Competition Law, Antitrust Immunity and Profits: A Dynamic Panel Analysis

Abstract

This paper tests whether the transition from the old Economic Competition Act, which was based on the so-called “abuse system”, to the new Competition Act, which was based on “prohibition system”, in the Netherlands had an impact on the price-cost margins in manufacturing industries during the period 1993-2007. The paper further investigates if the price-cost margins were higher in industries where temporary antitrust immunity was granted for subset of firms that engaged in concerted practices. The results indicate that the change in the competition law in the Netherlands had a very small and negative, yet statistically insignificant deterrent effect on the price-cost margins. Elsewhere, markups were higher in industries in which temporary antitrust immunity was granted for some class of coordinated actions.

Keywords: Price-cost margins; Competition law, Antitrust immunity, Antitrust enforcement, Dynamic panel data model, the Netherlands

JEL Classification: K21, L4, L6