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*

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.

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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