Antitrust & Competition Policy Blog

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

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Thursday, April 12, 2007

The Vertical Restraints' Paradox: Justifying the Different Legal Treatment of Price and Non-Price Vertical Restraints

Posted by D. Daniel Sokol

Shubha will be happy to know that I found a recent working paper that agrees with him on the need for per se illegality treatment of RPM.  Ittai Paldor, an SJD student at U Toronto has the following working paper out on SSRN entitled The Vertical Restraints' Paradox: Justifying the Different Legal Treatment of Price and Non-Price Vertical Restraints.

Abstract: In a case currently pending before the U.S. Supreme Court the court has been urged to overrule the longstanding per se illegality rule presently applicable to minimum resale price maintenance, or RPM. Over the past fifty years antitrust theorists and economists have advanced several pro-competitive explanations for RPM. Additionally, scholars have argued that non-price vertical restraints (such as territorial exclusivity) and RPM have similar effects on price and quantity and should therefore be treated similarly by law. Nearly thirty years ago, the Supreme Court ruled that non-price vertical restraints should be subject to a rule of reason, acknowledging their pro-competitive potential. Since no explanation has been forwarded to justify treating RPM differently, there seems to be good reason to rectify the inconsistency and subject RPM to a rule of reason too. And indeed, the Court has recently granted Certiorari, signaling at least a willingness to reconsider its position. In the following I argue that legal policymakers' current approach is economically justified. I show that all pro-competitive explanations for RPM suffer from a common flaw, the possibility of non-price competition, which challenges RPM's ability to achieve any of the pro-competitive goals attributed to it. I then proceed to show that non-price vertical restraints are capable of achieving the pro-competitive goals which RPM is incapable of achieving. This justifies both applying a per se illegality rule to RPM and applying a different rule, namely a rule of reason, to other vertical restraints.

April 12, 2007 | Permalink | Comments (1) | TrackBack (0)

Wednesday, April 11, 2007

Antitrust and Media Diversity

Posted by D. Daniel Sokol

David Balto reports on a recent decision in California.  Reilly v. Media News challenges a series of newspaper mergers in the Bay Area.  Mr. Reilly, a consumer, argues the mergers are anticompetitive and he argues the anticompetitive effects are not just a matter of prices but the importance on diversity of ownership and diversity of media views.  Judge Illston decided Mr Reilly had standing.  She relied on Judge Walker's decision in an earlier merger challenge brought by Mr. Reilly "Chief Judge Walker [in Reilly 1]  simply noted that the Newspaper  reservation Act reflects a congressional concern with "encouragement of  ultiple sources of newspaper news, features and opinion," and "the Sherman Act and Clayton Act should be read bearing in mind [these] legislative purposes.Id. at 1195. There is no reason to think that Congress was only concerned with newspaper diversity in situations where the NPA is involved.

"This Court agrees with the analysis of standing made in Reilly I. The NPA evidences that Congress values the existence of separate sources of newspaper content in a community, and that loss of separate sources injures consumers. The existence of the NPA thus strongly suggests that loss of diversity of content is a "threatened loss or damage `of the type the antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful. "' Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S.104,113 (1986). This conclusion is consistent with the Supreme Court's broad interpretation of the Clayton Act, which "does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers.... The Act is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated." Blue Shield v Mcready" and "A refusal to compete with respect to the package of services offered to customers, no less than a refusal to compete with respect to the price term of an agreement, impairs the  ability of the market to advance social welfare by ensuring the provision of desired goods and services to consumers at a price approximating the marginal cost of providing them."  FTC v. Indiana Federation of Dentists, 476 U. S. 447, 459 (1986); see also Glen Holly, 352 F.3d at 377 ("Antitrust law addresses distribution restraints in order to protect consumers from the higher prices or diminished choices that can sometimes result from limiting intrabrand competition.") (citation omitted).

Download reilly.stngdecision.pdf

April 11, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 10, 2007

Law Professor's Brief in Cascade v. PeaceHealth

Posted by D. Daniel Sokol

Professor Daniel Crane of Cardozo Law School (of recent fame on this blog for his excellent Antitrust Antifederalism article) is filing a law professors' amicus brief in Cascade v. PeaceHealth, a 9th Circuit case on bundled discounts.  This is in response to the following (rather unusual) request by the 9th Cir. panel:

The court invites supplemental briefs by any amicus curiae addressing the following issue raised in this appeal: Whether a plaintiff who seeks to establish the predatory or anticompetitive conduct element of an attempted monopolization claim under § 2 of the Sherman Act by showing that the defendant offered bundled discounts to the defendant's customers must prove that the defendant's prices were below an appropriate measure of the defendant's costs. If so, what is the appropriate measure of costs and how should the trial court instruct the jury on the matter of costs? If not, what standard should the trial court instruct the jury to use to determine whether the bundled discounts are predatory or anticompetitive?

The Crane brief answers the first question yes.  It argues in favor of a discount reallocation screen (the plaintiff must show that the competitive product was priced below cost after reallocation of discounts from the monopoly product) and advocates average variable cost as the appropriate measure of cost.

The brief will be on behalf of a group of law professors.  It is due to be filed next Thursday (April 19).  Anyone wishing to review a draft of the brief should email Dan

April 10, 2007 | Permalink | Comments (0) | TrackBack (0)

Spulber and Yoo on Trinko

Posted by D. Daniel Sokol

Trinko is one of the most important antitrust decisions of recent years.  Daniel Spulber of Northwestern University's Kellog School of Management and Christopher Yoo of Vanderbilt Law School examine Trinko and apply its meaning to the current debate on net neutrality issues in their working paper entitled Mandating Access to Telecom and the Internet: The Hidden Side of Trinko.

Abstract: Antitrust has long played a major role in telecommunications policy, demonstrated most dramatically by the equal access mandate imposed during the breakup of AT&T. In this Article we explore the extent to which antitrust can continue to serve as a source of access mandates following the Supreme Court's 2004 Trinko decision. Although Trinko sharply criticized access remedies and antitrust courts' ability to enforce them, it is not yet clear whether future courts will interpret the opinion as barring all antitrust access claims. Even more importantly, the opinion contains language hinting at possible bases for differentiating among different types of access, in contrast to previous analyses, which have generally grouped all of the forms of access into a single category. We build upon this language to offer an analytical framework, based on a branch of mathematics known as graph theory, that captures the manner in which different components of network can interact with one another as part of a complex system. Our analysis  also offers a basis for classifying the different types of access into five categories: retail, wholesale, interconnection, platform, and unbundled. We then employ this framework to analyze a range of policy and doctrinal issues, including the current debate over network neutrality.

April 10, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, April 9, 2007

50 Years Later: Is Less EU Competition Policy Better?

Posted by D. Daniel Sokol

Valentine Korah of University College London provides her thoughts on 50 years of competition policy in the EU here (free registration required).  Korah notes a pattern of decreasing competition policy intervention.

Korah makes a number of interesting points.  One insight in particular on the current state of Article 82 stands out.  Korah writes, "The old views on Article 82 are still accepted by the courts, although the views are now controversial. The Commission is trying focus on avoiding consumer harm, and analyzing the direct or indirect effects on consumers of conduct alleged to be abusive. There is a huge dispute between those influenced by the German school of Ordo Liberals, interested in competition as an institution and the protection of competitors, on the one hand, and those influenced by developments in the USA and concern for efficiency." 

Are we in fact seeing the Americanization of Article 82?

April 9, 2007 | Permalink | Comments (0) | TrackBack (0)

International Competition Network in Action

Posted by D. Daniel Sokol

The International Competition Network (ICN) has, in my estimation, been the most important and effective international antitrust institution for norm creation and implementation since its creation in 2001.  Two ICN events are coming up in the near term that are worth noting. 

As posted on the ICN website, "The Irish Competition Authority and the UK Office of Fair Trading will be hosting an ICN Mergers Workshop on Substantive Issues in Merger Review to be held on April 12th-13th, 2007, in Dublin, Ireland. The Workshop is aimed at case handlers of competition authorities and it is intended to promote the outputs delivered by the ICN Merger Investigation and Analysis Subgroup over the last two years."

The ICN annual meeting conference website is now up, here.  The meeting will be in Moscow.  As documents become final, they will be posted on the conference website.  The conference agenda is exciting and is available here.  I have been involved with the inputs of a number of subgroups and think that this conference and materials will be excellent.  As noted earlier, due to the upcoming birth of our second child, my wife has forbidden my travel in May and June so I will not attend the conference.  We will try to get someone to report from the conference for the blog.

April 9, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 8, 2007

Comparative Perspectives on Multi-Jurisdictional Antitrust Enforcement

Posted by D. Daniel Sokol

The Centre for Competition Policy at the University of East Anglia will hold its annual summer conference from June 14-15.  This year's theme is Comparative Perspectives on Multi-Jurisdictional Antitrust Enforcement.  You can find more conference information here.

Speakers include:
Professor Stephen Calkins (Wayne State University); Firat Cengiz (CCP, University of East Anglia); Professor Andrew Gavil (Howard University); Dr. Michael Harker (CCP, University of East Anglia); Professor Scott Hemphill (Columbia University); Professor William Kovacic (FTC); Dr. Philip Marsden (BICL); Professor Stephen Wilks (Exeter University).

April 8, 2007 | Permalink | Comments (0) | TrackBack (0)