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Price Squeeze: Lessons From The Telecom Italia Case

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  • Michele Polo

Abstract

This paper analyzes a price squeeze case in the provision of telecommunication services to the Italian Public Administration, in which Telecom Italia, the incumbent company, was condemned for bidding below costs. We develop the analysis of the case highlighting the possible anticompetitive story and the alternative competitive explanation. We then construct a quantitative imputation test to verify the alleged anticompetitive behavior. The methodological issues and the assumptions needed to implement the test are discussed in detail, showing their link to a precise test of the anticompetitive story. We discuss the reasons why the Antitrust Authority and our views diverge over the evaluation of Telecom Italia bidding. The role of judicial review in cases with complex economic arguments is discussed.

Suggested Citation

  • Michele Polo, 2007. "Price Squeeze: Lessons From The Telecom Italia Case," Journal of Competition Law and Economics, Oxford University Press, vol. 3(3), pages 453-470.
    • Handle: RePEc:oup:jcomle:v:3:y:2007:i:3:p:453-470.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhm012
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    References listed on IDEAS

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    1. Gual, Jordi & Hellwig, Martin F. & Perrot, Anne & Polo, Michele & Rey, Patrick & Schmidt, Klaus M. & Stenbacka, Rune, 2005. "An Economic Approach to Article 82," Discussion Papers in Economics 745, University of Munich, Department of Economics.
    2. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
    3. Jan Bouckaert & Frank Verboven, 2004. "Price Squeezes in a Regulatory Environment," Journal of Regulatory Economics, Springer, vol. 26(3), pages 321-351, August.
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    Cited by:

    1. Stephen Martin & Jan Vandekerckhove, 2013. "Market Performance Implications of the Transfer Price Rule," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 466-487, October.
    2. Justus Haucap & Torben Stühmeier, 2016. "Competition and antitrust in Internet markets," Chapters, in: Johannes M. Bauer & Michael Latzer (ed.), Handbook on the Economics of the Internet, chapter 9, pages 183-210, Edward Elgar Publishing.

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