Snake-Oil with Mathematics is Still Snakeoil: Why Recent Trends in the Application of So-Called “Sophisticated” Economics is Hindering Good Competition Policy Enforcement

In the last 20 or so years, EU competition policy has been characterised by the increasing use of economics which has led to more predictable and robust decisions. However, there are now concerns, indeed complaints, that the pendulum has swung too far with the introduction of new tests such as Upward Pricing Pressure tests and the increasing reliance on theoretical possibilities as a guide for enforcement. This paper examines whether so-called “sophisticated” economics is helping or hindering good competition policy. First, the paper identifies the criteria against which economic analysis should be judged as constituting good practical economics. The paper then considers why some of these recent developments fail to meet those criteria and as a result are indeed hindering good competition policy enforcement.