From Industrial Organisation Economics to Financial Analysis

Industrial Organisation economics, widely used by Competition Authorities, has consistently fallen short when it comes to tackling harms caused by size, market power and concentration.

Accounting and financial analysis (“AFA”) provides a complementary set of tools that can and should be applied more broadly in competition law enforcement because it often provides clearer answers to tricky cases and it more directly identifies abuse caused by size and market power. 

Our new report explains how AFA is better able to measure excess profits or predatory pricing, where industrial organisation economics has had limited results. AFA uses internationally standardised data from company accounts. This data is used routinely by companies and analysts to understand the business world, and it can be used in standard and accepted ways to measure (for example) excess profits, or predatory pricing. This data is legally mandated and audited according to agreed international standards, and also generally available on public record, so it is far less open to manipulation.