COMPETITION COMMISSION INVESTIGATIONS:

MORE EXPERIENCED CHAIRMEN DELIVER TOUGHER VERDICTS

The greater the experience of the person chairing a Competition Commission investigation into possible abuse of monopoly power, the tougher the verdict is likely to be. That is one of the conclusions of research by Ludivine Garside and colleagues at the Centre for Market and Public Organisation.

The research also shows that once an investigation has started, the investigated firms immediately change their behaviour even before the outcome of the investigation is announced.

The research considered hundreds of firms investigated for ‘possible abuse of a monopoly situation’ – monopoly cases – published by the UK’s Competition Commission (formerly the Monopolies and Mergers Commission) since 1970.

The study examines whether the outcome of investigations of UK firms suspected of exploiting their monopoly position depends on the individual chairman of the investigative committee, and in particular whether greater experience makes them more or less likely to find a company ‘guilty’.

The answer is yes, that is, holding everything else constant a more experienced chairman is far more likely to find a company guilty than a less experienced chairman.

The researchers consider possible explanations for the relationship. One could be that chairmen differ in their degree of toughness and tougher chairman tend to stay longer. But the study is able to reject this explanation.

It is also able to reject the possibility that chairmen of cases choose to be tougher to increase their chances of becoming head of the Commission.

Thus, it appears that it is the experience built up within the Commission that affects the view of the world and increases the chances that a chairman will believe the company is doing something wrong. Indeed, their analysis predicts that if experience were able to build up sufficiently, a chairman would eventually find every firm they consider guilty.

ENDS

Notes for Editors: ‘Does Within-tenure Experience Make you ‘Tougher’? Do Investigated Companies Manipulate Data? Evidence from Competition Law’ by Ludivine Garside, Paul Grout and Anna Zalewska was presented at the Royal Economic Society’s 2007 Annual Conference at the University of Warwick.

Garside and Grout are in the Department of Economics at the University of Bristol. Zalewska is in the School of Management at the University of Bath.

For Further Information: contact Ludi Garside on 0117-33-10704 (email: ); or RES Media Consultant Romesh Vaitilingam on 07768-661095 (email: ).