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Modelling the macroeconomic impact of competition policy
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Modelling the macroeconomic impact of competition policy

2021 update and further development

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This report provides an update of the macro-model simulations of the impact of the competition policy interventions of the European Commission over the period 2012-2020. The novelties of this year’s report include the transition from EU28 to EU27, the inclusion of preliminary data on antitrust enforcement for the period 2012-2020, and the regular update with data for the year 2020 on merger interventions and cartel prohibitions. The year 2020 saw a relatively small total number of interventions, but the 25 interventions included four merger interventions with affected markets of substantial size. Taken together, 2020 was an ‘average’ year in terms of the macroeconomic impact of the Commission’s activities. The report presents the results of the macroeconomic impact of competition policy interventions by the European Commission using the QUEST III macro-model of the EU economy and an EU-wide input-output model. The simulations make use of the information provided by DG Competition on the European Commission’s merger interventions and cartel prohibitions as well as preliminary data on antitrust interventions other than cartels. The simulations carried out in QUEST III illustrate that competition policy has a positive impact on GDP of 0.37% in the medium term. This impact includes the direct price effects (as captured by the customer savings calculations) as well as the indirect, deterrent effects of the Commission’s competition policy interventions. The difference between the five-year GDP impact of 0.37% reported here and the 0.27% reported in last year’s report can be explained by three factors: (1) the transition from the EU-28 to the EU-27 due to Brexit; (2) the impact of the Commission’s antitrust interventions (in the report of the previous year, only merger interventions and cartel prohibitions were considered); and (3) the effect of the Commission’s competition policy interventions of 2020. Similarly, the calculations carried out using the input-output framework suggest that, on average over the period 2012-2020, competition policy enforcement has reduced the EU’s overall price level by 0.63 percentage points, including both within-sector and cross-sector spill-over effects. Industries with many important downstream links (i.e. those that sit higher up in supply chains) tend to produce stronger spill-over effects than industries with few downstream connections (i.e. those that sell a large share of their output to final users). Activities with large spill-overs include finance, insurance and business services, resource extraction, the energy sector, basic manufacturing, and certain components of the transport network. Finally, the report presents new developments in data analysis and modelling, including in particular: (i) the on-going research on the assessment of the evolution of mark-ups in the EU; (ii) improvements in the mathematical approach chosen to model deterrence; and (iii) the possible correlation between mark-up levels and Commission interventions at the sector level. On this last point, the report finds that the Commission’s competition policy interventions (excepting cartel prohibitions) tend to focus on industries with high mark-ups and concentration ratios.
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ISSN 2443-6208
ISBN 978-92-76-47977-2
DOI 10.2763/729367
Luettelonumero KD-AQ-22-001-EN-N
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ISSN 2443-6208 ISBN 978-92-76-47977-2 DOI 10.2763/729367 Luettelonumero KD-AQ-22-001-EN-N
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