Buying power : how to measure it ?

In OECD countries, when buyers try to exercise their market power against producers to protest the concentration of consumer goods there is a stalemate. Competition authorities are consequently looking to see if buyer concentration has not reached new highs and authorities are seeking to protect producers from potential distribution clout, spurred by buyers.

The distributor’s buying power increases when the supplier’s negotiation options narrow and become more costly. Since the two sides do not come to the negotiation table as equals, the suppliers are economically dependent on the distributors. In previous concentration of distribution cases, the European Commission used a “threat rate” to assess the level of dependence. This rate is measured by a distributor’s revenue share of its suppliers. If the rate exceeds 13%, then the supplier is dependent on this distributor because ending the business relationship would dampen the supplier’s activity, perhaps definitely so.

The distributor’s commitment is therefore the key in a merger to ensure that the distributor and the supplier continue doing business together. As this threat rate is very simple, other measures may offer a better view of the state of balance or imbalance between distributors and suppliers.

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« Prices control - an economic insight »

The AJCA magazine (Actualité Juridique Contrats d’Affaires) released in July presents a report devoted to the tariff practices including an article written by Laurent Benzoni, Professor of Economy at Sorbonne University and Founding partner at TERA Consultants. The article aims to define and understand the Competition Authority’s strategy to ensure a control over the competitive prices.

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Anti-competitive practice of prices on-net / off-net

Outremer Telecom versus Orange Caraïbes and Orange

In 2010, Outremer Telecom’s brought a private enforcement action before the Paris Commercial Court against, Orange Caraïbes and Orange, claiming that they had implemented an excessive on-net / off-net price differentiation in the West Indies-Guyana zone. TERA Consultants assisted Outremer Telecom regarding their application for compensation.

On March 16th 2015, the Court granted 8 million euros compensation to Outremer Telecom for damages suffered as a result of these anticompetitive practices on mobile and fixed telephony markets.

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« Private enforcement conference: damage assessment»

Laurent Benzoni was invited to speak at the "Economics & Competition Law"lunchtime conference on 8 June alongside Nathalie Dostert (Paris Commercial Court), Lionel Lesur & Laurent Ayache (McDermott Will & Emery). He contributed his economic expertise on the assessment of damages caused by anti-competitive practices.

The synthesis of the debates can be consulted on TERA Consultants.fr or on Concurrences.com.