THE MISUSE OF PROFIT MARGINS TO INFER MARKET POWER

Robert H. Bork and J. Gregory Sidak

Journal of Competition Law and Economics, 2013, vol. 9, issue 3, 511-530

Abstract: Profit margins are not reliable evidence from which to infer market power in antitrust cases. The use of accounting profit margins has no economic justification in dominance proceedings. Its use can increase the frequency and magnitude of enforcement errors. To illustrate, we examine the case of Telcel, which Mexican regulators declared dominant in mobile telephony on the basis of Telcel's profit margins. We show that, to the contrary, Telcel's margins were actually within the bounds of regularly observed profit margins in the telecommunications industry.

JEL-codes: D02 D43 D61 K21 K23 L13 L44 L51 L96 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:9:y:2013:i:3:p:511-530.

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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