Chillin'Competition

I attach below the slides presented at today’s lunch talk on State Aid and the Financial Crisis.

Thanks to C. Caffarra, C. Ahlborn, D. Piccinin for their stimulating presentations.

According to a speaker at this event, one of the remedies imposed in the Fortis decision implies something close to a Commission-sponsored retail cartel. On the facts, the point may be valid, but is not that straightforward. The remedy is as follows: “Predatory pricing on the retail deposit market is… prohibited“. This, in essence, seeks to preclude the risk that the otherwise failing bank initiates a price war  thanks to tax-payers money, and ends up forcing out healthier firms from the market. On face value, this makes a lot of sense, even though this leads to prohibit under Article 87 EC something that would not be as such prohibited under Article 82 EC, absent dominance.

Now, if I understand correctly, the cartel problem likely originates from the fact that the Commission has also imposed this remedy on other Belgian banks that have benefited from public subsidies (e.g., KBC), as a result of what the remedies might, altogether, have the cumulative effect of chilling competition.

Fire and Brimstone

091005_When in a Hole Stop Digging