Predatory Pricing Under the Federal Competition and Consumer Protection Act of 2019 of Nigeria: An Unfinished Business

Predatory pricing is one of the market practices that are prohibited in competition law. It occurs when a dominant firm sells its product at an unreasonably low price in order to eliminate competitors from the market. The Federal Competition and Consumer Protection Act, 2019 of Nigeria prohibits this practice. This article, therefore, examines predatory pricing under the Act. It argues that the prescription of the cost-based principles of marginal and average cost as sole determinants of predatory pricing under the Act would not provide the Federal Competition and Consumer Protection Commission (FCCPC) and courts with the appropriate legal standard in determining predatory pricing. It suggests that the provision of the law should be reformed to include the principle of recoupment as a legal standard for imposing liability for the practice against defaulting firms. This will assist the FCCPC and courts to distinguish pro-competitive predatory pricing from anticompetitive predatory pricing.

EXPRESS: Can Encroachment Benefit Hotel Franchisees?

Franchise encroachment is the addition of an outlet in the vicinity of existing franchisees. It is a highly contentious issue resulting in revenue cannibalization of incumbent locations. Against this backdrop, we consider the possibility that the addition of same brand outlets can in fact, create positive effects via customer utility and ultimately, benefit franchisees. This may be due to a range of mechanisms such as quality signaling, learning, or brand awareness, resulting in a positive pathway on franchisee performance. We unpack this using detailed proprietary and publicly available datasets from the hotel industry over a five-year period, and an experiment. Our results evidence positive effects on customer utility for same brand outlets, and stronger effects for newer brands, cross brands, and online travel agency channel bookings. Counterfactual simulations indicate that although encroachment hurts franchisees on average, it can modestly benefit same brand franchisees in low brand density markets. Together, this illustrates the potential "sunny side" of encroachment, underscoring the need to update our view of encroachment as context-dependent. Our novel emphasis on customers versus the dominant firm view suggests customer and incumbent responses to encroachment should be accounted for in the development of franchise strategy and public policy decisions.

Market Power in Output and Emissions Trading

This article focuses on the strategic behavior of firms in the output and the emissions markets in the presence of market power. We consider the existence of a dominant firm in the permit market and different structures in the output market, including Cournot and two versions of the Stackelberg model, depending on whether the permit dominant firm is a leader or a follower in the output market. In all three models, the firm that dominates the permit market is more sensitive to its initial allocation than its competitor in terms of abatement and less sensitive in terms of output. In all three models, output is decreasing and the permit price is increasing in the permit dominant firm’s initial allocation. In the Cournot model, permit dominance is fruitless in terms of output and profit if the initial allocation is symmetric. Output leadership is more relevant than permit dominance since an output leader always tends to, ceteris paribus, produce more and make more profit whether it also dominates the permit market or not. This leadership can only be overcompensated for by distributing a larger share of permits to the output follower, and only if the total number of permits is large enough. In terms of welfare, Stackelberg is always superior to Cournot. If the initial permit allocation is symmetric, welfare is higher when the same firm dominates the output and the permit market at the same time.

Dominant Firm Unilateral Conduct: Monopolization and Abuse of Dominance

A firm acting alone—that is, unilaterally—can also harm competition. If it has sufficient influence on a market, it can exclude rivals or limit their capacity to compete. Competition law regimes typically contain provisions prohibiting such conduct. Most use the concept of abuse of dominance to identify and combat it, but a few, including the US, use the term “monopolization” for this purpose. This component of competition law is often controversial and politically sensitive, and globalization increases this tension. This chapter identifies the issues in applying competition law to single firm conduct and reveals how regimes decide whether to pursue it. A single firm can harm competition only if it has sufficient power to influence a particular market, so the chapter looks at how regimes assess this power, how they define the relevant market, and which kinds of conduct constitute a competition law violation. Although most competition laws target this type of conduct, variations in actual treatment are great. The Guide outlines the global patterns and the factors that lead to them.

Creating duty on dominant firm: a case for alternative economic analysis

The desirability of creating norms within the framework of law has been a challenging process in a free market economy. The principles of antitrust law enunciated by courts in abuse of dominant cases has led to ‘refusal to deal’ as a contested doctrine. When dominance is treated as legitimate aspiration and free market choices are the medium to achieve the aspirations of free market enterprises, any duty or obligation cast on the firm is considered antithetical to the spirit of free market unless it eclipses the anticompetitive effect. Where an economic analysis of antitrust law has non-economic impacts with ethical and moral issues, it calls for an alternative economic thought which also considers plural values of society. This also reflects a conflict arising out of lack of norms and respect for property rights. This paper attempts to analyze the cases and framework which is currently employed by the courts and the challenges it puts forth in creating a norm that is universal. The author by drawing on the principles of Gandhian economic thought and its essential features of trusteeship, non-possession and non-violence creates space for resolution of conflicts promoting ethical and moral considerations. Resolution of conflict through ethical and moral norms also assimilates the varied goals of antitrust regulation, including non-economic goals when the goals of antitrust require a broader consideration that accommodates the wider spectrum of market participants.

Post-merger branding strategies and market power in the Brazilian brewing industry

PurposeThe purpose of this paper is to investigate firm strategies and the exertion of market power in the brewing sector in Brazil following a merger between the two largest brewers (Brahma and Antarctica) that created Ambev and given that the existing literature is inconclusive on this subjectDesign/methodology/approachIn this study the authors apply cointegration analysis to price series of beer brands. The authors use the reduced form vector error correction (VEC) model to measure the price responses of beer brands in terms of direction, magnitude and speed. The authors use monthly retail prices for the primary brands of beer in the city of São Paulo, Brazil's largest consumer market. Specifically, the authors use two sets of retail prices, one from bars (the main point of beer sales, with roughly 50% of market share) and another from supermarkets. The series range from 1994 to 2014, depending on the brand.FindingsThis study indicates that Ambev's two major brands (Skol and Brahma) behave as market leaders, while its third brand (Antarctica) has been used to challenge the low-price competitor (Nova Schin). The authors also found evidence that the pricing policies of Brahma and Antarctica have changed toward cooperation following the creation of Ambev.Research limitations/implicationsThe main limitation of this article is that the authors only had access to retailer data. As the merger involved brewers, the authors would ideally use manufacturer beer prices in their econometric analysis. However, the consistency of our results suggests that retailers have been passively transmitting brand strategies launched at a manufacturer level.Social implicationsAs the dominant firm created following the merger of the two largest brewers appears to use one of its brand to restrict entry of competitors and the premium brands to enjoy high profits, consumers tend to be harmed by high beer prices and lack of options. Furthermore, small and medium-size companies cannot grow due to entry barriers created by the dominant firm.Originality/valueThis paper is the first to apply cointegration analysis to examine the effect of mergers on pricing strategies. The robustness of this study suggests that this approach could be used for antitrust agencies to monitor post-merger strategies.