for antitrust
intervention in such cases.
This chapter discusses the scope for antitrust intervention against such tacit collusion.
Section 2 first studies the circumstances in which such collusion can arise, and the forms it
can take. Section 3 discusses the alternative courses of action available to competition
authorities, and Section 4 focuses on specific issues for the telecommunications industry.


2. RELEVANT FACTORS FOR TACIT COLLUSION

2.1 The Logic of Tacit Collusion

Tacit collusion may ...