Competition Policy. The Case of the German Beer Market


Term Paper, 2020

17 Pages, Grade: 2,3


Excerpt

Table of Contents

List of Abbreviations

List of Figures

1 Introduction

2 Definition
2.1 Determination of a price
2.2 Characteristics of competitive markets
2.3 Analysis of the German beer market
2.4 Bundeskartellamt

3 “Bußgelder gegen Brauereien B10-105/11”

4 Conclusion

Bibliography

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Figures

Figure 1: The equilibrium of supply and demand

Figure 2: Beer sales in Germany between 1995 to 2019 (in 1.000 hectolitres)

Figure 3: Development of consumer prices for beer in Germany in the years 2000 to 2019 (compared to the previous year)

Figure 4: Total sales of the leading German brewery groups in 2017 and 2018 (in 1,000 hectolitres)

1 Introduction

Competition is a cornerstone of our economic and social order. The system of competition is based on values that are fundamental to our society: freedom, initiative and personal responsibility. The fact that competition fundamentally leads to the best overall economic results is undisputed in most economies today. However, just as in sport, economic competition can only work if there are rules that everyone must abide by.”1

Andreas Mundt, President of the Bundeskartellamt

This assignment will give an overview on competition policy on the example of the German beer market. This includes the definition of how a price is determined and what the characteristics of a competitive market are. The German beer market will be described as an example of a competitive market. Subsequently the case “Bußgelder gegen Brauereien B10-105/11” 2 investigated by the Bundeskartellamt in 2014 will give a practical example for price agreements.

2 Definition

To give the economic background and the basic understanding of the topic this chapter will defined and summarize the theory of how a price is determined and what a competitive market is. Also, the German beer market will be described. The Bundeskartellamt and its field of activity will be introduced to build a basis for the case “Bußgelder gegen Brauereien B10-105/11”.

2.1 Determination of a price

It is assumed that companies want to achieve the highest possible profits. The focus of interest is the question of the criteria according to which companies set their sales prices in order to maximise their profits. Pricing is mainly influenced by the cost situation and competitive pressure in the respective markets. The intensity of competition is determined by the number of market participants and their behaviour. If, on the supply side, the number of market participants is divided into many, few and only one, the market forms polypol, oligopoly and monopoly can basically be distinguished.3

Figure 1: The equilibrium of supply and demand

Abbildung in dieser Leseprobe nicht enthalten

Source: Own figure

The total demand function in the price-quantity diagram (Figure 1) has a continuously falling trend and the total supply function has a continuously rising trend. If both functions are shown in one diagram, the two functions intersect. This point of intersection represents a so-called market equilibrium. It exists when, at a given market price the demand exactly matches the supply of the good. The price is called the equilibrium price. The supply and demand quantity resulting from this price is the equilibrium quantity. The equilibrium price therefore results in a market clearance, i.e. the quantity offered is bought up exactly by the households.4 In this case neither the suppliers nor the demanders have any reason to change their dispositions with regards to the good. There is neither excess demand nor excess supply.5

Any imbalance in the market is brought into equilibrium by the price mechanism. This happens automatically, so to speak, and without state intervention. The existence of imbalances the rule. Due to constant movements of the supply and demand curves resulting from continuous changes in supply and demand determinants, markets are in permanent processes of price adjustment towards equilibrium.6

2.2 Characteristics of competitive markets

Competition is a phenomenon in the economy. It is characterized by the existence of markets and at least two suppliers and buyers in competition with each other.7 The advantageous features of the price mechanism in a competitive market only arise if there is competition between suppliers. Competition does not necessarily exist of its own accord. The core business objective of companies is to generate profits. The less competition there is in the market, the easier this goal can be achieved. This predictably leads to companies striving to restrict competition or even eliminate it completely.

The basic strategic patterns of restriction of competition pursued by undertakings are characterised either by solidarity or by rivalry. Solidarity between suppliers can be created by price fixing, the formation of cartels, partial mergers of companies or full mergers. From a macroeconomic point of view, it often has to be assessed negatively as competition is restricted. A macroeconomic analysis of competition policy must, however, weigh up whether mergers between companies do not have economic advantages due to the exploitation of synergy effects and economies of scale.

[...]


1 Bundeskartellamt, “Das Bundeskartellamt in Bonn,”: 2, accessed February 2020.

2 Bundeskartellamt, “Fallbericht 2. April 2014 Bußgelder gegen Brauereien,” https://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Fallberichte/Kartellverbot/2014/B10-105-11.pdf?__blob=publicationFile&v=1, accessed January 2020.

3 Hansjörg Drewello, Frank Kupferschmidt, and Oliver Sievering, Markt und Staat (Wiesbaden: Springer Fachmedien Wiesbaden, 2018), p. 99.

4 Hansjörg Drewello, Frank Kupferschmidt, and Oliver Sievering, Markt und Staat (Wiesbaden: Springer Fachmedien Wiesbaden, 2018), pp. 68–69.

5 Ibid., pp. 68–69.

6 Ibid., p. 71.

7 Ibid., p. 50.

Excerpt out of 17 pages

Details

Title
Competition Policy. The Case of the German Beer Market
College
University of applied sciences Frankfurt a. M.
Course
MBA
Grade
2,3
Author
Year
2020
Pages
17
Catalog Number
V919352
ISBN (eBook)
9783346246066
Language
English
Tags
MBA
Quote paper
Samantha Kim Schönhaber (Author), 2020, Competition Policy. The Case of the German Beer Market, Munich, GRIN Verlag, https://www.grin.com/document/919352

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