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6 Rev. L & Econ. 1 (2010)

handle is hein.journals/rvleco6 and id is 1 raw text is: Sabotaging Entry: An Estimation of Damages in the Directory Enquiry Service Market* MAITE MARTINEZ-GRANADO, GEORGES SIOTIS Universidad del Pais Vasco and NAIDER European Commission, Universidad Carlos III de Madrid, and CEPR A number of European countries, among them the UK and Spain, have opened up their DirectoU Enquit Services (DQs) market to competition. In Spain, both local and foregn firms challeged the incumbent as of April 2003. The latter raised its rivals' costs and forced quaiy downgrading by providing an inferior quaiy version of the (essential) input, namely the subscribers database. We illustrate how it is possible to quantify the effect of the practice in a situation where an entrant has no previous histoU in the market. We use the UK experience to construct the relevant counterfactual, that is, the but-for scenario. After controlig for relative prices and advertising intensiy, we find that one of the foreign entrants achieved a Spanish market share substantialy below what it would have obtained in the absence of abuse. While the case was taken to Court and the nature of the abuse was recognized, the amount of damages awarded was limited to evidence of invoice-based inflated input costs, while estimates derived from construction of the but-for scenario were dismissed. This initial rulng was upheld on appeal. At the time of writing, an appeal had been lodged with the Tribunal Supremo (highest Appeal Court) regarding the quantum of damages. We beleve that the limited amount of damages probably reflects a mixture of an overly conservative attitude towards damage awards, coupled nith a lack of understanding of the underlying economic reasoning of the case, as well as of the quantitative evidence presented by the aggrieved parry. 1. INTRODUCTION One of the last telecom services to be effectively liberalized has been Directory Enquiries (DQs) over the telephone networks. The latter service had traditionally been provided by the incumbent under a regulated monopoly regime. Calls to a single universal number would give access to an operator that would provide the phone number of a physical or legal subscriber. The same kind of services were also available, at much higher prices, for international DQs. That was made possible by a series of

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