Antitrust and regulation, complements or substitutes? the case of a vertically integrated firm

Abstract

This paper studies the interaction between regulation and antitrust. We consider a situation where an incumbent provides access to an essential facility and competes downstream with an entrant such that the anticompetitive danger is twofold. First, abusive access charges reduce the benefits of competition and second the incumbent may engage in predatory pricing or “margin squeeze”. We show that access regulation and antitrust are complementary instruments, i.e. tighter exante regulation that tends to fix lower access charge demands expost more antitrust monitoring aimed to deter predation.