Antitrust & Competition Policy Blog

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

Saturday, December 10, 2016

CRA Europe Conference and King's College Recap

Last week I was a panelist at the CRA Europe conference - which has a bigger collection of stars for a one day conference than any other conference in Europe. Cristina Caffarra hosted an amazing conference with lively discussion from enforcers, practitioners and academics. The most amazing thing is that the conference was standing room only for most of the day and I calculate that there had to be at least 600 people in the room. Some of the best moments were of course the unscripted ones.  As is typical at competition conferences, some of the best discussion is also in the hallways during coffee breaks.  Later in the week I spoke on a panel at King's College (home of the largest competition law LLM program in the world) with Terrell McSweeny (FTC) and Martin McElwee (Freshfields) on competition law, data privacy and big data. My sense is that between the two conferences, people around Europe are obsessed with Big Data issues. Given that Microsoft/Linkedin was decided this past week also added some current flavor to the discussion.  However, Tommaso Valletti, Chief Economist of DG Competition, said it best when he called the competition case where there is an actual Big Data problem a "unicorn."  

December 10, 2016 | Permalink | Comments (0)

Congratulations to Eleanor Fox - Winner of the Section on Antitrust Lifetime Achievement Award

Congratulations to my dear friend Eleanor Fox of NYU Law.  She has won our version of the Oscar (known as the Herb) for the AALS Section on Antitrust Lifetime Achievement Award.  Eleanor has been one of the most important voices in antitrust in the United States and globally for over a generation. Her work spans most topics and most continents.  I am a better person and scholar because of her.    

December 10, 2016 | Permalink | Comments (0)

Friday, December 9, 2016

Private Ordering in Chinese Antitrust

Angela Zhang, Kings College discusses Private Ordering in Chinese Antitrust.

ABSTRACT: This Article begins with an inquiry into why there is a rarity of private challenges of decisions made by the Chinese antitrust authorities. The legal approach to the study of administrative law, which has received most academic attention, has not been able to provide a satisfactory answer to this question. To resolve this puzzle, this Article draws attention to the factors beyond the law, particularly the reputation sanction that Chinese antitrust agencies can strategically inflict on firms under their investigations. Based on event study methodology, I identified significant abnormal stock returns in response to an antitrust agency’s proactive public disclosure of its investigation. As the regulator has the discretion in deciding whether and when to disclose its investigation, this gives it significant clout in influencing the stock performance of firms subject to its investigation. In addition, I hand-collected data from 860 news articles on three high-profile antitrust cases and identified an editorial slant that can further inflate the reputation damage to these firms. A close review of these news articles reveals that such bias stems not only from supply but also demand factors. This Article contributes to several strands of research, particularly on the use of reputation sanction in regulation, the role of media in legal enforcement, and the limits of law in resolving administrative disputes in China.

 

 

December 9, 2016 | Permalink | Comments (0)

Are Legacy Airline Mergers Pro- or Anti-Competitive? Evidence from Recent U.S. Airline Mergers

Dennis W. Carlton, University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER), Mark A. Israel, Compass Lexecon, Ian MacSwain, Compass Lexecon and Eugene Orlov, Compass Lexecon ask Are Legacy Airline Mergers Pro- or Anti-Competitive? Evidence from Recent U.S. Airline Mergers.

ABSTRACT: Due to a series of recent mergers, the number of legacy airlines in the United States has decreased from six to three. We conduct a comprehensive investigation of the effect on fares and output of these legacy airline mergers to determine whether the mergers have had an overall pro-competitive or anti-competitive effect on consumers. Our difference-in-differences regression analysis shows that, considered together or individually, these mergers have been pro-competitive, with no significant adverse effect on nominal fares and with significant increases in passenger traffic as well as capacity. Taken together and in sharp contrast to recent contrary claims, the results indicate that the recent legacy mergers were pro-competitive.

 

 

December 9, 2016 | Permalink | Comments (0)

Global Governance of Antitrust and the Need for a BRICS Joint Research Platform in Competition Law and Policy

Ioannis Lianos, UCL describes Global Governance of Antitrust and the Need for a BRICS Joint Research Platform in Competition Law and Policy.

ABSTRACT: In May 2016 the BRICS competition authorities signed a Memorandum of Understanding (MoU), which puts in place an Institutional Partnership between BRICS jurisdictions in the area of competition law through a general framework for multilateral cooperation. The paper takes stock of these recent developments and suggests the establishment of a BRICS Joint Research Platform which, in addition to its task to improve the quality of decision-making within BRICS’ competition authorities, will also serve as an alternative forum in the constitution of a global deliberative space in the area of competition law.

The paper offers a critical analysis of the call for policy convergence in competition law, which merely emanates from the global business community and enables established competition law regimes, such as that of the US and Europe, to influence the convergence point and more generally to take ownership of the process of global convergence of competition law.

The paper criticizes this state of affairs for not taking into account the different patterns of diffusion of competition law and consequently the variety of competition law systems emerging out of the original US antitrust law model and its EU competition law “spin-off”. In particular, it castigates the lack of participation in this global deliberative space of emergent and developing economies and the inability of various affected interests, beyond consumers and global businesses, to be considered. The study takes a broader perspective and puts forward a “participation-centred” approach that would seek to avoid both majority and minority biases, the ultimate objective being not policy convergence as such, but increasing levels of total trust between competition authorities and between competition authorities and their stakeholders. The BRICS Joint Research Platform may play an important role in contributing to the establishment of this new architecture of global governance of competition law.

December 9, 2016 | Permalink | Comments (0)

Thursday, December 8, 2016

Are These Cartels? Price Guidelines Adopted by Standard Setting Organisations (US, Institute of Electrical and Electronics Engineers)

Marco Lo Bue, Italian Competition Authority asks Are These Cartels? Price Guidelines Adopted by Standard Setting Organisations (US, Institute of Electrical and Electronics Engineers).

ABSTRACT: •Standard setting organisations adopt Ip policies to grant access at FRAND terms to patented technologies included in the technical standards. •As an example, the US Institute of Electrical and Electronics Engineers (IEEP) recently adopted guidelines suggesting methods to define reasonable rates. •These guidelines were not considered anticompetitive, although they provide a focal point influencing decisions on prices.

December 8, 2016 | Permalink | Comments (0)

Huawei/ZTE: Towards a More Demanding Standard of Abuse in Essential Patent Cases

Sean-Paul Brankin, Salome Cisnal de Ugarte and Lisa Kimmel (all Crowell & Moring) analyze Huawei/ZTE: Towards a More Demanding Standard of Abuse in Essential Patent Cases.

ABSTRACT: •The standard set out by the CJEU in Huawei/ZTE to assess patent-related abuses appears relatively narrow compared to previous jurisprudence. •On the whole, that approach seems appropriate given the need to strike a balance between safeguarding competition and protecting patent holders’ rights. •If followed, that higher standard would seem to exclude the possibility of action under Art 102 TFUE against non-practising patent owners.

December 8, 2016 | Permalink | Comments (0)

The As-Efficient-Competitor Test: Necessary or Sufficient to Establish an Abuse of Dominant Position?

Elisabeth de Ghellinck, Economics School of Louvain asks The As-Efficient-Competitor Test: Necessary or Sufficient to Establish an Abuse of Dominant Position?

ABSTRACT: •The As-Efficient-Competitor test alone is neither necessary nor sufficient to establish the abusive character of standardised retroactive rebate schemes. It is a powerful tool allowing to minimise the risk of making errors when reliable data are available. •The estimation of the relative size of the foreclosed sales remains key to establish the anticompetitive foreclosure impact as, by nature, standardised retroactive rebates do not necessarily foreclose the market. •Computing the effective prices provides a clear indication of the magnitude of the penalty imposed on the rival by the dominant firm.

December 8, 2016 | Permalink | Comments (0)

Online Booking Platforms and EU Competition Law in the Wake of the German Bundeskartellamt's Booking.com Infringement Decision

Silke Heinz is a partner at law firm Heinz & Zagrosek Partnerschaft von Rechtsanwälten describes Online Booking Platforms and EU Competition Law in the Wake of the German Bundeskartellamt's Booking.com Infringement Decision.

ABSTRACT: •Price-parity clauses in hotel platform agreements have increasingly captured the attention of national competition authorities. •In a recent decision, the German Federal Cartel Office has taken a stricter stance under Article 101(3) TFEU, leading to different outcomes in the same case across the EU. •The decision demonstrates the possible need for the Commission to use its powers under Article 11(6) of Regulation 1/2003. •The ongoing proceedings into hotel platform Expedia may even further challenge a uniform application of EU competition law within the European Network of Competition Authorities.

December 8, 2016 | Permalink | Comments (0)

Wednesday, December 7, 2016

The Death of Antitrust Safe Harbors: Causes and Consequences

Lindsey M. Edwards, George Mason and Joshua D. Wright, George Mason offer a post mortem on The Death of Antitrust Safe Harbors: Causes and Consequences

ABSTRACT: The rise of so-called “safe harbors” – conditions that, when satisfied, trigger a presumption of legality – is among the most prominent features of the evolution of antitrust law in the modern era. The emergence of antitrust safe harbors occurred quickly and is attributable to significant contributions from the Supreme Court, lower courts, and the federal antitrust agencies. The recent and ongoing weakening and disappearance of safe harbors from the antitrust landscape has been less well recognized. We explain the causes and consequences of the rise and fall of antitrust safe harbors. We argue that the disappearance of safe harbors is not explained by reversals in any of the factors – a shift in economic analysis of legal rules, economic theory, empirical evidence, or the influence of particular judicial appointments – that led to the original rise in safe harbors. Preliminary evidence suggests that other forces are at work, including but not limited to, changes over time in both partisanship and preferences for standards over rules at the FTC. If we are correct that the current and ongoing shift away from safe harbors at the agencies and in the courts is the result of systematic changes, understanding its causes will be critical to identifying its implications for agencies, courts, and practitioners moving forward.

December 7, 2016 | Permalink | Comments (0)

Renata Hesse: A Retrospective of Her Time at DOJ Antitrust

I am at the excellent CRA Europe conference hosted by Cristina Caffarra. The panels are excellent and the conference has been standing room only in what is a massive room at the Steigenberger Wiltcher's Hotel. As the Obama administration comes to a close, I have been giving thought to one of the conference keynotes, Renata Hesse.

I think that Renata has had a strong term heading DOJ Antitrust. She has brought some important merger challenges. She also has continued strong cartel enforcement (including under Brent Snyder the understanding that compliance credit should be given and some outreach on bid rigging to other parts of government).  I think some of the most important contributions have been in the little things that have been difficult to quantify like improving the morale at the agency.  This is not to say that I do not have some criticisms of DOJ Antitrust under her watch. Overall, however, I think she has had a number of important achievements and I want to celebrate her for those.

December 7, 2016 | Permalink | Comments (0)

Private Ordering in Chinese Antitrust

Angela Zhang, Kings College examines Private Ordering in Chinese Antitrust.

ABSTRACT: This Article begins with an inquiry into why there is a rarity of private challenges of decisions made by the Chinese antitrust authorities. The legal approach to the study of administrative law, which has received most academic attention, has not been able to provide a satisfactory answer to this question. To resolve this puzzle, this Article draws attention to the factors beyond the law, particularly the reputation sanction that Chinese antitrust agencies can strategically inflict on firms under their investigations. Based on event study methodology, I identified significant abnormal stock returns in response to an antitrust agency’s proactive public disclosure of its investigation. As the regulator has the discretion in deciding whether and when to disclose its investigation, this gives it significant clout in influencing the stock performance of firms subject to its investigation. In addition, I hand-collected data from 860 news articles on three high-profile antitrust cases and identified an editorial slant that can further inflate the reputation damage to these firms. A close review of these news articles reveals that such bias stems not only from supply but also demand factors. This Article contributes to several strands of research, particularly on the use of reputation sanction in regulation, the role of media in legal enforcement, and the limits of law in resolving administrative disputes in China.

December 7, 2016 | Permalink | Comments (0)

Tuesday, December 6, 2016

Substitution and Complementarity between Fixed-line and Mobile Access

Chengsi Wang (Department of Economics, University of Mannheim) and Julian Wright (Department of Economics, National University of Singapore) discuss Substitution and Complementarity between Fixed-line and Mobile Access.

ABSTRACT: Platforms use price parity clauses to prevent sellers charging lower prices when selling through other channels. Platforms justify these restraints by noting they are needed to prevent free-riding, which would undermine their incentives to invest in their platform. In this paper, we study the effect of price parity clauses on three different types of platform investment, and evaluate these restraints taking into account these investment effects. We find, that wide price parity clauses lead to excessive platform investment while without such price parity clauses there is insufficient platform investment. Even taking these investment effects into account, wide price parity clauses always lower consumer surplus and often lowers total welfare.

December 6, 2016 | Permalink | Comments (0)

Market power in the portfolio: Product market competition and mutual fund performance

Stefan Jaspersen analyzes Market power in the portfolio: Product market competition and mutual fund performance.

ABSTRACT: I provide evidence that fund managers who overweight firms with the most differentiated products ('monopolies') exhibit a superior risk-adjusted performance. This is consistent with information advantages due to a better understanding of qualitative information on a firm's competitive environment. I find that funds with above median monopoly bets outperform by up to 92 basis points annually and trade more successfully in both their monopoly and nonmonopoly sub-portfolios. My identification strategy includes exogenous shocks to information quality using the Sarbanes-Oxley Act and to a firm's product market environment using the 9/11 terrorist attacks. I document that managers who place larger monopoly bets are less likely to invest into rival firms at the same time, have a longer investment horizon, and hold more illiquid and high quality stocks.

December 6, 2016 | Permalink | Comments (0)

Reimbursing Consumers' Switching Costs in Network Industries

Jiawei Chen (Department of Economics, University of California) and Michael Sacks (Department of Economics, West Virginia University) explore Reimbursing Consumers' Switching Costs in Network Industries.

ABSTRACT: This paper investigates firms' decisions to reimburse consumers' switching costs in network industries. Prior literature finds that switching costs incentivize firms to harvest their locked-in consumers rather than price aggressively for market dominance, resulting in a lower market concentration. Using a dynamic duopoly model, we show that this result is reversed if firms have the option to reimburse consumers' switching costs. In that case the larger firm offers a bigger reimbursement to switching consumers than the smaller firm does, as an additional instrument to propel itself to market dominance. Consequently, an increase in switching cost increases market concentration. Compared to the case without reimbursements, allowing firms the option to reimburse results in greater consumer welfare despite having a much higher market concentration. Consumers' benefits from a larger network and switching cost reimbursement outweigh the higher price charged by a dominant firm.

December 6, 2016 | Permalink | Comments (0)

Multiproduct-Firm Oligopoly: An Aggregative Games Approach

Nocke, Volker and Schutz, Nicolas have an interesting paper on Multiproduct-Firm Oligopoly: An Aggregative Games Approach.

ABSTRACT: We develop an aggregative games approach to study oligopolistic price competition with multiproduct firms. We introduce a new class of demand systems, derived from discrete/continuous choice, and nesting CES and logit demand systems. The associated pricing game with multiproduct firms is aggregative and a firm's optimal price vector can be summarized by a uni-dimensional sufficient statistic, the iota-markup. We prove existence of equilibrium using a nested fixed-point argument, and provide conditions for equilibrium uniqueness. In equilibrium, firms may choose not to offer some products. We analyze the pricing distortions and provide monotone comparative statics. Under CES and logit demands, another aggregation property obtains: All relevant information for determining a firm's performance and competitive impact is contained in that firm's uni-dimensional type. Finally, we re-visit classic questions in static and dynamic merger analysis, and study the impact of a trade liberalization on the inter- and intra-firm size distributions, productivity and welfare.

December 6, 2016 | Permalink | Comments (0)

Monday, December 5, 2016

Competition and Big Data, 18.00 8 December 2016, King's College

Register Now

Public Seminar

Centre of European Law The Dickson Poon School of Law

 

Competition and Big Data Commissioner

 

Terrell McSweeny, Federal Trade Commission, Professor D Daniel Sokol, University of Florida and Martin McElwee, Freshfields Bruckhaus Deringer will be 'in conversation' on this very important and current issue.

In the Chair Professor Alison Jones, King's College London

18.00 8 December 2016

 

Date and Time

Thu 8 December 2016 18:00 – 19:00 GMT

 

Location

Edmond J Safra Lecture Theatre King's Building Strand Campus, King's College London WC2R 2LS United Kingdom

 

The lecture will be followed by a drinks reception CPD accredited by the the Bar Standards Board

 

Centre of European Law
King’s College London
Strand, London, WC2R 2LS
Tel 020 7848 2387
Email: cel@kcl.ac.uk
Web www.kcl.ac.uk/cel

December 5, 2016 | Permalink | Comments (0)

Less than Zero? The Economic Impact of Zero Rating on Content Competition

Soohyun Cho (Rutgers Business School, Rutgers, The State University of New Jersey, NJ, USA) ; Liangfei Qiu (Warrington College of Business, University of Florida, FL, USA) ; Subhajyoti Bandyopadhyay (Warrington College of Business, University of Florida, FL, USA) ask Less than Zero? The Economic Impact of Zero Rating on Content Competition.

ABSTRACT: One emerging business model for Internet service providers (ISPs) is to allow content providers (CPs) to subsidize Internet access for end consumers. In the present study, we develop a game-theoretical model to analyze the effects of this sponsorship of consumer data usage. The findings indicate that for an ISP, its optimal network management choice of data sponsorship largely hinges on specific market conditions such as the revenue rates of CPs and the fit cost for consumers. If the fit cost is low, the ISP will either allow both CPs to subsidize consumers’ Internet access, or allow only the more competitive CP to subsidize, depending on the CPs’ per-consumer revenue generation rates. If the fit cost is high, it is in the ISP’s interest not to allow any subsidization. The study also identifies the conditions under which an ISP’s network management choices of data sponsorship deviate from the social optimum. By identifying additional revenue models, these findings have direct implications for the telecom industry, for online content providers competing for customer loyalty, and for policymakers vested in this issue.

December 5, 2016 | Permalink | Comments (0)

Vertical Probabilistic Selling under Competition: the Role of Consumer Anticipated Regret

Yong Chao (College of Business, University of Louisville); Lin Liu (College of Business Administration, University of Central Florida) and Dongyuan Zhan (School of Management, University College London) analyze Vertical Probabilistic Selling under Competition: the Role of Consumer Anticipated Regret.

ABSTRACT: This paper studies probabilistic selling with vertically differentiated products when firms compete and consumers anticipate the potential post-purchase regret raised by possibly obtaining the inferior products. Intuitively, anticipated regret hurts the attractiveness of probabilistic selling. However, we find that probabilistic selling can be more profitable, and more likely to arise with anticipated regret than without it. This is due to the reverse quality discrimination (perceived quality of the random product becomes decreasing in consumer type at the competition margin), which increases the perceived differentiation, and may still maintain sufficient attractiveness of the random product for infra-marginal consumers. Meanwhile, it may hurt the competitor.

December 5, 2016 | Permalink | Comments (0)

Owning, Using and Renting: Some Simple Economics of the "Sharing Economy"

Horton, John J. (New York University) and Zeckhauser, Richard J. (Harvard University) describe Owning, Using and Renting: Some Simple Economics of the "Sharing Economy".

ABSTRACT:  New Internet-based markets enable consumer/owners to rent out their durable goods when not using them. Such markets are modeled to determine ownership, rental rates, quantities, and surplus generated. Both the short run, before consumers can revise their ownership decisions, and the long run, in which they can, are examined to assess how these markets change ownership and consumption. The analysis examines bringing-to-market costs, such as labor costs and transaction costs, and considers the operating platform's pricing problem. A survey of consumers broadly supports the modeling assumptions employed. For example, ownership is determined by individuals' forward-looking assessments of planned usage.

December 5, 2016 | Permalink | Comments (0)