Case study Industrial Economics and Antitrust 2005 Tommaso Cigaina – Alessandra Mangini

1. Case study Industrial Economics and Antitrust 2005 Tommaso Cigaina – Alessandra Mangini Case study: Cigaina - Mangini

2. Outline • The Actors • The Cases • T-Online/Travel (Phase I) • T-Online/Travel (Phase II) • Bild.de/T-Online • The Market • Theory • Definition • Barriers to Entry • (Juridical Perspective) • Conclusions Case study: Cigaina - Mangini

3. The Actors • Deutsche Telekom • T-Online • TUI • C&N • Lufthansa AG • Bild.de • MTF • EU Commission • BKartA VS Case study: Cigaina - Mangini

4. The Cases • Case COMP/M.2149: T-Online/TUI/C&N Touristik/JV • Case COMP/C-2/38.161: T-Online International/TUI/Thomas Cook • BKartA Case B-6 – 144/01: Bild.de/T-Online Case study: Cigaina - Mangini

5. T-Online/Travel (Phase I) JV: T-Online/TUI/C&N Offer online travel agency services on the T-Online portal Modified joint control provisions No longer under Merger Regulation Case study: Cigaina - Mangini

6. T-Online/Travel (Phase II) • Commission C-2: ex-post investigation • No exclusive content • JV cleared: No vertical/horizontal restriction Case study: Cigaina - Mangini

7. Bild.de/T-Online • Offer exclusive content through T-Online portal • Preferential billing system • Strengthening of T-Online position • BKartA: modification to the agreement • No exclusive content, fully accessible billing system Case study: Cigaina - Mangini

8. The market: theory • Communication market: the benefit to consumers comes from the ability to communicate with other consumers via the network NETWORK EXTERNALITY: additional advantage to consumers the higher the number of other consumers in the network • System market: provision of joint services NETWORK EXTERNALITY: additional advantage to consumers the more applications are avalable for that system Case study: Cigaina - Mangini

9. The market: theory (II) • Mixed mkt • Communication market + System market • Network effects are stronger • T-ONLINE’s market • Loop effects: a “spiral” of utilisation is created. The creation of a product entangles a cyclical dominance with related products Case study: Cigaina - Mangini

10. The market: definition • The Internet Market • Newly developed market • Temporary monopolies • The Travel Agencies Market • Traditional & Online agencies: 2 different mkts! • NO FORECLOSURE OF COMPETITION! Case study: Cigaina - Mangini

11. The market: definition (II) • The online applications market • No distinction between portal and ISP market • Exclusive content • Network externalities and “loop” effects Case study: Cigaina - Mangini

12. The market: Barriers to Entry • Gatekeepers Effect(not relevant in T-Online case) The incumbent owns an essential facility/technology fundamental for the functioning of the product or service. “Loop” effects might create foreclosure of competition in vertically integrated sectors. • Exclusive Content(fundamental in T-Online case) As the main driver for consumer choice is the variety of content (network externalities), the exclusivity of content on the T-Online portal may raise a concern for antitrust purposes. Case study: Cigaina - Mangini

13. Juridical Perspective …as a link to European Competition Law ... Case study: Cigaina - Mangini

14. Conclusions Internet and Antitrust The internet market is NOT a natural monopoly • Low initial fixed costs • No significant gatekeeper • Competitive players BUT… Case study: Cigaina - Mangini

15. Conclusions (II) …the T-Online case shows the role of: • Exclusivity of content (IP) • Network externalities (joint provision, loop effects) Need for Regulation …Trade-off between IP and Antitrust? Case study: Cigaina - Mangini

16. References • Belis, J.F.(2005), Droit Européen de la Concurrence, I-II partie, PUB • Dewatripont, M. and P. Legros (2000), “Mergers in Emerging Markets with Network Externalities: The Case of Telecoms”, in « Le nouveau modèle européen, » edited by P. Magnette and E. Remacle, vol.2, Editions de l’Université de Bruxelles, pages 109-117 • Ghezzi, F. (2001), “La valutazione delle concentrazioni verticali nei “mercati della convergenza” tra i settori delle telecomunicazioni e dell’emittenza televisiva”, report presented to the Conference “Diritto e Mercato: proprietà intellettuale e antitrust”, Perugia, Italy, May 25-26th 2001. • Katz, M.L. and C. Shapiro (1994), “Systems Competition and Network Effects,” Journal of Economic Perspectives, 8, pp.93-115. • Lemley, M.A., “Antitrust and the Internet Standardization Problem” 1996 DRAFT • Monti M, (2000), “European Competition Policy for the 21st Century”, XXVIII Annual Conference on International Antitrust Law and Policy, New York, October 17th 2000 • Nehl, P.H. and K. Parplies (2002), "Internet Joint Ventures and the Quest for Exclusive Content: the T-Online Cases, "Competition Policy Newsletter, June, 2:57-60. • Shapiro, C. and H. Varian (1999), Information Rules – A Strategic Guide to the Network Economy, Harvard Business School Press. • http://www.antitrustisti.net • http://europa.eu.int/comm/competition/index_en.html • COMP/M.1524 – Airtours/ First Choice Case study: Cigaina - Mangini