This presentation by the Romanian Competition Council was delivered during a workshop on “Methodologies to measure market competition” held virtually for competition authorities officials on 23 February 2021. More materials on the topic can be found at http://oe.cd/mmkts. This presentation was uploaded with the author’s consent.

1. RCC`s Aggregate Index of
Competitive Pressure
(the AICP)
Oana Romano
Chief Economist

2. AICP
. The Concept
Objective: implementing a systematic approach to market monitoring
Solution: a composite index indicating the propensity to full manifestation
of competition in a particular market/industry based on market indicators
The AICP
▪ introduced in 2013
▪ developed by the Chief Economist Unit
▪ 2 upgrades (2014, 2020)
Lajos Kassák
Building, 1923

3. AICP
. The Methodology (I)
▪ 21 primary indicators evaluated using a 7-step Likert-type scale (low to
high competitive pressure)
▪ When aggregated, indicators are weighted by importance:
Category A+: barriers to entry
Category A: number of competitors, market concentration, “maverick” competitors,
innovation, market transparency, price elasticity of demand, product
homogeneity and business associations
Category B: symmetry of market shares, structural links, symmetry of costs, marketing and
communication efforts, demand shocks, buyer power and external
competition
Category C: stability of market shares, multi-market contacts, profitability, market growth
and general price level
Saul Steinberg
Cube’s Dream, 1960

4. AICP
. The Methodology (II)
▪ Adjustment of certain indicators’ individual scale step given specific
market configurations that enhance/diminish the impact
ex. profitability (when combined with high innovation)
stability of market shares (when combined with asymmetry)
market growth (when combined with low barriers to entry)
▪ Method to allocate numerical values to scale points: nonlinear
(concave function)
▪ Method to compute the aggregate index: summation of factors’
numerical values, normalization to maximum possible sum
▪ Interpretation: expressed in percentage terms, lower values indicate
risks to competition
ex. AICP IT consulting services: 71%, AICP notary services: 32%
2.4
4.0
5.5
6.7
7.9
9
0
1.6
2.7
3.6
4.5
5.3
6
1.0
1.8
2.4
3.0
3.5
4
0.8 1.3
1.8 2.2
2.6
3
0
1
2
3
4
5
6
7
8
9
10
1 2 3 4 5 6 7
Value
Scale’s step
Categoria A+ Categoria A Categoria B Categoria C

5. AICP
. The Process
▪ Use of both internal and public data
▪ Qualitative/quantitative market indicators, pros and cons, limitations
▪ Documenting each decision/change
▪ The role of internal expertise – industries under scrutiny have
dedicated analysts
▪ Common approach - CEU as the integrator
Saul Steinberg
12 Biographies/A to B, 1960

6. AICP
. The Outputs
▪ The analytical framework
▪ Scores from recurrent evaluation of selected industries in a structured
manner
✓ both a cross-section evaluation of national industries and a reference for
case specific results (over 40 industries evaluated yearly)
✓ industry comparisons at different levels:
external use – general values
internal use – disaggregated level
▪ Results from case specific analyses
0%
10%
20%
30%
40%
50%
60%
AICP
Structure
Similarity
Behavior
71.1%(1.4%)
70.9(0.9%)
68.2%(3.1%)
65.6%(0.9%)
63.7%(0%)
63.5%(3.9%)
62.8(2.7%)
60.4%(0%)
59.5%(2.6%)
59.5%(1.0%)
57%(5.3%)
56.6%(1.7%)
55.3%(0.0%)
55.2%(-0.3%)
55%(1.8%)
54.6%(2.6%)
54.5%(1.0%)
53%(0.0%)
52.5%(2.7%)
52.3%(3.6%)
51.3%(3.9%)
51.1%(1.7%)
50.3%(1.9%)
50.1%(0.0%)
48.9%(0.0%)
48.5%(3.5%)
48%(0.0%)
47%(1.7%)
47%(0.2%)
46.5%(-0.8%)
46.1%(0.1%)
45.5%(0.8%)
45.1%(0.9%)
45.1%(3.0%)
44.6%(2.1%)
44.1%(1.6%)
43.8%(-1.1%)
43.6%(0.0%)
42.2%(0.4%)
42.2%(0.7%)
39%(-3.8%)
38.5%(-1.7%)
36.5%(-0.9%)
35.6%(0.0%)
33.4%(2.9%)
31.9%(3.2%)
IT consulting services
Clothing and footwear retail
Pay TV channels
IT outsourcing services
Architectural services
Spirits production
Distribution of spare parts for motor vehicles
Cloud services (infrastructure)
Bitumen with road applications
IT integration services
Distribution of cars
Electricity supply
Medicines production
Road freight transport
Broadband internet access services
Milk production
Legal services
Services of financial auditors
Beer production
Electricity production
Sunflower oil production
Building materials - AAC
Precast concrete
Services of insolvency practitioners
Rail freight transport
Distribution of movies to cinemas
Fixed telephony services
Building materials - Ceramic blocks
Retransmission of TV programs
Mobile telephony services
Food retail
Life insurance
Expanded polystyrene
Retail distribution of fuels
Banking services associated with debit cards
Rail passenger transport
Wholesale distribution of medicines
Cigarette manufacturing
Optional auto insurance
Banking services associated with credit cards
Car insurance for civil liability
Natural gas production
Home insurance
Retail distribution of pharmaceutical products
Cement manufacturing
Notary services
2019 2020

7. AICP
. The Outcomes
▪ Advocacy
▪ Prioritization
▪ Knowledge management
▪ Market screening
▪ Deterrence
▪ Performance measurement
Key variables: complexity – coverage – scope – inputs – exposure
Roman Cotoşman
The Network

8. AICP and RCC’s Big Data Project
RCC’s ongoing extensive digital project – the Big Data platform
(information gathering and analytics)
? implementing a complementary simplified version of the aggregate
index, relying exclusively on quantitative data available within the
platform, enabling a higher coverage of national industries
✓ using the platform to obtain references for the holistic approach
(current index)
Saul Steinberg
Untitled, 1958

9. The Chief Economist Unit