DP5813 Computing Abuse Related Damages in the Case of New Entry: An Illustration for the Directory Enquiry Services Market

Author(s): Maite Martinez Granado, Georges Siotis
Publication Date: September 2006
Keyword(s): abuse of dominance, competition policy, telecommunications
JEL(s): C22, L41, L96
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5813

A number of European countries, among which the UK and Spain, have opened up their Directory Enquiry Services (DQs) market to competition. In Spain, both local and foreign firms challenged the incumbent as of April 2003. The latter abused its dominant position by providing an inferior quality version of the (essential) input, namely the subscribers? database. We illustrate how it is possible to quantify the effect of abuse in situation were the entrant has no previous history in the market. We use the UK experience to construct the relevant counterfactual, that is the "but for abuse" scenario. After controlling for relative prices and advertising intensity, we find that one of the foreign entrants achieved a Spanish market share substantially below what it would have obtained in the absence of abuse.