Antitrust & Competition Policy Blog

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

Friday, September 4, 2015

Economic indicators for the presence of tacit collusion in merger control under varied focal points

Adrian Proctor describes Economic indicators for the presence of tacit collusion in merger control under varied focal points.

ABSTRACT: This article discusses how different focal points in a market can lead to different collusive agreements and how merger analysis can identify markets that may be vulnerable to these potential agreements. Focal points based on customer allocation and geographic markets are considered with recent UK examples of this type of analysis. The focal point firms are using for coordination can affect the transparency required to maintain coordination and how targeted or effective any punishment for deviation can be.

September 4, 2015 | Permalink | Comments (0)

Thursday, September 3, 2015

Learning from Unrealized versus Realized Prices

Kathleen Ngangoue and Georg Weizsacker are Learning from Unrealized versus Realized Prices.

ABSTRACT: Our market experiment investigates the extent to which traders learn from the price, differentiating between situations where orders are submitted before versus after the price has realized. When market participants have to submit their bids conditional on the price, they show a bias by reacting only to their private information and not to the hypothetical value of the price. In a sequential trading mechanism, where the price is known at the bid submission, bids react to price to an extent that is roughly consistent with the benchmark theory.

September 3, 2015 | Permalink | Comments (0)

Prices, Profits, and Preference Dependence

Yongmin Chen, University of Colorado at Boulder and Michael Riordan, Columbia University explore Prices, Profits, and Preference Dependence.

ABSTRACT: We develop a new approach to discrete choice demand for differentiated products, using copulas to separate the marginal distribution of consumer values for product varieties from their dependence relationship, and apply it to the issue of how preference dependence affects market outcomes in symmetric multiproduct industries. We show that greater dependence lowers prices and profits under certain conditions, suggesting that preference dependence is a distinct indicator of product differentiation. We also find new sufficient conditions for the symmetric multiproduct monopoly and the symmetric single-product oligopoly prices to be above or below the single-product monopoly price.

September 3, 2015 | Permalink | Comments (0)

'Private Enforcement of Competition law, The Hidden Story Part II: Competition Litigation Settlements in the UK, 2008-2012

Barry J Rodger, University of Strathclyde,  examines Private Enforcement of Competition law, The Hidden Story Part II: Competition Litigation Settlements in the UK, 2008-2012.

ABSTRACT: In the UK, competition law disputes which are made visible by the existence of court judgments, and especially by final substantive judgments on the merits, are likely to be the ‘tip of the iceberg’. This article provides an account of a research project on competition litigation settlements in the UK, in relation to the period 2008-2012 (a follow-up to earlier research for the period 2000-2005), comprising an extensive and focused analysis of the data accumulated in relation to the reported settlements during that period. This article helps to provide at least a partial narrative about the ‘hidden story’ of settlement practice in the UK. A number of patterns emerge from the research:- competition litigation settlements have predominately taken place in relation to Article 101, always in a B2B context, involving multiple parties, and these tend to result in payments in lieu of damages. The data evidences a small but significant role for mediation in this context, particularly in relation to large cartel-based claims involving multiple claimants (and defendants) in follow-on claims.

September 3, 2015 | Permalink | Comments (0)

Anti-Cartel Enforcement in a Contemporary Age Leniency Religion

Now Out is Anti-Cartel Enforcement in a Contemporary Age Leniency Religion edited by Caron Beaton-Wells (Melbourne Law School) and Christopher Tran (Victorian Bar, Australia). 

BOOK ABSTRACT: Leniency policies are seen as a revolution in contemporary anti-cartel law enforcement. Unique to competition law, these policies are regarded as essential to detecting, punishing and deterring business collusion – conduct that subverts competition at national and global levels. Featuring contributions from leading scholars, practitioners and enforcers from around the world, this book probes the almost universal adoption and zealous defence of leniency policies by many competition authorities and others. It charts the origins of and impetuses for the leniency movement, captures key insights from academic research and practical experience relating to the operation and effectiveness of leniency policies and examines leniency from the perspectives of corporate and individual applicants, advisers and authorities. The book also explores debates surrounding the intersections between leniency and other crucial elements of the enforcement system such as compensation, compliance and criminalisation. The rich critical analysis in the book draws on the disciplines of law, regulation, economics and criminology. It makes a substantial and distinctive contribution to the literature on a topic that is highly significant to a wide range of actors in the field of competition law and business regulation generally.

 

September 3, 2015 | Permalink | Comments (0)

Identifying Two Part Tariff Contracts with Buyer Power: Empirical Estimation on Food Retailing

Celine Bonnet and Pierre Dubois are Identifying Two Part Tariff Contracts with Buyer Power: Empirical Estimation on Food Retailing.

ABSTRACT: Using typical demand data on differentiated products markets, we show how to identify and estimate vertical contract terms modelling explicitly the buyer power of downstream firms facing two part tariff offered by the upstream firms. We consider manufacturers and retailers relationships with two part tariff with or without resale price maintenance and allow retailers to have a buyer power determined by the horizontal competition of manufacturers. Our contribution allows to recover price-cost margins at the upstream and downstream levels as well as fixed fees of two-part tariff contracts using the industry structure and estimates of demand parameters. Empirical evidence on the market for bottles of water in France shows that two part tariff contracts are used without resale price maintenance and that the buyer power of supermarket chains is endogenous to the structure of manufacturers competition. We are able to estimate total fixed fees and profits across! manufacturers and retailers.

September 3, 2015 | Permalink | Comments (0)

Optimal licensing of uncertain patents in the shadow of litigation

Rabah Amir (University of Iowa); David Encaoua (CES, CNRS) and Yassine Lefouili (Toulouse School of Economics, CES, CNRS) examine Optimal licensing of uncertain patents in the shadow of litigation.

ABSTRACT: This paper investigates the choice of a licensing mechanism by the holder of a patent whose validity is uncertain. We provide sufficient conditions of a general nature under which the licensor prefers to use a per-unit royalty contract. In particular we show that this is the case for the holders of weak patents if the strategic effect of an increase in a potential licensee's unit cost on the equilibrium industry profit is positive. The latter condition is shown to hold in a Cournot (resp. Bertrand) oligopoly with homogeneous (resp. differentiated) products under general assumptions on the demands faced by firms. As a byproduct of our analysis, we contribute to the literature on the cost paradox in oligopoly by offering some new insights of independent interest regarding the effects of cost variations on Cournot and Bertrand equilibria.

September 3, 2015 | Permalink | Comments (0)

Wednesday, September 2, 2015

Brazilian Competition Compliance Guidelines Workshop

Attached is a photo from my presentation at CADE on Monday on the Brazilian Competition Compliance Guidelines. Also presenting was Mario Schapiro of FGV Law.

Cade

 

September 2, 2015 | Permalink | Comments (0)

Physician competition and the provision of care: evidence from heart attacks

Abe Dunn (U.S. Bureau of Economic Analysis) and Adam Hale Shapiro (Federal Reserve Bank of San Francisco) examine Physician competition and the provision of care: evidence from heart attacks.

ABSTRACT: We study the impact of competition among physicians on service provision and patients’ health outcomes. We focus on cardiologists treating patients with a first time heart attack treated in the emergency room. Physician concentration has a small, but statistically significant effect on service utilization. A one-standard deviation increase in cardiologist concentration causes a 5 percent increase in cardiologist service provision. Cardiologists in more concentrated markets perform more intensive procedures, particularly, diagnostic procedures—services in which the procedure choice is more discretionary. Higher concentration also leads to fewer readmissions, implying potential health benefits. These findings are potentially important for antitrust analysis and suggest that changes in organizational structure in a market, such as a merger of physician groups, not only influences the negotiated prices of services, but also service provision.

September 2, 2015 | Permalink | Comments (0)

Help us to help us: how consumer data can alter quality races

Christian Trudeau (Department of Economics, University of Windsor) and Zheng Wang (Capital University of Business and Economics) explore Help us to help us: how consumer data can alter quality races.


ABSTRACT:   Recent technological changes have made it easy for firms to collect data on their consumers, which in turns allows them to improve the efficiency of their R&D. We explore the strategic interaction that occurs when two firms compete in a vertically-differentiated market to acquire this data and invest in R&D to set the quality of their product. Among our results, we find that if the initial quality lead is not too large, there exists equilibria where the laggard is able to reverse the lead by being particularly aggressive in acquiring this consumer data. While total welfare is higher when the initial leader maintains its lead, consumers prefer leapfrogging.

September 2, 2015 | Permalink | Comments (0)

Bank Competition and Financial Stability: Much Ado about Nothing?

Tomas Havranek and Diana Zigraiova offer a meta analysis of Bank Competition and Financial Stability: Much Ado about Nothing?

ABSTRACT: The theoretical literature gives conflicting predictions on how bank competition should affect financial stability, and dozens of researchers have attempted to evaluate the relationship empirically. We collect 598 estimates of the competition-stability nexus reported in 31 studies and analyze the literature using meta-analysis methods. We control for 35 aspects of study design and employ Bayesian model averaging to tackle the resulting model uncertainty. Our findings suggest that the definition of financial stability and bank competition used by researchers influences their results in a systematic way. The choice of data, estimation methodology, and control variables also affects the reported coefficient. We find evidence for moderate publication bias. Taken together, the estimates reported in the literature suggest little interplay between competition and stability, even when corrected for publication bias and potential misspecifications.

September 2, 2015 | Permalink | Comments (0)

Determinants of My Travel Schedule

I returned from Brasilia yesterday, where someone asked me how I determine what invitations to accept in terms of conferences or presentations.  My answer is below:

Determinants of My Travel Schedule

  1. Quality of the program
  2. Will my going help my students get jobs
  3. Will it improve the UF brand
  4. Do I have a related client meeting
  5. How many days away from my wife and children will my travel require (fewer improves my chances of attending)
  6. Can I justify the trip to the girls because there are cute and cuddly animals in the jurisdiction (for example, I was allowed to travel to Brazil because the girls had seen Rio and liked the birds, my teaching at U Melbourne was because koalas and kangaroos are cute)
  7. Was any one of the Fast and Furious movies filmed in the jurisdiction.  If yes, this increases the likelihood that I will go.

 

 

 

September 2, 2015 | Permalink | Comments (0)

Brazilian Antitrust Lawyer Plays Guitar Onstage With Bono... and Then lands the Brazilian Merger Deal of the Year

As the website of the Brazilian U2 fan club explains Paulo Lilla, o brasileiro que tocou com o U2 no MSG:  Foi mágico!!!

Who is Paulo Lilla?  He is a partner at Lefosse Advogados.  He is also in the banking merger deal of the year - Bradesco's acquisition of HSBC's Brazilian assets.

September 2, 2015 | Permalink | Comments (0)

2016 Section of Antitrust Law International Scholar in Residence Program (“SAL SIR”) Now Open

The Section of Antitrust Law International Scholar in Residence Program (“SAL SIR”) will provide funding of $10,000.00 USD each for up to two scholars to visit the United States to pursue competition policy-related research in the Spring of 2016.

Open 2016 Scholar in Residence Announcement

September 2, 2015 | Permalink | Comments (0)

A Theory of Continuous Uncertainty Types

Achim I. Czerny (Faculty of Economics and Business Administration, VU University Amsterdam, the Netherlands) ; Erik T. Verhoef (Faculty of Economics and Business Administration, VU University Amsterdam, the Netherlands) ; Anming Zhang (University of British Columbia, Canada) provide A Theory of Continuous Uncertainty Types.

ABSTRACT: This paper distinguishes uncertainty types that differ continuously with respect to the degree to which uncertainty affects the optimal price/price markup or optimal quantity. A monopoly example is used to show that seemingly strong assumptions on functional forms can represent a wide variety of different scenarios, while (implicit) assumptions on continuous uncertainty types can lead to quite special results. Monopoly examples of the newsboy problem type are further used to show that the optimal capacity level and the optimal composition of capacity in terms of the number and size of production units depends crucially on the type of uncertainty and the employed functional forms for utilities and costs.

September 2, 2015 | Permalink | Comments (0)

Tuesday, September 1, 2015

Bertrand-Edgeworth games under triopoly: the payoffs

Massimo A. De Francesco and Neri Salvadori analyze Bertrand-Edgeworth games under triopoly: the payoffs.

ABSTRACT: The paper extends the analysis of price competition among capacity constrained sellers beyond duopoly and symmetric oligopoly. The main focus is on the equilibrium payoffs under triopoly. The paper also includes insightful examples highlighting features of equilibrium which can arise in a triopoly but not in a duopoly. Most notably, the supports of the equilibrium strategies need not be connected, nor need be connected the union of the supports; further, an atom may exist for a firm different from the largest one.

September 1, 2015 | Permalink | Comments (0)

Where Do We Stand on Discounts? - A Danish Perspective

Christian Bergqvist, University of Copenhagen/Faculty of Law asks Where Do We Stand on Discounts? - A Danish Perspective.

ABSTRACT: The dominant undertaking’s ability to award discounts and other loyalty inducing considerations are subject to much ambiguity and many unsettled issues. Despite discounts being a commercial requirement, even for the dominant undertaking, it’s difficult to draw up clear principles, and while the approach to non-dominant undertaking’s restriction of competition has been fundamentally recast over the last 20 years, the appraisal of single company behaviour remains more formal and rigid. However, there have recently been indications that some of the same leniency might have been extended to discounts and single company behaviour. Consequently, an attempt shall be made to provide some guidelines under EU and Danish practice’red. Danish companies would normally be governed by both and the later has been aligned to the former, thus providing general guidance on EU practice.

September 1, 2015 | Permalink | Comments (0)

cGUPPI: Scoring Incentives to Engage in Parallel Accommodating Conduct

Serge Moresi, Charles River Associates (CRA), David Reitman , Charles River Associates, Inc., Steven C. Salop, Georgetown University Law Center, Yianis Sarafidis, Charles River Associates (CRA) discuss cGUPPI: Scoring Incentives to Engage in Parallel Accommodating Conduct.

ABSTRACT: We propose an index for scoring coordination incentives, which we call the “coordination GUPPI” or cGUPPI. While the cGUPPI can be applied to a wide range of coordinated effects concerns, it is particularly relevant for gauging concerns of parallel accommodating conduct (PAC), a concept that received due prominence in the 2010 U.S. Horizontal Merger Guidelines. PAC is a type of coordinated conduct whereby a firm raises price with the expectation—but without any prior agreement—that one or more other firms will follow and match the price increase. The cGUPPI is the highest uniform price increase that all the would-be coordinating firms would be willing to implement without side payments. A larger cGUPPI implies a more pronounced incentive and ability for firms to engage in coordinated price increases. The difference between the post- and pre-merger cGUPPI (i.e. the Delta cGUPPI) is a practical way to score the effect of a merger on coordinated effects concerns.

September 1, 2015 | Permalink | Comments (0)

Patents, Technical Standards and Standards-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature

Jorge Contreras, Utah provides an overview of Patents, Technical Standards and Standards-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature.

ABSTRACT: Despite their potential efficiency benefits, voluntary consensus standards have over the past decade become the subject of significant private litigation, regulatory enforcement and policy debate. Much of the controversy centers on the perceived proliferation of patents covering standardized technologies, potentially abusive enforcement of such patents against manufacturers and users of standardized products, and the terms on which patent holders may be required to license the use of those patents to others. This chapter offers a brief overview of the legal and economic literature concerning interoperability standards and standards-setting organizations, with a focus on empirical studies and contemporary patent and patent licensing concerns.

September 1, 2015 | Permalink | Comments (0)

Monday, August 31, 2015

The Faceless Court

Angela Huyue Zhang King's College London – The Dickson Poon School of Law investigates The Faceless Court.

ABSTRACT: This Article is the first to study EU competition law by examining the behavior of judges and their law clerks (officially entitled référendaires) at the Court of Justice of the European Union, against the unique institutional settings in Europe.  The study is both quantitative and qualitative.  It provides the most comprehensive and up-to-date analysis of the background of judges and advocates general appointed to the Court since 1952.  It is also the first to provide a comprehensive statistical analysis on the background of référendaires.  As the background of référendaires is not publicly disclosed, the author hand-collected data from LinkedIn and created a dataset of 103 former référendaires and 74 existing référendaires working for the Court.  The study also benefits from a field trip the author conducted in May 2014 and extensive interviews with former and existing members and staff at the Court.

The Article has several major findings.  First, the quality of EU judges varies significantly, due to a lack of procedural safeguards for appointment and a high salary that attracts political appointees.  As a consequence, some judges are dominated by their référendaires.  Second, both judges and référendaires, especially those at the General Court, face increasingly heavy caseloads due to a number of inherent institutional defects.  This increases the risk for judges and their référendaires to compromise quality for quantity.   It also means that more work must be delegated to référendaires.  As a consequence, the voices of référendaires are amplified.  Third, référendaires come from a relatively homogeneous background and most of them are Francophones trained in the French legal system.   Moreover, judicial formalism increases the value of career référendaires, who become powerful conservative forces that resist changes and reform.  Furthermore, the revolving door between the Court and the Commission helps the latter exert influence on the Court from the inside and gain a comparative advantage in litigation.  Fourth, the French legal tradition, with its emphasis on empowering the State rather than protecting individual liberty, has a dominant influence on the Court.  Fifth, the Court’s practice of issuing a single, collegial decision encourages free-riding, increases pressures for judges and référendaires to conform and suppresses dissent, as illustrated in the Microsoft case.  Sixth, the division of labor between the lower court and the higher court creates divergent incentive structures for judges and référendaires working at different levels.  While a small group of judges and référendaires at the General Court have the incentive to innovate the formalistic case law by introducing more economic analysis, they are unable to do so as its ruling could be struck down by the higher court.  At the same time, while the higher court is in a position to innovate, many judges and référendaires there lack the incentive to do so as competition is peripheral to the constitutional law debate.

This Article further sheds light on understanding why the differences between US antitrust law and EU competition law have persisted, despite powerful forces of globalization and convergence.  As institutional change is path-dependent, evolution within each of these systems is only gradual.  The Article therefore provides a basis for predicting that such divergence might persist in the future.  Achieving a sound understanding of the Court is the key to legal reform.  The Article concludes by contributing to the ongoing debate about how to reform the Court.

August 31, 2015 | Permalink | Comments (0)