Economic Regulation - Related Publications
This briefing note gives an insight into the key issues surrounding price comparison websites in the context of the Competition and Markets Authority study of digital comparison tools. Just how beneficial are they to consumers?
Europe Economics was commissioned to conduct a cost-benefit analysis on the Technical Standards drafted by ESMA with respect to the implementation of the Benchmarks Regulation. The Benchmarks Regulation extends consistent EU-level regulation to the development of benchmarks. This is in the wake of the LIBOR and related scandals. In the study we considered both the direct compliance costs to market participants, in both qualitative and, where possible, quantitative terms, as well as undertook a qualitative analysis of the potential benefits and other indirect costs. Our project also broke new ground in describing and scaling the market landscape for benchmarks in Europe.
The UK asset management industry has grown significantly over the past decade, remaining positioned as the largest in Europe by far and second only to the US globally. However, additional challenges and sources of uncertainty are forthcoming: the impact of the UK’s decision to leave the European Union and the publication of the interim findings of the Financial Conduct Authority’s (FCA) asset management market study. In this briefing note we describe their potential effects and provide an overview of the main facts and figures characterising the industry.
On 7th December, the Competition and Markets Authority (CMA) fined pharmaceutical company Pfizer £84.2 million for excessive pricing. Sida Yin, Analyst at Europe Economics, has written a briefing note on the recent excessive pricing cases in the pharmaceutical sector and the role of the regulatory framework.
Europe Economics was commissioned to provide technical assistance in the development of the methodology for the evaluation of fiscal measures to implement Article 7 of the Energy Efficiency Directive. This involves assessment of different fiscal policies used in a selection of Member States including the use of price elasticity data and additionality assumptions in arriving at claimed energy efficiency benefits.
Europe Economics was contracted by DG COMP of the European Commission to report on “Different forms of cooperation between insurance companies and their respective impact on competition”. This study compares different forms of cooperative insurance structures, not limited to pools, setting out the advantages and disadvantages of each type of cooperative structures for both insurers and clients. This research also analyses the different competitive dynamics associated with each form of insurance cooperation scheme. The research moreover identifies potentially non-essential features, from the perspective of maximising the efficiency of these schemes. CMS-Hasche Sigle provided legal input to the study, and Prof Dr Martin Eling provided expert insurance and economic input. This work was conducted in the context of DG COMP’s review of the IBER, with further context available here
Ross Dawkins led this work for Europe Economics.
Europe Economics was contracted by DG COMP of the European Commission to report on “Switching of tangible and intangible assets between different insurance products”. This study investigates supply-side substitutability in the context of large, unconventional non-life risk, such as nuclear, cyber and natural catastrophe. The study’s focus is on the ability of insurers to switch between different insurance products in the short-term, and on identifying the various constraints that may impede this process. CMS-Hasche Sigle provided legal input to the study. This work was conducted in the context of DG COMP’s review of the IBER, with further context available here
Ross Dawkins led this work for Europe Economics.
Stephen Topping, a Managing Consultant at Europe Economics, has written a briefing note on the regulatory precedent set by Ofwat’s decision to move from RPI to CPI indexation at PR19.
Ofwat’s decision to begin a transition to either CPI or CPIH indexation from 1 April 2020 increases the likelihood that other regulators will follow suit in future price reviews.
Our report on “The uses (and abuses) of Modelling Adjustments in Internal-Ratings Based Models” has been published by the Association for Financial Markets in Europe.
Ofgem has published a report written by our Consultant Benjamin Tannenbaum on “Proof of flow under market coupling”, which includes an economic analysis of the trading arrangements and the barriers to entry in wholesale power trades in Europe. The report assesses the economic impact on power market participants of a range of different options for estimating the path of power in an interconnected system where power price and cross-border capacity allocation are determined simultaneously and anonymously.
Europe Economics’ final report on the Market Abuse Regulation (MAR) has been published. This study analyses the cost impacts expected to arise from the implementation of the European Securities and Markets Authority’s Technical Standards related to the MAR. Our work covered topics such as Market Soundings, Insider Lists and Suspicious Transaction and Order Reporting.
Europe Economics has published a new study of the EU market for patented medicines. Serious problems are identified for patients in lower income countries, resulting from the combination of External Reference Pricing and parallel trade. You can view the annexes to this report here
, and a discussion paper on the case for transparency in pricing here
Europe Economics have written a research paper for the European Parliament's Committee on Economic
and Monetary Affairs on the impact of proposed EU regulations on Money Market Funds. You can read our full report by clicking on the link below and read an executive summary written by the European Parliament by clicking here
Europe Economics have written a report for the Department for Business, Innovation & Skills considering the impact of the single market on prices, quality and the range of goods available. It develops an international benchmarking approach to measure the effect of the single market and then tests this method on the car and home insurance sectors.
Europe Economics, with our partners Ramboll and the Evaluation Partnership, have conducted a study for DG Taxud to assess the substitutability between physical and electronically-supported publications; evaluate the impact of current VAT reduced rates; and evaluate the impact of extending either the reduced rate or the standard rate regime to all kinds of publications.
This Europe Economics report for Business for Britain focuses on EU regulation and tax measures affecting wholesale financial services — of vital interest to the City — and considers which, of such regulation introduced at EU level, the UK would have introduced itself, acting alone, and which it would not.
The economic impact of interchange fee regulation in Poland; a report for Mastercard.
Andrew Lilico, Executive Director of Europe Economics and author of the report, said:
“The impact of similar legislation around the world provides a clear warning of the need for further scrutiny of the proposed regulations. The experience in Spain, Australia and the United States has been that consumers have so far paid more in banking fees, but not seen a reduction in prices at the shops. Large retailers appear to gain the most, while small businesses might not enjoy the same reductions in fees, but could pay more for their banking services.
Proposals to regulate commercial cards and separate schemes and card processing are likely to be particularly disruptive. The consequences of legislative interference in interchange fee rates require much more careful examination than they have received up to now. The justification for action is not rigorous enough for an intervention with so many poorly understood risks.”
Europe Economics have written a report for the Financial Conduct Authority on an evaluation of the costs and benefits of a change to the accountability regulations in the financial services sector and amendments to the rules on remuneration. This included the development of a cost of compliance model and estimation of the indirect costs and benefits.
This report was commissioned from Europe Economics by Business for Britain. Chancellor George Osborne recently stated: “If we cannot protect the collective interests of non-eurozone member states then they will have to choose between joining the euro, which the UK will not do, or leaving the EU.” This report considers whether the concern Osborne raises is applicable to EU-level setting of finance and financial services regulation and, if so, what reforms might address it.
We argue that prior to the Eurozone crisis, the general thrust of EU financial services measures reflected the UK’s traditions of liberalisation, competition and the encouragement of trade. This was particularly so in the ways EU-level financial regulation affected other Member States much more than it affected the UK, because EU rules mirrored pre-existing UK rules. We illustrate this with the examples of the Markets in Financial Instruments Directive and the Takeover Directive. Furthermore, there was a traditional reluctance to over-rule the EU on financial services regulation as the UK was the centre of the largest finance / financial services industry in Europe, whilst the EU in turn offered UK firms large and growing financial services export opportunities.
Since the financial crisis of 2008 and especially since the Eurozone crisis of 2010 onwards, the UK’s influence on EU-level financial services regulation has declined markedly. In many parts of the EU the financial crisis and thus the Eurozone crisis are blamed upon “light touch” regulation failing the discipline the activities of “Anglo-Saxon” financiers in the US and UK. For many in the EU, the UK’s pre-crisis influence upon financial regulation is seen as malign.
Both in the UK and in the rest of the EU, there has been a significant change in the spirit and thrust of regulation since 2008. But whereas in the UK the change has been towards increasing quality of supervision and strengthening market incentives, at EU level the focus has been much more upon extending scope of regulation, curbing specific behaviours, and protecting the integrity of the Eurozone. The Eurozone is now set to have the collective weight in qualified majority voting to impose any financial regulation it chooses upon the UK, and its significantly divergent interests mean it may do so.
This considerable loss of UK influence is exemplified by the UK being reduced to pursuing four legal cases in the financial services regulation area at the European Court of Justice — at least three of which it seems likely to lose. At the same time, opportunities for financial services exports outside the EU are now growing (and expected for the foreseeable future to grow) much more rapidly than inside the EU, increasing the cost to UK exporters of an EU focus, whilst the main threats of regulatory arbitrage to the UK are less and less from other European countries and more and more from outside the EU.
We consider potential reforms to EU-level setting of financial services regulation, including the extension of “double majority voting” (whereby changes to Single Market rules would require a majority of both Eurozone and non-Eurozone members to pass) and specific undertakings for forbearance from other EU Member States in respect of financial and financial services regulation. We argue that although such measures may offer some protection in the very short term (up to around 2018) they are unlikely to be sustainable over the longer term because almost all current non-Eurozone members of the EU intend to join the euro by 2020, meaning “double majority voting” would become very close to a UK veto on any new financial regulation — and thus unacceptable to Eurozone members.
To make such reforms to voting procedures viable over the longer term would require a large influx of new EU members that would not be required or expected to join the euro for many decades. Given the change to the nature of the EU that would result and the pool of countries from which such an influx would have to come, the challenges of achieving such a large expansion would be very significant indeed.
These are complex issues, and further research would be warranted in a number of areas. But we believe the central message is clear: For EU-level setting of finance/financial services to be in the UK’s interests long-term, as well as amendments to a number of existing EU regulations, there would also need to be a set of new principles for how EU financial regulations are agreed. Even then that would be unlikely to be viable unless the long-term membership of the Eurozone and non-Eurozone EU are much closer to balance than is currently planned.
MasterCard commissioned Europe Economics to undertake a critique of the European Commission’s impact assessment of policy options related to the regulation of interchange fees paid by acquiring banks to card issuing banks. The report also considers the impact of the European Commission’s proposals in the UK.
This report was commissioned by MasterCard from Europe Economics, and was produced in
conjunction with Professor Sheri Markose of the University of Essex. The study assesses the impacts
of introducing interchange fee (IF) regulation charged by card issuers to acquirers in the UK.
Europe Economics provided advice to the CAA on the use of long-run incremental cost (LRIC) estimates in assessing the competitive price level and the existence of market power, in December 2012. The CAA has published our work as part of its ‘Minded To
’ report for the Stansted Market Power Assessment.
Our work is also referenced in the CAA’s initial proposals
for economic regulation at Stansted.
Our work on LRIC is also referenced in the CAA’s initial proposals
for economics regulation for Gatwick Airport. This document includes GAL’s comments on our work and our response.
This paper investigates whether movements in index-linked government bond yields are correlated with movements in medium-term GDP growth rates in the way one might expect from theory. The paper finds that movements in UK ten-year index-linked gilts can now be seen to have been highly correlated with movements in average ten-year GDP growth (a relationship that has not been obvious until the recent recession). As theory implies should be possible, we appear to be able to infer an excellent forecast for the ten-year ahead growth rate of the economy from the yield on index-linked bonds. When we apply this model to current data, the forecast growth rate is markedly lower than that produced by approaches such as those used by the UK Office for Budget Responsibility.
Europe Economics provided analysis for the Open Europe report on safeguarding the UK's financial trade in Europe. Open Europe argues that the Government must seek to safeguard the economic benefits to Europe and the UK offered by the financial services sector. We contributed to the quantification of the impact of financial centres and financial development on growth.
In a paper for Open Europe, Europe Economics considered the pros and cons of the European Union setting financial services regulation to apply to the UK. It is argued that some of the most material reasons why EU setting of financial regulation might have been to the net benefit of the UK, are unlikely to apply over the next few years.
The European Commission (DG Justice) has published a major empirical study carried out by Europe Economics on the problems that consumers experience with digital content services.
ComReg has published Europe Economics' report on the costs and benefits of options to enable international access to Irish non-geographic numbers.
The City of London has published a report by Europe Economics on the value of Europe's international financial centres to the EU economy. The report demonstrates that the activities of international financial centres are not socially useless (or even socially destructive) and that the financial sector innovations are generally not destructive. International financial centres produce and contribute towards a whole host of socially useful functions that households, businesses and governments benefit from.
The Phase 3 report on trajectories for achieving zero carbon standards for new non-domestic buildings has been published by CLG. Europe Economics, working with AECOM carried out the updated cost-benefit analysis following on from our work on Phases 1 and 2.
Ofwat has published a report by Europe Economics on the use of comparators in utility regulation. The report analysed different possibilities for what is compared, how comparisons are made, and how the results are used, drawing on examples from a number of different utility regulators. The report also provided recommendations on how Ofwat might use comparators going forward.
Article by Stefano Ficco and Saattvic for Competition Law Insight on whether the super-complaint regarding excessive online transaction surcharges by the consumer organisation Which? to the OFT is economically justifiable.
Europe Economics's advice to Ofgem on the cost of capital for transmission and gas distribution (Phase III Report).
Europe Economics's advice to Ofgem on the cost of capital for transmission and gas distribution.
To view the main document click on the title.
To view the referenced document by Europe Economics for Ofgem, click here
Dermot Glynn spoke at the Pharmaceutical Parallel Trade Conference hosted by SMI in London in February 2011 about patient safety and access to medicines when repackaging of parallel trade medicines is allowed.
The following publication is reproduced from IMS Pharma Pricing & Reimbursement April 2011 and details Dermot Glynn's speech.
Europe Economics's advice to Ofgem on the cost of capital for transmission and gas distribution (Phase I Report).
Our report on the role of the US Small Business Administration in public procurement has been published by the Enterprise Trust today.
Dr Andrew Lilico has written a letter to provide an update to previous reports on the economic analysis of restrictions on the display of tobacco products in light of relevant additional data recently published in Canada for JTI.
A Report by Europe Economics on Future Price Limits – Risk and Incentives: Options Appraisal has been published by Ofwat and is now available.
The report reviews principles and practice in setting incentives and managing risk and looks at how regulation might develop in the water sector as this market is opened to competition.
Please note the report may take a few seconds to download.
Europe Economics report for the CAA.
Europe Economics was commissioned by the CAA to advise on the appropriate cost of capital that NERL is allowed to charge over the third price control period CP3.
Europe Economics advised the CAA on regulating finance issues in relation to NATS, in particular the concern of the CAA that bondholders may not view as credible any stated commitment by the CAA not to “bail out” NATS in the event of financial distress as credible.
Our report on the role of the US Small Business Administration in public procurement has been published by the Enterprise Trust.
To access the report through the Enterprise Trust website
, click on 'Procurment and SMEs in the US'.
This Short Impact Assessment by Europe Economics builds on the Impact Assessment carried out by the European Commission to provide a quantitative assessment of the costs and benefits associated with the so-called “AIFM Directive”. It considers the rationale for intervention in the AIFM sector, as well as alternative approaches for regulation
Ofwat published its final price determinations for the water industry on November 25 2009. Water companies now have a few weeks to decide whether to accept Ofwat's determinations or to appeal to the Competition Commission. Europe Economics have been advising Ofwat on cost of capital and financeability. Our updated report on the cost of capital has been published on the Ofwat website.
Europe Economics has produced a Supplemental Report for JTI on the impacts of restrictions on the display of tobacco products.
A report assessing methods which should be used to determine the prices to be
charged by Telstra for use of its local loop, in particular for the Unconditioned Local Loop
Europe Economics was invited in February 2009 to express its views on regulation and regulators to the House of Commons Regulatory Reform Committee in connection with its inquiry into "Themes and Trends in Regulatory Reform". The Committee has now published its report, which may be viewed on-line.
Click to access the House of Commons Regulatory Reform Committee website.
To view the submission of Europe Economics click on 'WRITTEN EVIDENCE - VOLUME II (HC 329-II)' at the foot of the page, then click on 'Memorandum submitted by Europe Economics'.
Europe Economics' report for the FSAP Evaluation has now been published. Our work was based on structured interviews with a diverse mix of European financial services companies to obtain estimates of the cost of compliance with the selected directives (MiFID, CRD, 3AMLD, Transparency Directive, Financial Conglomerates Directive and Prospectus Directive). The study was completed in January 2009.
Report for the European Parliament
A report for the Irish Commission for Communication Regulation
Europe Economics has prepared a report on the economic analysis of a display ban and/or plain packs requirement in the UK for JT International and Gallaher Limited (both members of the Japan Tobacco Group).
CAA reference to the Competition Commission for Stansted
Airport Supporting Paper IV
Economic Regulation of Heathrow and Gatwick Airports 2008–2013 – CAA Decision, Supporting Paper I
Report for the European Commission DG Energy and Transport.
In April 2006, the DTI concluded a consultation on the possibility of extending Sunday trading hours for larger stores. It also commissioned a cost benefit analysis of such a policy move from consultants Indepen, and that analysis was published in early May 2006. The Association of Convenience Stores (ACS) then asked Europe Economics to review Indepen's report.
Report for the Campaign to Protect Rural England
Working Paper by Andrew Lilico