The economic analysis of long-term contracts

In an article published in August 2014 in the Journal of Competition Law and Practice, David Spector addresses the economic analysis of long-term contracts.

Recent decisions by the European Commission, especially in the energy sector, reflect a suspicion that dominant companies might use such contracts to deter entry. However, these decisions leave room for a case-by-case approach.

This article reviews the possible foreclosure effects of such contracts as well as their procompetitive justifications. It ends with a few suggestions on the handling of long-term contracts by competition authorities, to better focus on those that are likely to harm competition without depriving companies and their customers from the frequent efficiency benefits that such contracts may bring.