Posted by Bloomberg
By Ferdinando Giugliano
Europe shouldn’t be smug about market dominance. It’s not just a Silicon Valley thing.
Margrethe Vestager, the EU’s competition commissioner, has a reputation for being one of the world’s most committed trustbusters. From Apple Inc, to Alphabet Inc, the Danish politician has taken on some of the world’s most powerful corporations.
Yet it’s fair to ask whether the EU is really such a shining beacon when it comes to reining in its own companies.
Over the past few years, several academic papers have shown how monopoly power appears to be expanding rapidly in the US. Possible explanations include globalization and technology, but the timidity of American antitrust authorities in tackling the “abuse of dominance” is to blame too.
The EU, by contrast, has been hailed for fostering greater competition thanks to its single market and stricter antitrust enforcement. Vestager’s battles with Google and Apple — which have had an easy ride in the US — have cemented the European Commission’s reputation in this area.
Yet new economic research shows that Europe isn’t immune from the rise of dominant companies. Jan De Loecker and Jan Eeckhout, who wrote a seminal paper on the decline of competition in the US, have recently obtained estimates for the evolution of market power globally. Their study, looking at the financial statements of more than 70,000 firms in 134 countries, shows the markup that European businesses charge over their marginal cost increased from roughly zero in 1980 to 64% in 2016. The jump — particularly pronounced in Denmark, Italy and Belgium — is even higher than in the US.