Risky business: political uncertainty and the cost of capital for regulated firms

Statements by politicians about nationalising or intervening in the functioning of regulated industries have attracted substantial media attention in recent times, leading to an increase in political and regulatory risk for regulated industries. A case study focusing on National Grid, the energy transmission company in the UK, suggests that increased political and regulatory risk can affect the valuation of regulated utilities through a combination of lower expected cash flows and a higher cost of capital

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State aid spotlight on tax: the General Court’s judgments on Fiat and Starbucks

In 2015, the European Commission ordered Starbucks and Fiat to each pay €20m–€30m in the Netherlands and Luxembourg, respectively, as their tax arrangements were found to constitute illegal state aid. On 24 September 2019, the General Court upheld the Commission’s Fiat decision, but annulled the Starbucks decision. What were the key economic issues in these cases, and what are the implications of the judgments?

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State of play: what’s going to happen with UK freight after Brexit?

The Prime Minister of the UK, Boris Johnson, has pledged to deliver Brexit on 31 October 2019, without further delays, whether or not a deal is in place. Retailers and manufacturers are preparing their supply chains, with companies and organisations reviewing their distribution networks and, in many cases, stockpiling inputs. On 18 August, a UK government report on the detailed preparations and scenario modelling undertaken by HM Treasury was leaked to The Sunday Times. In this article, we review some likely sources of friction and delay and quantify the potential impact on supply chains.

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Death of an old star…evolution of a new one?

‘Superstar firms’ are increasingly dominating markets. Network effects may consolidate the position of these firms, but they can also help new entrants to undermine them. In some markets, network effects will both dampen competition ‘within’ the market and spur competition ‘for’ the market. Francesca Arduini, Oxera Analyst, argues that we can employ the framework of evolutionary game theory to derive four key policy insights into this topic

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Competition between airports in Europe soars… but where next for regulation?

Where airports do not face effective competition, it may be necessary to introduce economic regulation to protect passengers’ interests. Regulation can help to ensure fair prices, sufficient investment, high-quality service, and efficient costs. At the same time, it is important that regulatory interventions are targeted at areas where competition will not deliver the desired outcomes. With increasing competition between airports, what tools are available to help policymakers decide whether regulation is required?

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No Withdrawal Agreement? What happens next?

During October 2018, the UK and the EU are hoping to have agreed on the basis for the UK to withdraw from the Union, with the Agreement to be ratified by EU institutions and the UK Parliament before the UK leaves on 29 March 2019. What happens if the UK leaves with no deal in place?

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The Heathrow third runway: what next?

Given the approval of the UK government’s National Airports Policy Statement on 5 June 2018, observers may think that the last remaining major obstacles have been removed and the bulldozers are ready to roll in to clear the site for the third runway at Heathrow. But in truth, as Mike Toms, Oxera Director, explains, there are still many hoops to jump through before the project gets off the ground

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Discrimination or differentiation? Price discrimination as an abuse of dominance

When does price discrimination by a dominant firm amount to an abuse? Is the mere existence of a price difference sufficient? A recent ruling by the Court of Justice of the European Union (CJEU) provides some guidance on these questions, highlighting the ability to distort competition as a key criterion for a finding of abuse. Taking an economic perspective, we look at the CJEU’s approach and consider the implications for other cases of discrimination more broadly

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