Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, March 27, 2015

15th ANNUAL LOYOLA ANTITRUST COLLOQUIUM April 24, 2015

In honor of the 20th anniversary of the Institute for Consumer Antitrust Studies, we are making the April 24, 2015 annual Loyola Antitrust Colloquium open to the public on a space available basis.  The colloquium is free and Illinois CLE is available.  Persons interested in reserving a spot should email antitrust@luc.edu.  The schedule follows below.

 

                                                       15th ANNUAL LOYOLA ANTITRUST COLLOQUIUM

 

                                                                                           April 24, 2015

 

                                                       INSTITUTE FOR CONSUMER ANTITRUST STUDIES

                                                                         LOYOLA UNIVERSITY CHICAGO

                                                                                       SCHOOL OF LAW

 

8:45 AM                                               Continental Breakfast and Registration

Loyola University Chicago School of Law

10th Floor Power Rogers & Smith Ceremonial Courtroom              

25 E. Pearson

Chicago, IL. 60611

 

9:10 AM                                               Welcome Professor Spencer Weber Waller

Professor and Director

Institute for Consumer Antitrust Studies

Loyola University Chicago School of Law

 

9:15 AM                                   Joshua Paul Davis, University of San Francisco School of Law

                                                                    Shannon Wheatman, Kinsella Media

                                                                   

                                                                    Writing Better Jury Instructions: Antitrust as an Example

 

Commentators:               

 

                                                                Adam Levitt, Grant & Eisenhofer

                                                                Thomas Horton, University of South Dakota School of Law

                                                                               

10:30 AM                                             Coffee Break

 

10:45 AM                                             Jonathan B. Baker, Washington College of Law, American University

                                                                Steven C. Salop, Georgetown University Law Center

 

                                                                Antitrust, Competition Policy, and Inequality

 

                                                                Commentators

 

Daniel Crane, University of Michigan Law School

                                                                Honorable Tom Miller, Attorney General of Iowa

 

 

12:00 PM                                             Lunch

Kasbeer Hall

15th Floor

25 E. Pearson

 

12:30 PM                                             Lunch Address

 

David Gelfand, Deputy Assistant Attorney General for Litigation, Antitrust Division, U.S. Dep’t of Justice

 

 

1:30 PM                                                Max Huffman, University of Indiana-Indianapolis School of Law

                                                                Mark Anderson, University of Idaho College of Law

 

                                                                Devils, Scriptures, and Antitrust

 

Commentators:

               

                                                                Robert Pratt, Chief, Illinois Antitrust Bureau

                                                                Peter Carstensen, Wisconsin Law School

 

                                                               

2:45 PM                                                Ice Cream Sundae Break

 

                                                                And join the authors for a book signing of:

 

                                                                Andrew I. Gavil & Harry First, The Microsoft Cases: Competition Policy for the 21st Century (MIT Press 2014)

 

                                                                Copies available for sale

 

 

3:30 PM                                                Paul Stancil, J. Reuben Clark Law School, Brigham Young University 

 

                                                                The Neglected Role of the Individual in Antitrust Theory

 

                                                                Commentators

 

                                                                Ted Banks, Scharf Banks Marmor LLC

                                                                Justin (Gus) Hurwitz, University of Nebraska College of Law

 

 

4:50 PM                                                Reception for Current and Former Student and Research Fellows of the Institute

                                                                13th Floor Faculty Lounge

March 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Rethinking Competition Law: From a Consumer Welfare to a Capability Approach

Rutger J.G. Claassen, Utrecht University Department of Philosophyn and Anna Gerbrandy, Europa Institute Utrecht University School of Law address Rethinking Competition Law: From a Consumer Welfare to a Capability Approach.

ABSTRACT: European competition law is predominantly focused on maximizing consumer welfare. This overarching purpose (which is supported by economic theory) leaves little place for safeguarding non-economic values, such as sustainability. This makes it difficult to allow cooperation between companies which contributes to such non-economic goals. In this paper, discussed during Mancept Conference in Fall 2014, we explore whether it is possible to establish a different normative framework, in which such goals can be taken into account and balanced against the economic goal of consumer welfare. To answer this question, we take four steps. First, we discuss (concisely) current EU competition law and the difficulty of fitting non-economic goals into the dominant interpretation of that law. Second, we proposes a different normative framework, based on the capability approach advanced by philosopher Martha Nussbaum and economist Amartya Sen. Third, we argue that there are good principled reasons to incorporate non-economic goals into competition law. Fourth, we compare to which results applying both the capability approach and the consumer welfare approach to three (illustrative) cases in which non-economic goals are at stake would lead. Overall, we argue that the capability framework, although not without difficulties of its own, may provide a more legitimate theory for application of European competition law.

March 27, 2015 | Permalink | Comments (0) | TrackBack (0)

FRAND Royalty Rates After Ericsson v. D-Link featuring The Honorable Judge James Robart May 15, 2015

The ABA Section of Antitrust Law’s Intellectual Property Committee

and the ABA Section of Intellectual Property Law’s Antitrust Committee

Present

 

FRAND Royalty Rates After Ericsson v. D-Link
featuring The Honorable Judge James Robart


   May 15, 2015

Noon-1:15p.m. EST


The U.S. Court of Appeals for the Federal Circuit recently issued an important decision in Ericsson v. D-Link, addressing proper methodologies for calculating FRAND royalty rates. This panel, featuring The Honorable Judge James Robart, who was the first U.S. judge to determine a FRAND royalty rate, will provide a legal and economic analysis of the Federal Circuit's decision. Panelists from the judiciary, government, and the private sector will discuss issues such as the appropriate methodology, the incremental value approach, concerns about hold-up and royalty stacking, and the use of the “smallest salable patent practicing unit."


Moderator

Henry Su, Attorney Advisor to Chairwoman Edith Ramirez, U.S. Federal Trade Commission  
Speakers

The Honorable Judge James Robart, U.S. District Court for the W.D. Washington

Tina Chappel, Director of Intellectual Property Policy, Intel Corp.

Greg Leonard, Economist and Partner, Edgeworth Economics LLC

Koren Wong-Ervin, Counsel for Intellectual Property and International Antitrust, U.S. Federal Trade Commission

 

To register and receive dial-in information, visit:  http://shop.americanbar.org/ebus/ABAEventsCalendar/EventDetails.aspx?productId=187572212.

March 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Air Ticket Sales as Bids from Airline Alliances

Marc Ivaldi, Toulouse School of Economics; Centre for Economic Policy Research (CEPR), Milena T. Petrova, Bocconi University, Miguel Urdanoz, University of Toulouse 1 - Toulouse School of Economics (TSE) discuss Air Ticket Sales as Bids from Airline Alliances.

ABSTRACT: Motivated by the higher price sensitivity and service homogenisation in the airline industry in recent years, we propose a new methodology to deal with transaction prices and to estimate the effect of alliances in the US domestic market. The assumption that airlines compete on price allows us to take advantage of the observational equivalence between Bertrand competition and the reverse English auction. We then apply an MLE method, developed by Paarsch (1997) for estimating auctions, to recover the distributional characteristics of air fares using a sample of airline tickets from the US domestic market. This procedure allows us to benefit from the heterogeneity of individual prices while most studies have used average prices, which would have involved a loss of information and a potential bias. We find that an alliance operating in a market is associated with prices on average 18.9 percent higher. Additionally, we find the standard deviation of ticket prices to be 4.3 percent higher, which is likely related to more efficient revenue management practice by alliance partners operating together in the same market.

March 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Competition, Consumer Protection, and the Right (Approach) to Privacy

Maureen K. Ohlhausen, Federal Trade Commission and Alexander Okuliar, Federal Trade Commission have an important new paper on Competition, Consumer Protection, and the Right (Approach) to Privacy.  Worth reading!

ABSTRACT: Many people view Samuel Warren and Louis Brandeis’s 1890 work, The Right to Privacy, as the starting point for the consumer privacy laws in the United States. Warren and Brandeis’s concerns about the ability of technology to invade the private sphere continue to resonate today, 125 years later. The technology encroaching on privacy now is, of course, the Internet – or, to be more precise, the technologies that permit the tracking and aggregation of individual consumers’ online behavior and that support the many services that financially sustain the broader Internet ecosystem. As was the case in Warren and Brandeis’s day, numerous proposals have surfaced for how to defend expectations of personal privacy while still realizing the benefits of commercialized technology. Those defending free market principles argue that the best solution is little-to-no government intervention – consumer demand for privacy will create a market for privacy protections. Other commentators propose increased governmental scrutiny of the collection and use of consumer data online, and some even advocate unifying the competition and consumer protection laws to examine privacy through a competition lens. We focus this paper on evaluating this last proposal.
This article proceeds in three main parts. We begin with the historical development of privacy protections in the United States and the tension between privacy concerns and the growing value of consumer data in the digital arena. Next, we explore how the agencies and courts have applied the FTC Act and antitrust law in this area over the years and the reasoning behind the bifurcation of the FTC Act into separate spheres of competition and consumer protection law. This explains the historical separation of privacy as a consumer expectation from commercialized privacy and data. Third, we synthesize analytical factors from the historical approaches to privacy and offer them as guidance for distinguishing between competition and consumer protection issues at the intersection of competition law, consumer protection law, and privacy.

March 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 26, 2015

Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism

Dan Crane, Michigan has a timely paper on Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism.

ABSTRACT: Tesla Motors is fighting the car dealers' lobby, aided and abetted by the legacy Detroit manufacturers, on a state by state basis for the right to distribute its innovative electrical automobiles directly to consumers. The Tesla wars showcase the important relationship between product innovation and innovation in distribution methods. Incumbent technologies may block competition by new technologies by creating legal barriers to innovative distribution methods necessary to secure market acceptance of the new technologies. While judicial review of such special interest capture is generally weak in the post-Lochner era, the Tesla wars are creating new alliances in the political struggle against crony capitalism that could contribute to a significant re-telling of the conventional public choice story.

March 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Tacit Collusion – The Neglected Experimental Evidence

Christoph Engel Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Universitat Osnabrück - Faculty of Law explores Tacit Collusion – The Neglected Experimental Evidence.

ABSTRACT: Both in the US and in Europe, antitrust authorities prohibit merger not only if the merged entity, in and of itself, is no longer sufficiently controlled by competition. The authorities also intervene if, post merger, the market structure has changed such that "tacit collusion" or "coordinated effects" become disturbingly more likely. It seems that antitrust neglects the fact that, for more than 50 years, economists have been doing experiments on this very question. Almost any conceivable determinant of higher or lower collusion has been tested. This paper standardises the evidence by way of a meta-study, and relates experimental findings as closely as possible to antitrust doctrine.

March 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Horizontal Merger Analysis in Retail Markets

Daniel S. Hosken, Government of the United States of America - Federal Trade Commission and Steven Tenn, Charles River Associates analyze Horizontal Merger Analysis in Retail Markets.

ABSTRACT: In this essay, we describe antitrust analysis of horizontal mergers in U.S. retail markets. We begin by providing a brief overview of the economic and legal framework governing horizontal merger policy, and highlight key issues in analyzing retail mergers. Next, we discuss the changing legal treatment of retailing mergers by providing a description of four major merger challenges brought by U.S. antitrust authorities over the last 50 years. We then provide a detailed discussion of the economic tools used to analyze retailing mergers. We start by presenting a frequently used model of retail competition to illustrate how retail mergers can create or enhance market power. We then describe a variety of structural and reduced form empirical techniques that can be used to quantify competition between merging retailers and, in some cases, to forecast merger price effects.

March 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Causal Uncertainty and Damages Claims for the Infringement of Competition Law in Europe

Ioannis Lianos, UCL ponders Causal Uncertainty and Damages Claims for the Infringement of Competition Law in Europe.

ABSTRACT: In a tort law regime established on the basis of corrective justice considerations, causation requirements will tend to play a predominant role in regulating the damages claims brought forward. The requirement of the causal link between the harm suffered and the anticompetitive conduct in damages claims for infringement of EU competition law has nevertheless received remarkably little attention in the recently adopted EU Damages Directive and in academic literature. The Damages Directive and some recent case law of the Court of Justice of the EU proceed to some limited harmonization of evidential presumptions and procedural requirements, as well as the exclusion of national rules that may deny the right of the parties harmed by the competition law infringement to receive compensation. Yet, the contours of the requirement of causal link are left to the interpretative work of national courts, in view of their respective tort law doctrines on causation and the lack of a proper EU tort law. The study first explores the role of the concept of causation in claims for damages for infringement of EU competition law and the different approaches taken by the legal systems of EU Member States in conceptualizing the inquiry of a causal link. It then focuses on the methods used by the tort law systems of the EU Member States, the recent Damages Directive and the case law of the EU Court to engage with situations of causal uncertainty, which may frequently arise in the context of competition law actions for damages, in view of the complexity of the commercial environment and the multiple factors influencing markets.

March 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 25, 2015

Illegal Cartel Overcharges in Markets with a Legal Cartel History: Bitumen Prices in South Africa

Willem H. Boshoff, Stellenbosch University - Department of Economics describes Illegal Cartel Overcharges in Markets with a Legal Cartel History: Bitumen Prices in South Africa.

ABSTRACT: In recent years, South African competition authorities have initiated a number of price-fixing cases in markets where cooperation among competitors was legal and often encouraged. These markets present economists with special difficulties when estimating cartel overcharges. Conventional approaches often rely on temporal approaches, where pricing during the cartel period is compared with prices in a competitive period. In markets with a legal cartel history, a competitive price cannot be identified in the period preceding illegal collusion. Structural change also reduces data, and hence the robustness of temporal models. Spatial approaches, where prices are compared with those in other countries, offer a better alternative. The paper studies the performance of temporal and spatial approaches in estimating overcharge in the context of a bitumen price-fixing case. The results suggest that, while the bitumen cartel may have responded to cost and demand shocks in a similar way to how players in more competitive markets respond, it was still cushioned by a large monopoly premium: the long-run level of South African bitumen prices are higher than in comparable competitive markets. The findings have implications for the study of transition dynamics from legal to illegal cartel regimes and for the detection of cartels.

March 25, 2015 | Permalink | Comments (0) | TrackBack (0)

Podcast with Prof. Michael Carrier on "How Not to Apply Actavis"

The podcast discusses and elaborates on Professor Carrier's essay, in which he explores two recent district court decisions that could frustrate the Supreme Court's recent directive to apply antitrust law to "exclusion payment" patent settlements. The Court's high-profile Actavis decision set broad guidelines for lower courts on how to assess the settlements, in which a brand-name drug company pays a generic to drop its patent challenge and delay entering the market. Carrier carefully surveys and refutes the district courts' understanding of the Actavis decision, arguing that the courts improperly favor settlements at the expense of meaningful antitrust scrutiny. Carrier concludes that consumers will pay the price if other courts do not step in to correctly apply Actavis.

 

The link to the podcast with Professor Carrier is: http://www.northwesternlawreview.org/online/conversation-professor-michael-carrier-antitrust-law-and-patent-settlements.

 

The link to Professor Carrier's essay is: http://www.northwesternlawreview.org/online/how-not-apply-actavis.

March 25, 2015 | Permalink | Comments (0) | TrackBack (0)

Theories of Self-Preferencing and Duty to Deal - Two Sides of the Same Coin?

Bo Vesterdorf, Herbert Smith Freehills asks Theories of Self-Preferencing and Duty to Deal - Two Sides of the Same Coin?

ABSTRACT: In the on-going EU Commission investigation into Google with respect to online search, a new non-discrimination theory is being proposed: complainants allege that under Article 102 TFEU, a dominant firm must provide its customers access to competitors’ products or content, and must design its own products or manage its own distribution channel so as to not preference their own operations over those of competitors. If this theory is upheld, it will have unexpected adverse effects on firms in a variety of markets, online and offline. This article shows, however, that such a claim has no support in EU jurisprudence or policy. In EU law, only firms controlling truly indispensable or essential facilities can be required to deal with rivals on any terms, and if dominant firms have no duty to deal with rivals, any ‘favouring’ of their own businesses and differential treatment of their competitors cannot be considered abusive.

March 25, 2015 | Permalink | Comments (0) | TrackBack (0)

TREATING RAND COMMITMENTS NEUTRALLY

Einer Elhauge (Harvard) suggests TREATING RAND COMMITMENTS NEUTRALLY.

ABSTRACT: This article argues that the same legal standards should apply to RAND commitments whether they are made to standard-setting organizations or not. The arguments for concluding that RAND commitments should limit injunctive patent relief or trigger antitrust liability turn on whether the commitment reasonably induces lock-in that generates hold-up effects or market power when that commitment is breached. But RAND commitments can induce such lock-in effects when they are made outside of standard-setting organizations and do not always induce them when they are made to standard-setting organizations. Thus, any special legal rules for RAND commitments should turn on whether the commitments induced such lock-in, rather than on the institutional context. The arguments against using special legal rules for RAND commitments turn on the extent to which lock-in might fail to generate holdup problems, denying patent injunctions might generate reverse-holdup problems, and contract or promissory estoppel remedies might obviate the need for antirust liability. But those arguments likewise apply equally inside and outside of standard-setting organizations. Thus, however one resolves the arguments for and against applying special legal rules to RAND commitments, the resulting legal standards should be the same whether or not the commitment is made to a standard-setting organization.

March 25, 2015 | Permalink | Comments (0) | TrackBack (0)

THE MEANING OF FRAND, PART II: INJUNCTIONS

Greg Sidak (Criterion Economics) explains THE MEANING OF FRAND, PART II: INJUNCTIONS.

ABSTRACT: Under what conditions may the holder of standard-essential patents (SEPs) seek to enjoin an infringing implementer without breaching the SEP holder's contract with the standard-setting organization (SSO) to provide access to those SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms? I show that the SEP holder's contractual obligations still permit it to seek an injunction. A FRAND commitment requires the SEP holder to offer a license for the SEPs on FRAND terms (or otherwise to grant implementers access to the SEPs). Extending an offer containing a price within the FRAND range discharges the SEP holder's contractual obligation. Thereafter, the SEP holder may seek to enjoin an implementer that has rejected a FRAND offer. This analysis indicates the imprudence of categorically banning injunctions for the infringement of SEPs, as some scholars have advocated and as one of the world's most significant SSOs—the Institute of Electrical and Electronics Engineers (IEEE)—actually did in 2015 in amendments to its bylaws. Such a ban would invite opportunism by implementers and is unnecessary. Courts already can prevent opportunism by SEP holders by conditioning an injunction on the implementer's actual or constructive rejection of a FRAND offer.

March 25, 2015 | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 24, 2015

Away From Market Shares? The Increasing Importance of Contestability in EU Competition Law Cases

Geert Goeteyn (Shearman & Sterling), Patrick Smith (RBB) and Sara Ashall (Shearman & Sterling) ask Away From Market Shares? The Increasing Importance of Contestability in EU Competition Law Cases.

ABSTRACT: In recent cases, the European Commission has shown a willingness to look beyond market shares to the contestability of markets when assessing the compatibility of mergers with EU competition law. In Syniverse/MACH, that approach, which understands that the strength of competition may not be expected to vary together with traditional measures of concentration, allowed the Commission to approve the proposed transaction, despite very high levels of concentration in three different relevant markets. The Commission granted clearance subject to conditions in relation to two of the relevant markets, while accepting that no such remedies were required in the third market of concern taking into account, in particular, the competitive constraints exerted by the customers’ ability to self-supply.

March 24, 2015 | Permalink | Comments (0) | TrackBack (0)

EU Merger Control: The Relevance of Captive Sales for the Purpose of Market Definition and Competition Assessment

Geert Goeteyn and Sara Ashall describe EU Merger Control: The Relevance of Captive Sales for the Purpose of Market Definition and Competition Assessment.

ABSTRACT: When assessing mergers, the European Commission's starting point is to consider only sales made on the merchant market in its assessment and exclude in-house or captive sales, in particular when defining markets. In recent years, it has adopted a pragmatic approach in its competition analysis by taking into account a variety of factors, including how in-house supply works practically in the market, the level of captive sales, and the extent of switching. This pragmatic approach corresponds to that used in the United States as well as, progressively, in emerging jurisdictions like Brazil.

March 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Competing with Complementors: An Empirical Look at Amazon.com

Feng Zhu (Harvard Business School, Technology and Operations Management Unit) and Qihong Liu (University of Oklahoma) research Competing with Complementors: An Empirical Look at Amazon.com.

ABSTRACT: Platform owners sometimes enter complementors' product spaces to compete against them directly. Prior studies have offered two possible explanations for such entries: Platform owners may target the most successful complementors so as to appropriate value from their innovations, or they may target poor performing complementors to improve the platforms' overall quality. Using data from Amazon.com, we analyze the patterns of Amazon's entries into its third-party sellers' product spaces. We find evidence consistent with the former explanation: that the likelihood of Amazon's entry is positively correlated with the popularity and customer ratings of third-party sellers' products. Amazon's entry reduces the shipping costs of affected products and hence increases their demand. Results also show that third-party sellers affected by Amazon's entry appear to be discouraged from growing their businesses on the platform subsequently.

March 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Advertising, Consumer Awareness and Choice: Evidence from the U.S. Banking Industry

Maria Ana Vitorino (University of Minnesota), Ali Hortacsu (University of Chicago), and Elisabeth Honka (The University of Texas at Dallas) explore Advertising, Consumer Awareness and Choice: Evidence from the U.S. Banking Industry.

ABSTRACT: Does advertising serve to (i) increase awareness of a product, (ii) increase the likelihood that the product is considered carefully, or (iii) does it shift consumer utility conditional on having considered it? We utilize a detailed data set on consumers' shopping behavior and choices over retail bank accounts to investigate advertising's effect on product awareness, consideration, and choice. Our data set has information regarding the entire purchase funnel, i.e. we observe the set of retail banks that the consumers are aware of, which banks they considered, and which banks they chose to open accounts with. We formulate a structural model that accounts for each of the three stages of the shopping process: awareness, consideration, and choice. Advertising is allowed to affect each of these separate stages of decision-making. Our model also endogenizes the choice of consideration set by positing that consumers undertake costly search. Our results indicate that advertising in this market is primarily a shifter of awareness, as opposed to consideration or choice. Along with advertising, branch density, marital status, race and income are very signficant drivers of awareness. We also find that consumers face non-trivial search/consideration costs that lead the average consumer to consider only 2.2 banks out of the 6.7 they are aware of. Conditional on consideration, branch density, the consumer's current primary bank (i.e. inertia), interest rates and education are the primary drivers of the final choice.

March 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Monday, March 23, 2015

Provider Competition and Over-Utilization in Health Care

Boone, J. (Tilburg University, Center For Economic Research) and Douven, R.C.M.H. (Tilburg University, Center For Economic Research) research Provider Competition and Over-Utilization in Health Care.

ABSTRACT: This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We argue that each of these can be optimal depending on the contracting environment of a speciality. In particular, CfM is optimal in a clinical situation where the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether pat! ients react to decentralized information on quality differences between providers and whether payer’s and patients’ preferences are aligned.

March 23, 2015 | Permalink | Comments (0) | TrackBack (0)

Areeda-Turner in Two-Sided Markets

Stefan Behringer (Universitat Duisburg-Essen) and Lapo Filistrucchi (Tilburg) discuss Areeda-Turner in Two-Sided Markets.

ABSTRACT: Areeda and Turner (1975) were the first to argue that a price below marginal costs should be considered a sign of predation. Recognizing that marginal cost data were typically unavailable, the authors concluded that a price below average variable cost should be presumed unlawful. This so called Areeda-Turner Rule has become the standard to assess claims of predation. We first show that in two-sided markets price cost margins on the two-sides of the market are interrelated and that a monopolist, even in the absence of actual or potential competition, may find it optimal to charge a price below marginal cost on one s! ide of the market. As a result, showing that the price is below average variable cost on one side of the market cannot be considered a sign of predation in such markets. This is in contrast to a recent decision of the Commercial Court of Paris that sanctioned Google for giving away for free its online mapping services. We thus extend the Areeda-Turner rule to two-sided markets. We argue that one should apply the rule by taking into account revenues and costs from both sides of the market. As applications, we analyse three alleged cases of predatory behaviour in the market for daily newspapers. Our examples highlight that applying a one-sided Areeda-Turner rule may lead to assess a perfectly legitimate profit maximizing pricing policy as a predatory attempt.

March 23, 2015 | Permalink | Comments (0) | TrackBack (0)