Antitrust & Competition Policy Blog

Trends and Developments in Global Competition Law

Posted by D. Daniel Sokol

The University of London Interdisciplinary Centre for Competition Law and Policy (ICC) and US law firm Crowell & Moring are hosting a conference entitled Trends and Developments in Global Competition Law.  Ththe conference will focus on: international merger control; international cartel procedures; private enforcement, damages claims and recovery; and abuse of dominance.  Conference registration is available here.

FTC Commissioner Rosch on Antitrust-IP in the Pharmaceutical Industry

Posted by D. Daniel Sokol

David Balto has brought to my attention a speech that FTC Commissioner Tom Rosch made yesterday on IP-Antitrust issues specific to the pharmaceutical sector.  According to David, the speech highlights include:

• Rosch believes that both Tamoxifen and Schering were wrongly decided.
• Rosch hopes that the Supreme Court will accept cert in Tamoxifen
• The FTC supports the objectives of the proposed patent settlement legislation   
• Rosch believes that the FTC can successfully challenge patent settlements under the standards in the Tamoxifen and Schering decisions and the Commission should do so
• The speech addresses how competition should be analyzed in a merger where the parties suggest that there is no lost competition because the overlapping product of one of the merging parties violates the patent of the other merging party
• the speech addresses issues surrounding building a patent thicket 
• Finally, the speech suggests that FTC Section 5 can be used to attack the conduct of a patent troll

You can download the speech here.

ABA Sections of Antitrust and Intellectual Property Law: Strategic Choices, Evolving Standards, and Practical Solutions

Posted by D. Daniel Sokol

I just reviewed the brochure for the annual ABA Antitrust-Intellectual Property conference.  Like the previous ABA Antitrust-IP conferences, this one looks very interesting with a nice mix of academics, government officials and lawyers from both in-house and law firm perspectives.  The agenda is available here and registration here.      

Property, Liability and Market Power: The Antitrust Side of Copyright

Posted by D. Daniel Sokol

Two Italian academics, Antonio Nicita of the University of Siena and  G.E. Ramello of the University of Eastern Piedmont, have published a new working paper on the interface between IP and Antitrust entitled Property, Liability and Market Power: The Antitrust Side of Copyright.

ABSTRACT: This paper investigates the interplay between copyright law and antitrust law in two distinct respects. We first argue that the origin of copyright seems to be rooted not only in the need to foster the production and the spread of knowledge but also in the necessity of limiting market power on the side of distributors. We then show the potential impact on market competition of the evolution of copyright as a property rule. While property rules reduce transaction costs in the standard case of bilateral monopoly over the exchange of information goods, they might increase transaction costs. When coupled with market power, a property rule enables the right holder to control uses and prices so as to implement entry deterrence strategies against potential competitors. Conversely, we argue that reversing property rules in favor of competitors or switching to liability rules for copyright may restore competitive outcomes. This conclusion brings new insights on the application of the essential facility doctrine to copyrighted works.

Cascade Health Solutions v. PeaceHealth Law Professor's Brief

Posted by D. Daniel Sokol

A few weeks ago I put out a call for law professors to sign on to a brief that Dan Crane of Cardozo Law School authored on predatory pricing.  You can find the brief that was submitted to the 9th Circuit below.

Download peacehealth_amicus_brief.pdf

A Critique of Cartel Fine Discounting by the U.S. Department of Justice

Posted by D. Daniel Sokol

This week we had an excellent discussion in my class of international cartels.  John Connor of Purdue's Agricultural Economics Department has been at the forefront of cartel research and I assigned one of his recent articles on the topic.  John has a new working paper that suggests that cartel fines are under-deterring cartel behavior entitled A Critique of Cartel Fine Discounting by the U.S. Department of Justice.

ABSTRACT: This paper surveys declared Department of Justice policies on cooperation discounts on fines for corporate criminal price-fixing violations and develops and tests a statistical model to explain the actual discounting practices of the DOJ. The sample consists of 56 corporations that were fined for hard-core cartel behavior between 1996 and 2006 and for which reasonably accurate data on recommended fines can be found. In most respects there is consistency between principle and practice, but in three respects a divergence is observed. As promised, the DOJ does reward the second-in, third-in, and successive firms that agree to plead guilty with progressively smaller cooperation discounts. Discounts are larger for low-ranking (early-to-plead) firms, but for companies with the same rank discounts are larger when the number of cartel participants is small. A second reasonable finding is that the longer a guilty firm delays in coming to terms with the DOJ, the smaller will be its cooperation discount. Delay and moving down in the queue act independently and additively. If a firm delays its guilty plea by seven months and at the same time moves to fourth place and loses second place, the empirical model predicts that the fine tends to increase by 12 percentage points of affected sales. Three additional findings seem to point to inconsistent application of the DOJ's public policy on rewarding cooperation of guilty cartel participants. First, neither the size of a defendant's affected commerce nor the duration of its collusion raises or lowers cooperation discounts. Second, Asian and European defendants receive distinctly lower cooperation discounts than corporate defendants from North America; the effect averages 14 to 19 percentage points of the Guidelines' maximum recommended fine. Third, two measures of price-fixing recidivism are unrelated to the cooperation discounts of the sampled cartelists. The DOJ seems to be disregarding its avowed policy of rewarding lower discounts to cartel recidivists. Most evidence points to under deterrence of current penalties on cartels, particularly the international ones that comprise the bulk of this study's sample. It is likely that the level of U.S. fines contributes to under deterrence by building in expectations on the part of would-be cartelists for large cooperation discounts. Moreover, excessive discounting of cartel fines undermines the effectiveness of corporate leniency programs by reducing the monetary value of early cooperation. The DOJ and the USSC should re-examine the guidelines and toughen the fines for defendants from durable cartels and histories of recidivism.

Antitrust Consent Decrees in Theory and Practice: Why Less is More

Posted by D. Daniel Sokol

Richard Epstein of the University of Chicago Law School (and who taught me contract law) recently  published a book that addresses antitrust consent decrees-- Antitrust Consent Decrees in Theory and Practice: Why Less is More.  The book blurb is as follows:

For over one hundred years, the antitrust consent decree has been a major weapon in the federal enforcement of antitrust laws. In Antitrust Consent Decrees in Theory and Practice, Richard A. Epstein undertakes the first systematic study of their use and effectiveness from both a historical and analytical perspective.

Epstein observes how differences in antitrust philosophy can shape the kinds of comprehensive settlements that the government will seek and the courts will grant. Epstein takes issue with aggressive antitrust enforcement strategies that seek to use government power to fundamentally alter industry structures or the business practices of regulated firms, in some instances leading to their breakup. To explain the perils of that approach, Epstein carefully examines the history of consent decree litigation, culminating in detailed studies of the AT&T breakup and the government antitrust actions against Microsoft.

Applying modern theories of antitrust analysis, Epstein's central thesis is that bold antitrust remedies that are not tightly tied to a defensible theory of wrongful conduct often prove counterproductive. Such measures typically force firms to adopt business practices and structural reorganizations that substantially impede their ability to compete effectively in the marketplace. The disparate fates of AT&T and Microsoft are the result of a major and fruitful shift in thinking about the use and limits on the antitrust laws in a wide variety of industrial contexts.

Antitrust Consent Decrees in Theory and Practice will be of interest to any reader who is concerned with the larger implications of the government regulation of law and business. Epstein brings nearly forty years of personal knowledge and experience to this matter. Written in a clear and nontechnical style, this book should prove an invaluable resource to any student of regulation and economic policy, as well as lawyers and policymakers concerned with antitrust litigation.

For those interested in seeing Epstein in person discuss this book (and if you haven't ever seen Epstein speak, you really need to do so), the American Enterprise Institute will be hosting a book forum on May 16 with Epstein, discussant Doug Melamed of WilmerHale and moderator Michael Greve of AEI.  Details are available here.

Retail Mergers, Buyer Power and Product Variety

Posted by D. Daniel Sokol

Next week is the final week of classes at the University of Wisconsin.  My final class will focus on comparative buyer power issues.  A new working paper titled Retail Mergers, Buyer Power and Product Variety by Roman Inderst of the London School of Economics & Political Science and Greg Shaffer of the University of Rochester - Simon School of Business addresses buyer power merger issues.

ABSTRACT: This article analyses the impact of retail mergers on product variety. We show that, following a merger, a retailer may want to enhance its buyer power by committing to a 'single-sourcing' purchasing strategy. Anticipating further concentration in the retail industry, suppliers will strategically choose to produce less differentiated products, which further reduces product variety. If negotiations are efficient, the overall loss in product variety may reduce consumer surplus and total welfare. With linear tariffs, however, there may be a countervailing effect as the more powerful retailer passes on lower prices to final consumers.

EU Merger Remedies Consultation

Posted by D. Daniel Sokol

Earlier today, the European Commission launched a public consultation draft guidelines on merger remedies.  The press release explains, "The new draft Remedies Notice would adapt the current guidelines (dating from 2001) in the light of an extensive study undertaken by the Commission into the implementation and effectiveness of remedies (see IP/05/1327), recent judgements of the European Courts and the new Merger Regulation (139/2004 –see MEMO/04/9), in force since2004. The new Remedies Notice is due to be adopted definitively by the Commission later in 2007, taking into account the results of the consultations just launched."

The draft notice is available here.

Global Antitrust Law and Economics

Posted by Einer Elhauge and Damien Geradin

No one would think of writing a casebook on Massachusetts Antitrust Law. It has long been too obvious that such a book would be parochial in at least two senses. First, markets (not to mention legal practices) generally span regions far larger than any state. Second, antitrust analysis has a common methodology applicable across the states, and thus does not benefit from a state-centric focus.

Yet antitrust casebooks continue to be parochial in the sense that they focus on the antitrust and competition law of only one nation. That perspective is rapidly becoming as outmoded as a state-centric approach would be. Markets are increasingly becoming global or at least multinational. A typical merger between large U.S. corporations must get approval not just in the United States but also by the European Community (the “EC”), for their activities often affect both markets. Likewise for large European corporations. Cartels in one nation affect supply in others. And countries are increasingly entering into treaties with each other about the content or enforcement of competition laws. Thus, businessmen, lawyers, and lawmakers can no longer content themselves with understanding only the antitrust and competition law of their nation. They must also understand the other regimes that form part of the overall legal framework that regulates competitive behavior.

Modern antitrust law is thus global antitrust law. (We shall use “antitrust” law to refer to what other nations generally call “competition” or “anti-monopoly” law.) Modern antitrust law also differs from traditional antitrust law in that it now reflects the dominance of the economic model of analyzing antitrust and competition policy. This is a shift that has occurred both in the U.S. and EC, where legal models that once included political, formalistic, corporatist, or autonomy-based notions of “competition” have embraced an exclusively economic methodology based on maximizing consumer welfare, and have done so in a way that is common to the diverging political viewpoints in each. There remain important differences between the U.S. and EC, and differing political viewpoints, but they no longer have as much to do with different values as with different presumptions about how to resolve theoretical or empirical ambiguities raised by a common framework of antitrust economics. The same is true for most other developed nations, as well as for the developing nations that increasingly borrow from the antitrust frameworks of the U.S. or EC.

These two key aspects of modern antitrust law are highly related, for the common economic methodology used in the U.S. and EC means both are amenable to analysis by a common body of scholarship that speaks an increasingly common language of antitrust economics. It differs from pure economics in that it must crucially concern itself with the administrability and implementation of economic concepts in a world where information is limited, decision-makers are imperfect, adjudication is lengthy and costly, and parties are strategic both in litigation and in responding to different substantive rules. But those realities are common across nations, and thus this modern methodology means that antitrust and competition scholars are, whether they recognize it or not, now part of a global community and that ideas generated on one continent cannot safely be cabined and ignored on the others.

We thus organize this casebook as a study of global antitrust law and economics. Major U.S. and EC laws and cases will be presented and analyzed on each major antitrust topic. Although we also briefly summarize in each section the competition laws of other jurisdictions, our focus is on the U.S. and EC for several reasons. First, as a practical matter, the lion’s share of global antitrust enforcement is done by the U.S. and EC. Second, as a conceptual matter, nations outside those jurisdictions by and large borrow the basic statutory frameworks of either the U.S. and EC and employ similar methods of antitrust analysis. Knowing how the U.S. and EC jurisdictions have grappled with the standard set of antitrust problems thus goes a long way to understanding how antitrust analysis is done in the rest of the world too. We discuss other nations in a bit more length where they seem to clearly raise a “third way” of addressing an important antitrust issue. This is not a book on comparative law in the narrow sense of analyzing comparisons purely in order to shed light on laws that are really national in application. Rather we write with the conviction that this combination of laws from varying nations in actual practice presents a truer picture of the overall regime of competition law that now faces multinational market players. But it is surely a delightful side-benefit that this juxtaposition provides important comparative insights into differing possible approaches and their benefits and drawbacks, which will also aid analysis even in purely national markets. Nor is this a book on international antitrust law in the narrow sense of analyzing how nations resolve legal conflicts between their antitrust regimes. Such topics will certainly command attention in our final chapter, but our dominant perspective is that the antitrust laws of multiple nations are legally relevant to modern antitrust law and practice. Thus, this is not a book on comparative or international antitrust law any more than a casebook on contracts law that includes cases from multiple states is a book on comparative or interstate contracts law. It is rather a book designed to replace more parochial books on basic antitrust law by giving a more realistic sense of the range of issues and analyses relevant to modern antitrust law wherever practiced.

Introducing Guest Bloggers Einer Elhauge and Damien Geradin

Posted by D. Daniel Sokol

Shubha and I want to extend a warm welcome to this week's guest bloggers Einer Elhauge and Damien Geradin, who will discuss their new case book Global  Antitrust Law and Economics (Foundation Press 2007).

Einer Elhauge is the Petrie Professor of Law at Harvard Law School and faculty director of the Petrie-Flom Center for Health Law Policy, Biotechnology and Bioethics. He teaches a gamut of courses ranging from Antitrust, Contracts, Corporations, Health Care Law, and Statutory Interpretation. Before coming to Harvard, he was a Professor of Law at the University of California at Berkeley, and clerked for Judge Norris on the 9th Circuit and Justice Brennan on the Supreme Court. He received both his A.B. and his J.D. from Harvard, graduating first in his law school class.

Damien Geradin is a Professor of Competition Law and Economics at the Tilburg University (The Netherlands) and a member of TILEC. His areas of research include antitrust, network industries (telecommunications, postal services, energy and transport), and economic regulation in general. Damien is the Director of the Global Competition Law Center (GCLC), a think tank devoted to analytical research in the area of competition law, which is based at the College of Europe in Bruges (Belgium). He also held visiting Professorships in a number of leading US Universities including Columbia, Harvard, UCLA and Yale.  He is also a partner in the Brussels office of the international law firm Howrey LLP. Howrey is a firm specialized in antitrust, IP, and litigation.  He is the co-editor-in-chief of the Journal of Competition Law and Economics (Oxford University Press) and of the Journal of Network Industries (Intersentia). He has published more than 50 legal and economic papers in a variety of academic journals, including the Common Market Law Review, the European Law Review, the Journal of Competition Law and Economics, the Berkeley Technology Law Journal, the Columbia Journal of European Law, the Journal of World Trade, the Journal of International Economic Law, the European Foreign Affairs Review, and the Utilities Law Review. Damien Geradin's work has been quoted by the European Court of Justice, the US Court of Appeals (10th Circuit), as well as in numerous regulatory proceedings.