The Economic Effect of Competition Law enforcement: the case of the Netherlands

In this paper we try to bridge the gap between the outcome ambitions of competition policy in terms of welfare gains and consumer surplus and the longer term effects of competition policy on growth and employment. First of all, an overview is given of the different definitions of welfare. We explain why maximising the consumer surplus is an important part of the mission statement for most competition authorities. In the second part of the paper we estimate the impact of the introduction of the competition law on economic development. The effects of antitrust policies, merger control and energy regulation on the consumer surplus appear substantial. This increase in consumer surplus can be interpreted as a cut in the ¿market power wedge¿ which, from a modelling point of view, is comparable to a cut in the tax wedge. A model simulation for the Netherlands shows that the economy responded positively to this increase in the consumer surplus. We find that production has grown by an extra 0.5% and that employment has increased by 0.4% as a result of the enforcement of the Competition Law