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Bart P.M. Joosen

This chapter discusses State aid to the Dutch financial sector, highlighting the most significant case of 2008. The banking consortium bidding to acquire ABN AMRO was subject to material constraints caused by the financial crisis. When one of the consortium members, the Belgian-Dutch conglomerate Fortis, was unable to complete the transaction due to a shortage of financing, this caused an immediate and severe crisis within ABN AMRO. Given the potentially severe consequences of that bank’s collapse on the Dutch economy, the government provided emergency liquidity assistance, nationalizing parts of the bank and becoming the new shareholder. The European Commission assessed compliance of that assistance with the prevailing State aid rules. The discussion of the ABN AMRO case demonstrates that State aid is permitted in exceptional circumstances, to remedy a serious disturbance in the economy of a Member State, albeit with limitations and strict conditions.

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François-Charles Laprévote and Florine Coupé

In the early days of the financial crisis, the Commission’s review of State aid granted to banks in order to remedy serious threats to a national economy was still in its infancy. However, the length and intensity of the crisis resulted in a tailored-made and detailed ‘Crisis Framework’. This chapter outlines the various measures used by Member States to support their banks facing financial difficulties, e.g., recapitalization, impaired assets measures, guarantees, and liquidity measures. This chapter also describes the applicable texts, the emblematic cases, and the Commission’s assessment of the main legal issues for each type of measure.

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Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

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Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

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Conor Quigley

This chapter describes the application of State aid rules to the United Kingdom during the financial crisis. It considers the schemes granted through bank recapitalization, the wholesale funding guarantee scheme, short-term liquidity measures, and a working capital guarantee scheme or asset-backed securities scheme. It also describes individual aid granted by the UK State to Northern Rock, Bradford & Bingley, Dunfermline Building Society, Royal Bank of Scotland and Lloyds Banking Group.

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Peter C. Carstensen

This chapter describes the harms that abuse of buyer power causes including both exploitation of producers and exclusion of competing buyers. It highlights the global dimensions of the problems that abuse of buyer power is causing.

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Peter C. Carstensen

This chapter provides an analysis of buyer power and its measurement. It starts by pointing out that for competition policy the distinction between ‘monopsony’ and ‘buyer power’ is only a matter of degree. A firm possessing either form of power can engage in abusive conduct. Hence, the appropriate focus is on the potential for abuse rather than some abstract label. Buyer power can be usefully separated into two categories. The first involves situations where the buyer is obtaining inputs or components for its product. The second situation involves the distribution of branded consumer goods. The sources of power in the two situations are different and the structural thresholds of concern are also different. Branded good producers need a wide range of outlets and so can be more vulnerable to exploitation of buyer power by multiple buyers than component producers who only need to have sufficient options for sales. The chapter concludes by identifying three factors that increase the potential for buyer power exploitation: the buyer is usually the key decider with respect to both purchase in general and from whom to purchase, arbitrage is much less feasible for producers relative to the options that buyers have, and the nature of buying markets makes self-correction by the market of buyer power inherently more difficult.

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Peter C. Carstensen

This chapter evaluates competition policy toward buyer cartels and buying groups. It starts by defining the two categories. It then argues that despite some plausible theoretical arguments for buyer cartels their overall impact on the competitive process makes them a serious risk that should generally be avoided. In limited circumstances, such cartels may be deemed in the public interest, but if so, a public authority must closely regulate and oversee such activity. Buying groups, on the other hand, are likely to add to market efficiency and so should be allowed unless they incorporate such a large share of buying that they create an undue risk of buyer power. If a group must have a substantial share to achieve efficiency, it rules and conduct must be closely examined to avoid unnecessary risk to competition. In most instances, such levels of concentration are unnecessary to achieve the efficiency enhancing effects of buyer groups. Hence, such groups should not be allowed to exist. The chapter also briefly reviews the analysis of vertical restraints imposed by buyers on producers. Chapter 5 had addressed this topic as well. Strict controls over the creation of undue buyer power and buyer cartels will enhance the overall competitive process because this will avoid the creation of the kind of power that Chapters 5 and 6 showed to be difficult or impossible to regulation.

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Peter C. Carstensen

This chapter examines the actual and potential rules that can govern abusive unilateral conduct by buyers. It reviews existing laws on both exploitation and exclusion as well as the potential remedies available for such conduct. It concludes that there are serious impediments to effective definition of standards to govern such conduct as well as to remedy it. These difficulties are especially significant when the abuse is exploitive. Exclusionary abuses are more remediable but that requires a stricter standard than is currently used. Moreover, even such remedies may not restore workably competitive buying markets. The chapter also examines the potential for structure remedies, that is, restructuring the buyer side of the market, which, while promising in theory, are both unlikely and present serious problems of defining the conduct that would justify such intervention. The conclusion is that direct remedy for unilateral abuse of dominant buyer power is very difficult and so every effort should be made to avoid allowing such power to be created.

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Peter C. Carstensen

This chapter summarizes the central points of this book. It reiterates the conclusion that buyer power is a significant threat to the competitive process. But consistent with Chapters 5 and 6 control of such power once it exists is difficult. For that reason, competition policy should focus on policies that can avoid or limit the creation of such power. Specifically, this means that a robust merger standard and clear limits on the scope of buying groups are key components for competition policy. The chapter also argues that the scope of the buyer power problem is more pervasive than most common illustrations, including those relied on in this book, might suggest. Lastly, the chapter points out that the global nature of many of the buyer power issues identified means that existing national law enforcement may be unable to provide effective control even if it has the appropriate policies. While this issue is beyond the scope of this specific project, it is an important one for competition policy generally and especially for policy to control abusive buyer power.