Antitrust & Competition Policy Blog

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

Friday, June 24, 2016

The impact of network competition in the mobile industry

Houpis, George ; Rodriguez, Jose Maria ; Ovington, Thomas ; Serdarevic, Goran explore The impact of network competition in the mobile industry.

ABSTRACT: In 2000, there were as many countries served by a single mobile network as by network competition. Today, only 30 countries, representing less than 3% of the world’s population, are served by a single network. There has been considerable discussion about the optimal number of network operators in the mobile industry. More recently, some regulators and governments have considered implementing a single wholesale network to deliver next generation mobile services due to concerns around low coverage, inefficient duplication of costs and lack of competition. To date, the authors are not aware of such single wholesale networks fully implemented in mobile industry. What is clear is that single wholesale networks represent a U-turn with respect the way in which the mobile industry has developed worldwide. Therefore, it is important to carefully examine the available evidence on the performance of mobile markets in countries with a single mobile networks, as thi! s is could shed some light on the expected performance of single wholesale networks. The key result is that countries with network competition have higher coverage, higher take-up and greater innovation than countries with a single mobile network, controlling for other relevant factors. This paper represents a significant contribution to the literature, as the authors are not aware of any other papers that have considered the impact of network competition compared to single networks on outcomes such as coverage. The results of the paper have significant policy implications, as they imply that moving away from the network competition model into the world of single wholesale networks could cause considerable consumer harm, which may be difficult to reverse once there has been a move away from network competition.

June 24, 2016 | Permalink | Comments (0)

Optimal Number of Firms in the Wireless Markets

Francois Jeanjean and Georges Vivien Houngbonon theorize about Optimal Number of Firms in the Wireless Markets.

ABSTRACT: In this paper, we design a theoretical model to analyze the impact of the number of firms on investment in the wireless communications industry. Our model extends the Salop’s framework by introducing investment in quality that either reduces the marginal cost of production or shifts the consumers’ valuation upward. We find that an increase in the number of firms reduces their incentives to invest in quality. The impact on the aggregate industry investment can be non-monotone. These theoretical findings are supported by empirical evidence from the mobile telecommunications industry. More specifically, we find that mobile operators’ investment in network infrastructure is not affected when going from two to three firms; but decreases above three firms. In addition, there is an inverted-U relationship between the industry investment and the number of mobile operators; the maximum being reached at three or four mobile operators.

June 24, 2016 | Permalink | Comments (0)

Thursday, June 23, 2016

Competition and market strategies in the Swiss fixed telephony market

Roberto E. Balmer analyzes Competition and market strategies in the Swiss fixed telephony market.

ABSTRACT: Fixed telephony has long been a fundamentally important market for European telecommunications operators. The liberalisation and the introduction of regulation in the end of the 1990s, however, allowed new entrants to compete with incumbents at the retail level. A rapid price decline and a decline in revenues followed. Increased retail competition eventually led a number of national regulators to deregulate this market. In 2013, however, many European countries (including Switzerland) continued to have partially binding retail price regulation in this market. More than a decade after liberalisation and the introduction of wholesale and retail price regulation, sufficient data is available to empirically measure the success of regulation and assess its continued necessity. This paper develops a market model based on a generalised version of the traditional dominant firm – competitive fringe model allowing for the incumbent a more competitive conduct than! that of a dominant firm. A system of simultaneous equations is developed and direct estimation of the incumbent’s residual demand function is performed by instrumenting the market price by incumbent-specific cost shifting variables as well as other variables. Unlike earlier papers that assess market power in this market, this paper also adjusts the market model to ensure a sufficient level of cointegration and avoid spurious regression results. This necessitates the introduction of intertemporal effects. While the incumbent’s conduct cannot be directly estimated using this framework, the concrete estimates show that its residual demand is inelastic (long run price elasticity of residual demand of -0.12). Such a level of elasticity is shown to be only compatible with a profit maximising incumbent in the case of largely competitive conduct (conduct parameter below 0.12 and therefore close to zero). It is consequently found that the Swiss incumbent acted rather competitiv! ely in the fixed telephony retail market in the period under review (2004-2012) and that the (partial) retail price caps in place can no longer be justified on the basis of a lack of competition.

June 23, 2016 | Permalink | Comments (0)

To Regulate or to Deregulate? The Role of Downstream Competition in Upstream Monopoly Vertically Linked Markets

Polemis, Michael ; Eleftheriou, Konstantinos ask To Regulate or to Deregulate? The Role of Downstream Competition in Upstream Monopoly Vertically Linked Markets.

ABSTRACT: This paper attempts to cast light to the relationship between Cournot-Bertrand controversy and monopoly regulation. To this purpose, we use a simple model of a vertically linked market, where an upstream regulated natural monopoly is trading via two-part tariff contracts with a downstream duopoly. Combining our results to those of the existing literature on deregulated markets, we argue that when the downstream competition is in prices, efficiency dictates regulating the monopoly with a marginal cost based pricing scheme. However, this type of regulation leads to significant welfare loss, when the downstream market is characterized by Cournot competition.

June 23, 2016 | Permalink | Comments (0)

Market Structure and Competition in Transition:Results from a Spatial Analysis

Martin Labaj (Department of Economics, Vienna University of Economics and Business) ; Karol Morvay (Department of Economic Policy, University of Economics in Bratislava) ; Peter Silanic (Department of Economic Policy, University of Economics in Bratislava) ; Christoph Weiss (Department of Economics, Vienna Uni! versity of Economics and Business) ; Biliana Yontcheva (Department of Economics, Vienna University of Economics and Business) discuss Market Structure and Competition in Transition:Results from a Spatial Analysis

ABSTRACT: The present paper provides first microlevel (indirect) empirical evidence on changes in the determinants of firm profitability, the role of fixed and sunk costs, as well as the nature of competition for a transition economy. We estimate size thresholds required to support different numbers of firms for four retail and professional service industries in a large number of geographic markets in Slovakia. The three time periods in the analysis (1995, 2001 and 2010) characterize different stages of the transition process. Specific emphasis is given to spatial spill-over effects between local markets. Estimation results obtained from a spatial ordered probit model suggest that entry barriers have declined considerably (except for restaurants) and the intensity of competition has increased. We further find that demand spill-overs and/or the effects associated with a positive correlation in unobservable explanatory variables seem to outweigh negative spill-over e! ffects caused by competitive forces between neighboring cities and villages. The importance of these spatial spill-over effects differs across industries.

June 23, 2016 | Permalink | Comments (0)

Wednesday, June 22, 2016

An Analytical Approach to Activating Demand Elasticity with a Demand Response Mechanism

Cedric Clastres (CNRS - Grenoble 2 UPMF - Universite Pierre Mendes France - IEPG - Sciences Po Grenoble - Universite Joseph Fourier) and Haikel Khalfallah (CNRS - Grenoble 2 UPMF - Universite Pierre Mendes France - IEPG - Sciences Po Grenoble - Universite Joseph Fourier) offer An Analytical Approach to Activating Demand Elasticity with a Demand Response Mechanism.

ABSTRACT: The aim of this work is to demonstrate analytically the conditions under which activating the elasticity of consumer demand could benefit social welfare. We have developed an analytical equilibrium model to quantify the effect of deploying demand response on social welfare and energy trade. The novelty of this research is that it demonstrates the existence of an optimal area for the price signal in which demand response enhances social welfare. This optimal area is negatively correlated to the degree of competitiveness of generation technologies and the market size of the system. In particular, it should be noted that the value of un-served energy or energy reduction which the producers could lose from such a demand response scheme would limit its effectiveness. This constraint is even greater if energy trade between countries is limited. Finally, we have demonstrated scope for more aggressive demand response, when only considering the impact in terms of ! consumer surplus.

June 22, 2016 | Permalink | Comments (0)

State Action Immunity and Section 5 of the FTC Act

Daniel A. Crane, University of Michigan Law School and Adam G. Hester, University of Michigan Law School examine State Action Immunity and Section 5 of the FTC Act.

ABSTRACT: The state action immunity doctrine of Parker v. Brown immunizes anticompetitive state regulations from preemption by federal antitrust law so long as the state takes conspicuous ownership of its anticompetitive policy. In its 1943 Parker decision, the Supreme Court justified this doctrine on the observation that no evidence of a Congressional will to preempt state law appears in the Sherman Act’s legislative history or context. In addition, commentators generally assume that the New Deal Court was anxious to avoid re-entangling the federal judiciary in Lochner-style substantive due process analysis. The Supreme Court has observed, without deciding, that the Federal Trade Commission might not be bound by the Parker doctrine but instead enjoys “superior preemption” authority under Section 5 of the FTC Act. Drawing on the FTC Act’s legislative history and its institutional distinctiveness from Sherman Act enforcement, this Article makes an affirmative case for FTC superior preemption power over anticompetitive state laws.

 

 

June 22, 2016 | Permalink | Comments (0)

THE ECONOMICS OF PASS-THROUGH WITH PRODUCTION CONSTRAINTS

Dov Rothman, Philipp Tillmann and David Toniatti (all Analysis Group) describe THE ECONOMICS OF PASS-THROUGH WITH PRODUCTION CONSTRAINTS.

ABSTRACT: This article reviews the implications of production constraints for pass-through. We consider production technology that can only be adjusted in discrete intervals and/or is costly to adjust. We show that, because of production constraints, a firm may not be willing to adjust its level of production in response to small changes in cost. Because price is determined by demand and the quantity produced, production constraints may result in a firm not changing price in response to a change in cost. This result has important implications for antitrust litigation—for example, the extent to which overcharges resulting from anticompetitive conduct upstream in the supply chain are passed through to purchasers downstream in the supply chain.

June 22, 2016 | Permalink | Comments (0)

DESIGNING AUCTIONS TO PROTECT COMPETITION AND TO PROMOTE EFFICIENCY AND REVENUE

Jia Yi Jayme Leong (Competition Commission of Singapore) and Hi Lin Tan, Competition Commission of Singapore are DESIGNING AUCTIONS TO PROTECT COMPETITION AND TO PROMOTE EFFICIENCY AND REVENUE.

ABSTRACT:  The use of auctions has become increasingly widespread, from the allocation of resources like electricity and spectrum, to the selling of personal items on online websites like eBay. Invitations to tender or to quote are standard procurement methods for government agencies. Against this backdrop, it is important to be aware that the design of auctions and tenders can affect antitrust risks, with further implications on allocative efficiency and revenues. Further, policymakers should keep in mind that an auction may in certain circumstances create a downstream monopoly, potentially resulting in welfare loss and higher prices downstream. This research paper provides an overview of different auction designs, compares their antitrust risks and effectiveness in achieving allocative efficiency and revenue maximization, and discusses some proposals to mitigate antirust risks.

June 22, 2016 | Permalink | Comments (0)

Tuesday, June 21, 2016

HOW PASS-ON THEORY SHOULD BE APPLIED IN KOREAN ANTITRUST LITIGATION

Se-In Lee, Pusan National University School of Law explains HOW PASS-ON THEORY SHOULD BE APPLIED IN KOREAN ANTITRUST LITIGATION.

ABSTRACT: In this article, I analyze and support the Korean Supreme Court's acceptance of pass-on theory in the recent flour price-fixing case decided in 2012. Since Korea belongs to the civil law system that aims at making actual damage compensation by private litigation, I agree with the court that a defendant should not be required to pay more than the actual damage suffered by plaintiffs. The Supreme Court stated that a defendant should establish a causal link between the alleged overcharge and any recovery made to plaintiffs through pass-on, but concluded that the required causal link was not established in the present flour price-fixing case. However, a notable feature of the judgment was that the Supreme Court allowed a reduction of the final damages awarded anyway, not on the basis of pass-on theory, but based on the notion of fairness. I support the Korean Supreme Court's decision to allow the pass-on defense to run, with burden of proof to establish it resting on the defendant. However, I suggest that the Korean courts should not calculate a reduction of damages according to the notion of fairness when a defendant cannot establish the pass-on causal link. It is time for the Korean courts to rely on a more concrete way of calculating damages than selecting some arbitrary numbers based on the notion of fairness.

June 21, 2016 | Permalink | Comments (0)

A RETROSPECTIVE ON MERGER RETROSPECTIVES IN THE UNITED STATES

Malcolm Coate, FTC offers A RETROSPECTIVE ON MERGER RETROSPECTIVES IN THE UNITED STATES.

ABSTRACT: Over the last decade, merger retrospectives have become increasingly popular in the economic literature. However, it is far from clear what implications can be drawn from these analyses, because the results suffer from a sample selection problem that undermines their implications. This article uses models of the Federal Trade Commission's enforcement activity to estimate challenge probabilities and address the selection issue. Although the small size of the sample limits the statistical interpretation of the results, general observations are possible. First, significant price effects generally appear in markets with very high challenge probabilities. When challenge probabilities are moderate, say 30 to 70 percent, retrospective results generate price effects in roughly half of the studies. For markets with low challenge probabilities, no price effects are observed in the retrospectives related to collusion theories. Positive price effects are observed for most of the retrospectives in differentiated goods markets, but theoretical analyses imply that most those results are highly problematic. Although retrospectives, interpreted in light of the likely competitive concern, can serve as a test for merger policy, an anomaly between the retrospective and the relevant policy prediction requires some type of case study to be undertaken to resolve the stark difference in implications prior to the analysis. More complete case studies are needed to fulfill the true promise of the retrospective research regime.

June 21, 2016 | Permalink | Comments (0)

Antitrust Balancing

Herb Hovenkamp (Iowa) is thinking about Antitrust Balancing.

ABSTRACT: Antitrust litigation often confronts situations where effects point in both directions. Judges sometimes describe the process of evaluating these factors as “balancing.” In its e-Books decision the Second Circuit believed that the need to balance is what justifies application of the rule of reason. In Microsoft the D.C. Circuit stated that “courts routinely apply a…balancing approach” under which “the plaintiff must demonstrate that the anticompetitive harm…outweighs the procompetitive benefit.” But then it decided the case without balancing anything.

The term “balancing” is a very poor label for what courts actually do in these cases. Balancing requires that two offsetting effects can each be measured against each other by some common cardinal unit, such as dollars or tons or centimeters. The factors that courts consider under the rule of reason rarely lend themselves to such measurement. Instead, balancing approaches are usually “binary” rather than cardinal. They are more like off and on switches that go in one direction or the other.

The Ninth Circuit’s decision in O’Bannon v. NCAA understood these limitations and performed balancing the way it should be done. In defending its compensation rules the court observed both the NCAA’s and the courts’ longstanding recognition of amateurism in collegiate athletics as requiring uncompensated play. This created a binary rule that a court could readily follow. The district court’s creation of a trust fund for deferred compensation and judicial determination of the payout was simply price regulation by another name.

One place where a more cardinal form of balancing can work is merger analysis, particularly under the 2010 Horizontal Merger Guidelines. The government’s prima facie challenge to a merger is based on a prediction of increased prices. If the test is met then the burden shifts to the defendant to show merger specific efficiencies of sufficient magnitude to reduce the predicted price to no higher than premerger levels.

Stating consumer price increases as the principal concern creates a unit of measure that makes balancing at least conceptually possible. Second, the consumer price test articulated in the Guidelines is easier to administer than a general welfare test. In order to estimate general welfare effects one must be able to quantify consumer harm, which includes not only higher prices but also deadweight loss. This requires information about the shape of the demand curve. In addition, offsetting efficiencies must always be assessed and netted out. This requires a court to look not only at per unit cost savings, but also at the output over which those costs will be spread.

Whether the Merger Guidelines more cardinal approach to balancing can be migrated to general antitrust litigation under the rule of reason depends on the challenged practice. Joint ventures with efficiency potential but threatening higher prices from collusion are a likely candidate. Practices that threaten exclusion will be more difficult to evaluate. Practices whose consequences show up in the longer run will be particularly difficult, as well as practices for which the defense has little to do with measurable prices.

June 21, 2016 | Permalink | Comments (0)

Antitrust Liability for Licensing Boards After North Carolina Dental: Antitrust Preemption as a Penalty Default?

James Cooper, George Mason asks Antitrust Liability for Licensing Boards After North Carolina Dental: Antitrust Preemption as a Penalty Default?

ABSTRACT: Most professions in the United States are regulated by boards composed of industry practitioners, who in their official roles routinely engage in anticompetitive conduct. Until the Supreme Court’s landmark decision in North Carolina State Board of Dental Examiners v. FTC, many believed that such conduct was beyond the reach of antitrust enforcement as long as it was taken pursuant to state policy to displace competition — a standard met with relative ease. After North Carolina Dental, states now must additionally take ownership of the anticompetitive actions of these boards to avoid the full force of the antitrust laws. In this manner, North Carolina Dental has the potential to prompt a large-scale restructuring of the state regulatory apparatus. This article explores the potential for antitrust preemption to play a role in this restructuring. I argue that, to the extent that unsupervised boards’ anticompetitive conduct would be justified on non-competition concerns, they are rendered defenseless in any rule of reason inquiry, and hence are subject to a de facto per se standard. Rather than adjusting the rule of reason inquiry to allow courts to weigh non-competition concerns in these cases, the better alternative would be to preempt the laws altogether. This approach has several advantages. First, it would avoid a dissonance between antitrust and due process inquiries into the same conduct. Second, it would act as a penalty default for states, and like penalty defaults in contracts, such a rule would assign the regulatory decision to the low-cost information provider — the state, rather than the court. Finally, this approach vindicates federalism to a greater extent than a modified rule of reason. The only role for a federal court under a preemption approach would be to uphold or strike down the law granting the board authority to engage in the suspect conduct. This decision, moreover, would be based on an objective analysis of the board’s regulatory structure, rather than a subjective weighing of competition and non-competition concerns.

 

 

June 21, 2016 | Permalink | Comments (0)

Monday, June 20, 2016

My daughter Elena is not the only Princess Elena

Elena came home today to inform me that there is a new Princess named Elena of Avalor. She is excited that there is another princess named Elena that will call her father Papi.  

From Disneypedia:

As with all Disney Junior programming, Elena of Avalor stories will be guided by an established curriculum that nurtures multiple areas of child development: physical, emotional, social and cognitive; thinking and creative skills, as well as moral and ethical development. Created for kids age 2-7 and their families, the stories are designed to communicate positive messages and life lessons that are applicable to young children about leadership, resilience, diversity, compassion and the importance of family and family traditions.

June 20, 2016 | Permalink | Comments (0)

UK: The Concurrent Enforcement by Regulators of Competition Law and Sector-Specific Regulation

Cosmo Graham, University of Leicester describes UK: The Concurrent Enforcement by Regulators of Competition Law and Sector-Specific Regulation.

ABSTRACT:  The UK has a unique model where competition law is enforced concurrently by the Competition and Markets Authority (CMA) and the sector regulators. A major reform was implemented by the Enterprise and Regulatory Reform Act 2013, extending concurrent powers to the financial services sector and the National Health Service. The reform led to more enforcement activity as well as to greater contacts, seemingly more information flows, greater understanding, and perhaps more trust between the agencies.

June 20, 2016 | Permalink | Comments (0)

The Competition Law Scholars Forum (CLaSF) and UCD Sutherland School of Law - “Competition Law and Enforcement Priorities” 16 September 2016

The Competition Law Scholars Forum (CLaSF) and UCD Sutherland School of Law (BLREG)

 

Workshop-“Competition Law and Enforcement Priorities”

 

At UCD Sutherland School of Law (Belfield, Dublin 4)

on Friday, 16 September 2016

 

DRAFT PROGRAMME

 

09:30 – 10.00: Registration

10.00: Introduction: Prof Barry Rodger (CLaSF), Mary Catherine Lucey (UCD BLREG)

10.10-10.45

Keynote Speaker –Professor William E. Kovacic, George Washington University Law School

10.45-11.15 Coffee

11.15-12.15

Prioritisation and Article 102:- Chair: TBC

‘Enforcement priorities Paper on Article 102 TFEU: Is a Title Enough to Overtake Constitutional Rules and Fundamental Rule-Of-Law Principles?’, Konstantinos Sidiropoulos, DPhil Candidate, Oxford University; ‘Far Beyond Meaningless: the non-enforcement of exploitative excessive prices’, Carmen Rodilla Marti, PHD Candidate, University of Valencia

12.15-13:15

Prioritising Enforcement: Commitments and State aid complaints:- Chair: TBC

‘Commitments: Guidance for a New Enforcement Style’, Stavros Makis, PHD Candidate, Department of Law, EUI, Florence; ‘Prioritisation in state aid control: Filtering out “unwanted” complaints’ Oskar Van Maren, The Asser Institute, the Hague

13:15-14:30 LUNCH

14:30- 15.45

Priorities in Enforcement: A Global and EU Perspective:- Chair: TBC

‘Goals, Values and Priorities of Competition Agencies: A View from Practice Around the World’ Dr Julian Nowag, Lund University, Sweden, Dr Maria Ioannidou QMU, London; ‘The Actual Role of Boosting the EU Competition Law Enforcement powers of NCAs: In Need of a Reframed Formula’ Catalin S. Rusu, Associate professor of European law, Radboud University, Nijmegen

15.45-16:00 Coffee Break

16:00-17:10

Enforcement priorities in Scotland and Ireland:- Chair: TBC

‘Is There a case for a Scottish Competition Authority? Contrasting Old, New and Regional Competition Enforcement Priorities in large, small and regional EU Economies’ Aiste Slezeviciute, PHD candidate, Edinburgh law School, and Solicitor, S and W, Edinburgh and Zeno Frediani, Solicitor, S and W; ‘An Analytical Review of the Choices/priorities made by Ireland’s Competition Authority/Competition and Consumer Protection Commission 1991-2016’ Dr Vincent Power, Partner, A & L Goodbody, Dublin

 

17:10-17:30 Closing Address: Dr John Temple Lang

17:30 Closing remarks

17.45Taxis to Central Dublin for bar/restaurant for speakers and participants

Mandatory prior registration with law.events@ucd.ie

June 20, 2016 | Permalink | Comments (0)

EU State Aid Law and Transfer Pricing: A Critical Introduction to a New Saga

Liza Lovdahl Gormsen, BIICL offers EU State Aid Law and Transfer Pricing: A Critical Introduction to a New Saga.

ABSTRACT: This article argues that the European Commission's recent State aid investigations concerning tax rulings are not based on firm legal grounds. The author examines the Commission's opening decisions in of Apple, Starbucks, Fiat Finance and Trade, Amazon, and McDonald's and criticises the Commission's use of the arm's length principle and the prudent market operator principle. The overall conclusion is that in the Commission's effort to try to develop the law and to expand its remit, it takes a number of unacceptable shortcuts.

June 20, 2016 | Permalink | Comments (0)

Individual Sanctions for Competition Law Infringements: Pros, Cons and Challenges

Florian Wagner-von Papp, University College London Faculty of Laws, David Viros, Daniel Zimmer, University of Bonn - Institut für Handels- und Wirtschaftsrecht; University of Bonn - Centre for Advanced Studies in Law and Economics (CASTLE), William E. Kovacic, George Washington University - Law School, and Andreas Stephan, University of East Anglia (UEA) - Centre for Competition Policy have a discussion on Individual Sanctions for Competition Law Infringements: Pros, Cons and Challenges.

ABSTRACT: Following the substantive harmonization in Regulation (EC) no. 1/2003, the European Commission has started more recently to focus on the harmonization of procedure and sanctions, and in January 2016, the European Parliament called for penalties against natural persons. This special issue looks at the current state of individual sanctions on the EU Member State level, examines from a comparative perspective the institutional challenges which these individual sanctions present, especially for leniency programmes, and discusses the pros and cons of introducing further individual, in particular criminal sanctions in Europe. It examines the experience with criminal sanctions in France, Germany, the United Kingdom and the United States, and presents empirical evidence on public attitudes towards competition law infringements in various Member States and the United States.

June 20, 2016 | Permalink | Comments (0)

Friday, June 17, 2016

Customer Location and the International Reach of National Competition Laws

Tadashi Shiraishi, University of Tokyo explores Customer Location and the International Reach of National Competition Laws.

ABSTRACT: The Customer Location Doctrine is an elaboration of the Effect Doctrine, which explains "effect" as "the effect on customers located in the particular jurisdiction". It explains almost all competition law practices, with some internal disputes in cases where some aspects of "customers" belong to different entities (i.e., the decision-maker and product-receiver aspects). This article examines cases and practices that exemplify and sophisticate the Customer Location Doctrine.

June 17, 2016 | Permalink | Comments (0)

Pleading Standards: The Hidden Threat to Actavis

Michael Carrier, Rutgers explores Pleading Standards: The Hidden Threat to Actavis.

ABSTRACT: In FTC v. Actavis, the Supreme Court issued one of the most important antitrust decisions in the modern era. It held that a brand drug company’s payment to a generic firm to settle patent litigation and delay entering the market could violate the antitrust laws.

Since the decision, courts have analyzed several issues, including causation, the role of the patent merits, and whether “payment” is limited to cash. But one issue — the pleading requirements imposed on plaintiffs — has slipped under the radar. This issue has the potential to undercut antitrust law, particularly because settlements with payment and delayed entry today typically do not take the form of cash. The complexity of non-cash conveyances increases the importance of the pleading stage.

For that reason, it is concerning that several courts have imposed unprecedented hurdles. For example, the district court in In re Effexor XR Antitrust Litigation failed to credit allegations that a generic delayed entering the market because a brand promised not to introduce its own “authorized generic” that would have dramatically reduced the true generic’s revenues. The same judge, in In re Lipitor Antitrust Litigation, dismissed a complaint despite allegations that the generic delayed entry in return for the brand’s forgiveness of hundreds of millions of dollars in potential damages in separate litigation.

This essay first introduces the Supreme Court’s Actavis decision. It then discusses the pleading standards articulated by the Court in Bell Atlantic v. Twombly and Ashcroft v. Iqbal. Turning to the cases that applied excessively high pleading requirements, it next focuses on the Effexor and Lipitor cases. Finally, it analyzes the settlement cases that applied a more justifiable analysis.

The essay concludes that the imposition of excessive standards, as was done by the Effexor and Lipitor courts, threatens to overturn established pleading standards and undercut the landmark Actavis decision. Such a result would significantly weaken the antitrust analysis of potentially anticompetitive settlements.

June 17, 2016 | Permalink | Comments (0)