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The Role of Undertakings in Regulatory Decision‐Making

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  • Teresa Fels
  • Joshua S. Gans
  • Stephen P. King

Abstract

The Australian Competition and Consumer Commission (ACCC) has powers under the Trade Practices Act 1974 (Cwlth) to accept undertakings from industry participants interested in taking actions, such as mergers, that may potentially be anticompetitive. This paper analyses the role of undertakings, focusing on horizontal mergers. We demonstrate that undertakings can provide an imperfectly in‐formed regulator with a credible signal of the positive social benefits of a proposed merger. In particular, if the merged parties undertake not to reduce their output following the merger, then the merger will only be proposed if it results in net social benefits. We discuss the practical issues of implementing a behavioural undertaking such as a minimum quantity commitment, and argue that these are no less difficult than other regulatory activities currently pursued by the ACCC.

Suggested Citation

  • Teresa Fels & Joshua S. Gans & Stephen P. King, 2000. "The Role of Undertakings in Regulatory Decision‐Making," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(1), pages 3-16, March.
    • Handle: RePEc:bla:ausecr:v:33:y:2000:i:1:p:3-16
    DOI: 10.1111/1467-8462.00132
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    Cited by:

    1. Cook, Paul, 2002. "Competition Policy, Market Power and Collusion in Developing Countries," Centre on Regulation and Competition (CRC) Working papers 30681, University of Manchester, Institute for Development Policy and Management (IDPM).

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