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Journal of Competition Law and Economics Advance Access originally published online on June 28, 2007
Journal of Competition Law and Economics 2007 3(3):453-470; doi:10.1093/joclec/nhm012
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

PRICE SQUEEZE: LESSONS FROM THE TELECOM ITALIA CASE

Michele Polo*

Correspondence: * Professor of Economics, Bocconi University and Fellow, Innocenzo Gasparini Institute for Economic Research. E-mail: michele.polo{at}uni-bocconi.it. The author acted as economic expert with LECG for Telecom Italia during the A351 case. An earlier version of this paper was presented at the CRESSE conference in Corfù in July 2006 and is included in the forthcoming Athens University of Economics and Business conference volume, Abuse of Dominance (Yannis Katsoulakos, ed., 2007).

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.


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