Sep 04, 2014
CRCAL’s New Guideline on Barriers to Entry – Paolo Buccirossi (Director and Founder, Lear)
The competitive assessment of mergers and firms’ conducts requires an understanding of whether the threat or the actual entry of new competitors in the market is likely to limit the ability of the incumbent firms to exert market power. The Guidelines on Barriers to Entry (BTEs) written by Paolo Buccirossi illustrate the elements that a competition authority needs to consider in examining the entry conditions that characterize a relevant market. They hinge on the economic literature on the subject matter and on international best practices, as set out in the merger guidelines issued by several competition authorities.
Even though in the academic literature the definition of BTEs has been the subject of a long and still not completely settled debate, competition authorities have developed a pragmatic and consistent approach. This is based on the need to ascertain whether, on a factual ground, the competitive threat coming from potential competitors, or from a fringe of smaller rivals, is sufficient to prevent one or more firms from altering the competitive process and harm consumers.
Entry may be defined as the decision of a firm to start offering products that it did not offer before or serving groups of customers or territories that it did not serve before. Entry is usually triggered by the prospect of earning economic profits. This may due to the existence of ma
