Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, August 27, 2014

'Financial Fair Play' or 'Oligopoleague' of Football Clubs?: A Preliminary Review Under European Union Competition

Nicolas  Petit, University of Liege discusses 'Financial Fair Play' or 'Oligopoleague' of Football Clubs?: A Preliminary Review Under European Union Competition.

ABSTRACT: This short paper offers a first analysis of the UEFA's "break even requirement" under the EU competition rules. It shows that there are good reasons to believe that the UEFA Financial Fair Play regulation violates Article 101 of the Treaty on the Functioning of the EU, in particular because it limits investments in the sense of Article 101(1) b) TFEU and in turn risks ossifying the market structure to the benefit of a tight oligopoly of football clubs.

August 27, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 26, 2014

ABA Section of Antitrust Law Antitrust Masters Course, October 9-11 2014

Every two years, the ABA Section of Antitrust Law puts on the highly-regarded Masters Course—a conference directed at young but experienced associates, partners, and government and in-house attorneys to provide deeper insight into key antitrust principles.  This is an unmatched training opportunity featuring a stellar line-up of senior antitrust practitioners in the public and private sectors.  This year, the conference will take place on October 9-11 at the Colonial Williamsburg Lodge in Historic Williamsburg, VA.

This program features a series of interactive sessions including breakout sessions on topics such as merger clearance, cartel practice, monopolization, class action litigation, antitrust economics, distribution issues, and non-U.S. competition law. 

After participating in this program, attendees will have gained invaluable insights into the latest and most important antitrust developments, learned the practice tools that are used by some of the most experienced antitrust practitioners in the field, and become personally acquainted with many distinguished leaders of the antitrust bar. So be sure to register early as space is limited for this outstanding program!

Visit www.ambar.org/atmasters to register, view faculty listing, download the full conference brochure/agenda and learn more today!

Additional Links:

Brochure PDF

Agenda

Faculty List

Hotel

Registration Information

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Lead Jurisdiction Concepts: Towards Rationalizing Multiple Competition Policy Enforcement Procedures

Oliver Budzinski, Ilmenau University of Technology discusses Lead Jurisdiction Concepts: Towards Rationalizing Multiple Competition Policy Enforcement Procedures.

ABSTRACT: Lead jurisdiction models represent one option how to extend and enhance contemporary interagency cooperation among competition policy regimes. They constitute a multilateral, case-related form of cooperation that is suited to effectively create a one-stop-shop for the prosecution of international cartels, the handling of cross-border mergers and acquisitions and the governance of international antitrust cases. Thus, lead jurisdiction models offer considerable economic benefits. However, they also entail several caveats. Three possible working problems and downside effects of lead jurisdiction models in international competition policy enforcement are discussed in this paper.

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Patents and Cumulative Innovation: Causal Evidence from the Courts

Alberto Galasso, University of Toronto and Mark Schankerman, London School of Economics provide Patents and Cumulative Innovation: Causal Evidence from the Courts.

ABSTRACT: Cumulative innovation is central to economic growth. Do patent rights facilitate or impede follow-on innovation? We study the causal effect of removing patent rights by court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeals for the Federal Circuit to control for endogeneity of patent invalidation. Patent invalidation leads to a 50 percent increase in citations to the focal patent, on average, but the impact is heterogeneous and depends on characteristics of the bargaining environment. Patent rights block downstream innovation in computers, electronics and medical instruments, but not in drugs, chemicals or mechanical technologies. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

New CPI Antitrust Chronicle Issue: Antitrust Antipasto

In this issue:

We're ending the summer with a departure from our usual focus on a single topic, rather presenting a diverse and topical assortment of articles. First up is Judge Ding Wenlian from the Shanghai Higher People's Court who discusses how Chinese authorities look at minimum RPM agreements. Then Michael Carrier continues our ongoing discussion of SEP issues with a comprehensive primer. Staying with technology issues are Shyam Khemani on how to best appraise the internet search market for competition violations and Mario Todino who finds a surprising convergence in the U.S. and EU approach to IP Rights. Finally, Jim Nieberding focuses on the potential anticompetitive aspects of MFNs. Enjoy!

Antitrust Antipasto
  1. Ding Wenlian, Aug 22, 2014

    Judicial Evaluations of Minimum Resale Price Maintenance Behavior

    In the absence of sufficient empirical evidence indicating that most minimum resale price maintenance behaviors harm competition, for China it is not a wise choice to adopt either a “per se illegal” or "principle of prohibition + exceptions exemption" for minimum resale price maintenance behavior. Ding Wenlian (Shanghai Higher People’s Court)

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  2. Michael Carrier, Aug 22, 2014

    What You Need To Know About Standard Essential Patents

    SEPs present complex issues that are constantly changing and bear watching. Michael Carrier (Rutgers Law School)

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  3. R. Shyam Khemani, Aug 22, 2014

    Competition, Innovation, and Dynamic Change in the Internet Information Search Industry

    Competition authorities need to ascertain if a firm’s alleged dominant market position stems from “superior competitive performance” over rivals. R. Shyam Khemani (MiCRA)

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  4. Mario Todino, Aug 22, 2014

    Antitrust Rules and IP Rights in the European Union and the United States—Towards Convergence

    There is much more convergence between the U.S. and the EU systems than what has been conventionally thought. Mario Todino (Gianni, Origoni, Grippo, Cappelli & Partners)

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August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Who is guarding China's trust busters?

Angela Zhang (Kings College) has an op-ed that asks Who is guarding China's trust busters?

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Experimenting with Behavior Based Pricing

Zuzana Brokesova (University of Economics in Bratislava), Cary Deck (Sam M. Walton College of Business, University of Arkansas and Economic Science Institute, Chapman University), Jana Peliova (University of Economics in Bratislava) are Experimenting with Behavior Based Pricing.

ABSTRACT: Many purchases of differentiated goods are repeated, giving sellers the opportunity to engage in price discrimination based upon the shopper’s previous behavior by either offering loyalty discounts to repeat buyers or introductory rates to new customers. Recent theoretical work suggests that loyalty discounts are likely to be implemented when customer preferences are not stationary and sellers can pre-commit to prices for repeat buyers, but otherwise repeat buyers can be expected to pay the same or more than new buyers. This paper reports the results of a series of controlled laboratory experiments designed to empirically test the impact of these factors on pricing strategies, seller profit and total cost to consumers. Absent price pre-commitments, sellers in the lab engage in poaching when it is optimal to do so, but the ability to pre-commit leads to prices being relatively more favorable to loyal customers. Customer! poaching increases seller profit and increases total consumer costs in the case of stable consumer preferences without price pre-commitment.

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay?

Keith M. Drake, Martha A. Starr, Thomas McGuire ask Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay?

ABSTRACT: Brand and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer along with a specified date at which the generic would enter the market.  The Federal Trade Commission contends that these agreements extend the brand’s market exclusivity and amount to anticompetitive divisions of the market.  The parties involved defend the settlements as normal business agreements that reduce business risk associated with litigation.  The anticompetitive hypothesis implies brand stock prices should rise with announcement of the settlement.  We classify 68 brand-generic settlements from 1993 to the present into those with and without an indication of a “reverse payment” from the brand to the generic, and conduct an event study of the announcement of the patent settlements on the stock price of the brand.  For settlements with an indication of a reverse payment, brand stock prices rise on average 6% at the announcement.  A “control group” of brand-generic settlements without indication of a reverse payment had no significant effect on the brands’ stock prices.  Our results support the hypothesis that settlements with a reverse payment increase the expected profits of the brand manufacturer and are anticompetitive.

August 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, August 25, 2014

Hospital Mergers with Regulated Prices

Kurt R. Brekke (Dept. of Economics, Norwegian School of Economics and Business Administration), Luigi Siciliani (University of York) and Odd Rune Straume (University of Minho) explore Hospital Mergers with Regulated Prices.

ABSTRACT: We study the effects of a hospital merger using a spatial competition framework with semialtruistic hospitals that invest in quality and expend cost-containment effort facing regulated prices. We find that the merging hospitals always reduce quality, whereas non-merging hospitals respond by increasing (reducing) quality if qualities are strategic substitutes (complements). A merger leads to higher average treatment cost efficiency and, if qualities are strategic substitutes, might also increase average quality in the market. If a merger leads to hospital closure, the resulting effect on quality is positive (negative) for all hospitals in the market if qualities are strategic substitutes (complements). Whether qualities are strategic substitutes or complements depends on the degree of altruism, the effectiveness of cost-containment effort, and the degree of cost substitutability between quality and treatment volume.

August 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Patent litigants, patent quality, and software: lessons from the smartphone wars

Ron Cass (Boston University) offers Patent litigants, patent quality, and software: lessons from the smartphone wars.

ABSTRACT: Commentators, public officials, and scholars have sounded alarms over the smartphone patent wars — hundreds of cases asserting infringement of patents by makers of smartphones and tablet computers—often suggesting broad, categorical “fixes” to problems this litigation reveals. In general, these recommendations sweep too broadly, throwing out good claims as well as bad and needed remedies as well as questionable ones. However, calls for attention along two margins promise improvements. One factor, the identity of the enterprise asserting patent rights, already is being used by courts in considering appropriate patent infringement remedies but its use needs to be refined. The other factor, patent quality—especially in software patents, where the existence of parallel schemes of intellectual property protection exacerbates quality problems—is even more critical to the way the system operates. Addressing the patent quality issue (which is distinct from patent clarity or patent notice) can do more than other reforms to reduce costs without reducing innovation incentives.

August 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Bank Competition and Credit Constraints in Developing Countries: New Evidence

Florian LEON (Universite d'Auvergne) explores Bank Competition and Credit Constraints in Developing Countries: New Evidence.

ABSTRACT: Whether competition helps or hinders small firms' access to finance is in itself a much debated question in the economic literature and in policy circles, especially in the developing world. Economic theory offers conflicting predictions and empirical contributions provide mixed results. This paper considers the consequences of interbank competition on credit constraints using firm level data covering 70 developing and emerging countries. In addition to the classical concentration measures, competition is assessed by computing three non-structural measures (Lerner index, Boone indicator, and H-statistics). The results show that bank competition alleviates credit constraints, while bank concentration measures are not robust predictors of a firm's access to finance. Findings highlight that bank competition not only leads to less severe loan approval decisions but also reduces borrowers' discouragement. In addition, a secondary result of this paper documents that banking competition enhances credit availability more by reducing prices than by increasing relationship lending.

August 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Bank Competition, Borrower Competition and Interest Rates

Carlos Bellon explains Bank Competition, Borrower Competition and Interest Rates.

ABSTRACT: The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.

August 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, August 22, 2014

Measuring competition in banking: A critical review of methods

Florian LEON (Universite d'Auvergne) is Measuring competition in banking: A critical review of methods.

ABSTRACT: Many studies have attempted to investigate the determinants and implications of competition in the banking industry. The literature on the measurement of competition can be divided between the structural and non-structural approaches. The structural approach infers the degree of competition from the structure of the market. The non-structural approach, based on the New Empirical Industrial Organization, assesses the degree of competition directly by observing behavior of firms in the market. This paper reviews the most frequently-used structural and non structural measures of competition in banking. It highlights their strengths and weaknesses, especially for studies based on a limited number of observations.

August 22, 2014 | Permalink | Comments (0) | TrackBack (0)

Market Power in a Power Market with Transmission Constraints

Mette Bjorndal (Dept. of Business and Management Science, Norwegian School of Economics), Victoria Gribkovskaia (Dept. of Business and Management Science, Norwegian School of Economics) and Kurt Jornsten (Dept. of Business and Management Science, Norwegian School of Economics) explore Market Power in a Power Market with Transmission Constraints.

ABSTRACT: In this paper we present a model for analysing the strategic behaviour of a generator and its short run implications on an electricity network with transmission constraints. The problem is formulated as a Stackelberg leader-follower game. The upper level problem is generator’s profit maximisation subject to the solution of the lower level problem of optimal power flow (OPF) solved by system operator. Strategic bidding is modelled as an iterative procedure where the supply functions of the competitive fringe are fixed while the strategic player’s bids are changed in a successive order until the bid giving maximum profit is found. This application rests on the assumption of supply function Nash equilibrium when the supplier believes that changes in his bids will not influence other actors to alter their bid functions. Numerical examples are presented on a simple triangular network.

August 22, 2014 | Permalink | Comments (0) | TrackBack (0)

Progressive entry and the incentives to invest in alternative infrastructures

Marc Bourreau (Telecom ParisTech) and Joeffrey Drouard (Universite de Rennes 1) discuss Progressive entry and the incentives to invest in alternative infrastructures.

ABSTRACT: In this paper we study an entrant's incentives to build a network infrastructure, when there is an initial phase of service-based competition where it leases access to the incumbent's infrastructure. We build a model in which the phase of service-based competition allows the entrant to step into the market by progressively acquiring market experience. We show that the acquisition of experience in the phase of service-based competition delays the entrant's investment when the prospects for infrastructure investment are good, and accelerates investment otherwise. We also show that when the acquisition of experience depends on the entrant's current customer base and facility-based entry is a long-term possibility, setting a low access price can accelerate the entrant's investment.

August 22, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 21, 2014

Does anti-competitive service sector regulation harm exporters? Evidence from manufacturing firms in Spain

Monica Correa Lopez and Rafael Domenech (both BBVA Research) ask Does anti-competitive service sector regulation harm exporters? Evidence from manufacturing firms in Spain.

ABSTRACT:  In a panel study of firm-level data from Spanish manufacturers, we show that reducing anti-competitive regulation in the provision of upstream services has a positive and sizeable effect on the volume of exports of downstream firms. Our estimates indicate that deregulation is very beneficial for the export performance of large corporations, especially if they are foreign-owned multinationals, while the evidence for SMEs is much weaker. Hence, firm characteristics matter for the connection between regulation and exports. Simulation exercises suggest that large firms increased their volume of exports by an average of 49% as a result of deregulation, such that the industries that benefited the most were typically more dependent on service inputs. The improvements in the regulatory framework of transportation services and energy provision that took place over the 1990s and 2000s in Spain had particularly strong effects on th! e volume of foreign sales.

August 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Supermarket Promotions and Food Prices

H. Lan, University of East Anglia, T.A. Lloyd, University of Nottingham and C.W. Morgan, University of Nottingham discuss Supermarket Promotions and Food Prices.

ABSTRACT: Using a sample comprising nearly a quarter of a million weekly prices from the largest seven supermarket chains in the UK, we present statistical evidence on two pricing practices that have attracted public interest. Analysing price dynamics before and after periods of promotional discounting the investigation finds first, no evidence of a general tendency for sales to disguise rises in the regular price, and second, some evidence for prices to rise prior to sales in a manner that is consistent with the exaggeration of the discount. As such, the results parallel the competition authority’s view of supermarkets use of promotions and also point to the useful contribution that retail price microdata might play in keeping prices in check.

August 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition between firms in developing and developed countries

Koichiro Kimura, Institute of Development Economics investigates Competition between firms in developing and developed countries.

ABSTRACT: We analyze competition in emerging markets between firms in developing and developed countries from the viewpoint of the boundaries of the firm. Although indigenous firms generally face a disadvantage in technology compared with foreign firms, they have an advantage in marketing as local firms. Moreover, they have opportunities to leave weaker fields to independent specialized firms and use lower wages. On the other hand, foreign firms also have their own advantages and disadvantages for growth. Therefore, entry conditions for indigenous firms can vary greatly depending on the situation. We classify these conditions into eight cases by developing a model and showing each boundary choice for indigenous firms.

August 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Financial decisions, market competition and firm performance: Empirical evidence for Ibero-American countries

Manuel Sanchez Valadez, Banco de Mexico provides Financial decisions, market competition and firm performance: Empirical evidence for Ibero-American countries.

ABSTRACT:  Economic literature had shown the existence of the interrelationship between the financial decisions of the firms and their competitive decisions; either by convenience or by data availability, most of empiric papers addressed separately the influence of both kinds of decisions over firm performance. With it, this paper through a cross-section model, which uses information of around 3,900 enterprises in 14 Iberoamerican countries, explores jointly the possible effects of both kinds of decisions of the firms (financial and competitive) over their performance. The results suggest the existence of differences in the relationships between variables accordingly the market competition intensity. Also the results suggest that the financial decisions of the firms could be used as an additional tool of the competitive strategy of the firms.

August 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 20, 2014

Competition and Environmental Externalities in the European Market of Municipal Waste

Francesco Silvestri (Dipartimento di Economia e Management, Universita di Ferrara) describes Competition and Environmental Externalities in the European Market of Municipal Waste.

ABSTRACT: The article focuses on the European Union Municipal Waste (MW) industry, exploring the effects of the conjoint implementation of Self Sufficiency Principle and of Proximity Principle (SSP/PP), that force local community to divert MW in the same district where it is generated. Since the number of disposing facilities allowed to operate in a district is regulated by (regional) public planning, forbidding through SSP/PP the opportunity to divert MW outside the district reduces the degree of competition in the whole sector. The rationale for a rule that denies a pillar of EU thinking such as competition policy seems to be to limit the end-of-the-pipe disposal of MW, and to favour the alternative strategy of selected collection and reuse-recycling. Setting an Industrial Organization model and solving it through backward induction, we show that in facts any increased competition in the industry leads to higher environmental externality, but even that the a compensation scheme from gainers to losers would be for effective than SSP/PP. This is true for any consistent value of the relevant variables, apart the case when the marginal external cost is over a specific threshold; in that unique case, the use of SSP/PP as a command and control environmental standard is justified.

August 20, 2014 | Permalink | Comments (0) | TrackBack (0)