Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, May 5, 2007

My International and Comparative Antitrust Seminar

Posted by D. Daniel Sokol

This was the last week of classes at the University of Wisconsin Law School.  My international and comparative antitrust law and economics seminar exposed students to different ways of thinking about antitrust and competition policy issues from around the world.  We covered cases and case studies from the United States, EU, Korea, Japan, Australia, New Zealand, Mexico, Brazil, Chile, UK, Singapore, South Africa, and Canada across a number of substantive areas of antitrust law and economics.  Our class would not have been as successful without the participation of our guest lecturers.  These experts provided critical insights to our understanding from enforcement and private sector perspectives:

Tom Burt, Microsoft
Radoslav Depolo, Tribunal de Defensa de la Libre Competencia (Chile)
Ken Glazer, Federal Trade Commission
Jim Griffin, King & Spaulding
Alberto Heimler, Autorita Garante della Concorrenza e del Mercato (Italy)
Ken Heyer, Department of Justice/Antitrust Division
Shyam Kehmani, World Bank
Joe Krauss, Hogan & Hartson
Tad Lipsky, Latham & Watkins
Bruce McDonald, Jones Day
Randy Tritell, Federal Trade Commission

The other experiment in the class was to have a mix of JD, LLM (on of whom previously worked at the Taiwan FTC) and economics PhD students trying to approach the same material from their different perspectives.  The diversity of skill-sets and backgrounds enriched our class discussions.   Given that outside of the classroom economists and lawyers need to interface on antitrust issues, our class was early exposure of this interaction.

May 5, 2007 | Permalink | Comments (0) | TrackBack (1)

Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach

Posted by D. Daniel Sokol

Cartel enforcement is one of the most interesting area of antitrust.  How do we measure cartel overcharges?  James F. Nieberding of LECG offers a number of different methods in his paper Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach: Methods and Issues

ABSTRACT: This paper presents several methods and discusses salient issues pertaining to the use of reduced-form models to estimate overcharges in antitrust matters (e.g., price-fixing) where but-for prices may be less than actual prices during the anticompetitive period. In particular, two common types of reduced-form estimations are discussed: the dummy variable approach and the forecasting approach. Under either methodology, an error correction model is then specified as one way to address technical problems often found in applied time-series analysis - nonstationary data and the existence of short-term and longterm dynamics.

May 5, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday, May 4, 2007

Innovation, Competition and Growth: A Schumpeterian Perspective on Canada’s Economy

Posted by D. Daniel Sokol

Canada's C.D. Howe Institute has release a new study on the Antitrust-IP interface by Peter Howitt, the Lyn Crost Professor of Social Sciences at the Department of Economics, Brown University, as it relates to Canada- Innovation, Competition and Growth: A Schumpeterian Perspective on Canada’s Economy.  The report concludes:

• Competition policy should not be relaxed in hopes of boosting innovation, because more competition actually strengthens the incentive to innovate. Recent empirical work points to a positive relationship between product market competition and productivity growth or innovativeness within a firm or industry.
• Canada needs to be wary of further extensions of patent protection, which could serve to discourage innovation more than stimulate it. The more broadly we extend patent rights to include such things as software and genetic combinations, the more we discourage follow-on inventors and inhibit the flow of ideas.
• Without sacrificing academic values that sometimes conflict with commercial interests, Canadian universities should continue to develop ties with private enterprise, to see that innovative ideas turn into adopted technologies.
• Openness to international trade is crucial for keeping pace with global technological change, as is a favourable R&D environment, offering clear messages for trade and tax policy.
• The effects of innovation on income inequality can be mitigated by strengthening the educational system and reducing mobility barriers, implying that federal and provincial governments should examine their approaches to education, with close attention to fundamental analytical skills, and emphasize policies that support labour mobility.   

May 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Scholarships in Law and Economics for Advanced Degree Study of Competition Policy

Posted by D. Daniel Sokol

The ESRC Centre for Competition Policy at the University of East Anglia is offering a number of full or part studentships for PhD candidates whose study relates to Competition Law and applicants for the MSc Industrial Economics and LLM in International Competition Law and Policy.  Further information and details about how to apply are available at their website: http://www.ccp.uea.ac.uk.

May 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 3, 2007

Why Hong Kong Needs an Antitrust Regime

Posted by D. Daniel Sokol

Mark Williams makes the case in an op-ed in the Financial Times on Why Hong Kong Needs an Antitrust Regime.  I agree with Mark.   Hong Kong faces market failures because of highly concentrated markets that allow incumbent monopolists to create barriers to entry.  An antitrust system can help facilitate a more competitive market. 

An antitrust agency can also help to prevent private firms from using government to shield anti-competitive conduct through competition advocacy.  I just made suggested revisions a chapter for my forthcoming book on Latin American Antitrust Developments in which Todd Zywicki of George Mason Law School draws upon the US experience to illustrate the importance of competition advocacy and how it can work in Latin America.  You can download Todd's draft here.  Todd's paper has equally important implications for Hong Kong on the importance of an effective competition advocacy program.

May 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 2, 2007

Final FTC/DOJ Single-Firm Conduct Hearing on May 8

Posted by D. Daniel Sokol

The final FTC/DOJ Single-Firm Conduct hearing will take place on May 8.  According to the FTC press release, "This final session will review a wide range of enforcement and policy issues regarding single-firm conduct, including analysis of monopoly power, various proposed standards for exclusionary conduct, and challenges in applying those standards to specific practices."  Speakers include:

May 8, 2007 (9:00 A.M. - 1:00 P.M.)        

Susan A. Creighton is a Partner at Wilson Sonsini Goodrich & Rosati PC and former Director of the Federal Trade Commission’s Bureau of Competition.

Jeffrey A. Eisenach is the Chairman of Criterion Economics, L.L.C. and an Adjunct Professor at George Mason University School of Law.

A. Douglas Melamed is a Partner and Co-chair of WilmerHale’s Antitrust and Competition Department and former Deputy Assistant Attorney General of the Department of Justice’s Antitrust Division.

Timothy J. Muris is a George Mason University Foundation Professor of Law, Of Counsel at O’Melveny & Myers LLP, and former Chairman of the Federal Trade Commission.          

Robert Pitofsky is the Joseph and Madeline Sheehy professor in Antitrust and Trade Regulation Law, Georgetown University Law Center, Counsel at Arnold & Porter LLP, and former Chairman of the Federal Trade Commission.

James F. Rill is a Partner at Howrey LLP and former Assistant Attorney General of the Department of Justice’s Antitrust Division.          

Charles F. (Rick) Rule is a Partner at Cadwalader, Wickersham & Taft LLP and former Assistant Attorney General of the Department of Justice’s Antitrust Division.

J. Gregory Sidak is a Visiting Professor of Law at Georgetown University Law Center and Founder of Criterion Economics, L.L.C.

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Antitrust Analysis of Category Management: Conwood v. U.S. Tobacco

Posted by D. Daniel Sokol

Josh Wright of George Mason Law School has expanded our knowledge on category management in a number of recent working papers.  His most recent paper on the topic, Antitrust Analysis of Category Management: Conwood v. U.S. Tobacco, examines the Conwood case.

ABSTRACT: Category management is a business practice whereby a retailer designates a manufacturer as a category manager or captain and gives the designated manufacturer authority concerning retail shelf space allocation within a product category. In return for shifting brand stocking decisions as well as promotion, product assortment, and inventory decisions to the designated manufacturer, the retailer receives a lower wholesale price or a per unit time payment from the manufacturer. This paper analyzes the antitrust law and economics of category management contracts, demonstrating that they are an element of the normal competitive process that benefits consumers and challenging the increased antitrust scrutiny that has been applied to such arrangements as exemplified by the Sixth Circuit's recent decision in Conwood Co. v. United States Tobacco Co. We show that the economics of category management contracts is not fundamentally different from exclusive shelf space contracts - control over the shelf space allocation decision is merely shifted from the retailer to a manufacturer with the manufacturer becoming the transactor that can violate the implicit contract and the retailer becoming the policer of the contract. Mistaken reasoning regarding fiduciary obligations and horizontal versus vertical contracts has led to the placement of greater antitrust scrutiny on category managers than on firms that have negotiated more restrictive fully exclusive distribution contracts.

May 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 1, 2007

Hovenkamp named to American Academy of Arts & Sciences

Posted by D. Daniel Sokol

Herberthovenkampphp Herb Hovenkamp, the Ben V. & Dorothy Willie Professor of Law and History at the University of Iowa Law School has been named a Fellow to the prestigious American Academy of Arts & Sciences.  Hovemkamp is one on the luminaries in antitrust scholarship and this is an award well deserved.

May 3 Update:
The Global Competition Review has a related story on Hovenkamp's honor available here (subscription required).


May 1, 2007 | Permalink | Comments (0) | TrackBack (1)

FTC Seeks Comments on Study on Authorized Generic Drugs

Posted by D. Daniel Sokol

According to the FTC website posting:

The FTC is considering conducting a study to analyze the use and likely short- and long-run competitive effects of authorized generic drugs in the prescription drug marketplace. Before investigating these issues, the FTC is seeking public comments on its proposed information requests to firms in the prescription drug industry. The information collection requirements described below will be submitted to the Office of Management and Budget (“OMB”) for review, as required by the Paperwork Reduction Act (“PRA”) (44 U.S.C. 3501-3520).
...
In recent years and with increasing frequency, brand-name drug manufacturers have begun to market authorized generic drugs at precisely the same time that a paragraph IV generic is beginning its period of 180-day marketing exclusivity. The likely effects of this practice on generic competition have been subject to some debate. In the short run, the entry of an authorized generic drug may benefit consumers by creating additional competition that lowers generic prices further than if only the paragraph IV generic were marketed. Many generic manufacturers assert, however, that in the long run, consumers will be harmed because an expectation of competition from authorized generics will significantly decrease the incentives of generic manufacturers to pursue entry prior to patent expiration. For a generic manufacturer, the additional competition from an authorized generic may result in significantly less profit during the period of 180-day exclusivity than if the generic manufacturer had no authorized-generic competition during that time.
...
[The paper discusses five issues based on the initial comments that the FTC received]: (A) the practical utility of the proposed study and why it is necessary for the proper performance of the FTC’s functions; (B) suggestions to narrow the scope of the study; (C) suggestions to use alternative sources of information; (D) comments requesting limitations on the use of the information submitted; and (E) suggestions to broaden the scope of the study.

May 1, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, April 30, 2007

Ice Cream and Antitrust

Posted by D. Daniel Sokol

A new paper, Mergers when Firms Compete by Choosing both Price and Promotion, by Luke Froeb of Owen Graduate School of Management of Vanderbilt University, Steven Tenn of the Federal Trade Commission and Steven Tschantz of the Department of Mathematics of Vanderbilt University analyzes the merger effects in the 2003 merger between Häagen-Dazs and Dreyer that the FTC challenged.

ABSTRACT: Enforcement agencies have a relatively good understanding of how to measure the loss of price competition caused by merger. However, when firms compete in multiple dimensions, merger effects are not well understood. In this paper, we study mergers in industries where firms compete by setting both price and promotion, and ask what happens if we mistakenly assume that price is the only dimension of competition. To answer the question, we build a structural model of the super-premium ice cream industry, where a 2003 merger between Häagen-Dazs and Dreyer's was challenged by the Federal Trade Commission. A structural merger model that ignores promotional competition under-predicts the price effects of a merger in this industry (5% instead of 12%). About three-fourths of the difference can be attributed to estimation bias (estimated demand is too elastic), with the remainder due to extrapolation bias from assuming post-merger promotional activity stays constant (instead it declines by 31%).

April 30, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 29, 2007

Rebuilding Illinois Brick: A Functionalist Approach to the Indirect Purchaser Rule

Posted by D. Daniel Sokol

Barak Richman and Christopher Murray of Duke Law School tackle indirect purchaser issues in Rebuilding Illinois Brick: A Functionalist Approach to the Indirect Purchaser Rule.

ABSTRACT: The indirect purchaser rule, established three decades ago in Illinois Brick v. Illinois, has generated sufficiently steady and widespread criticism that Congress's Antitrust Modernization Commission is now considering possible reforms. The debate over reforms, however, has been constrained by an undue emphasis on legal formalism and has failed to generate innovative alternatives. We review the development of the doctrine, identify its significant shortcomings, and articulate the functional objectives that antitrust rules of standing should pursue. Building off these objectives, which constitute the foundations of antitrust law, and incorporating some lessons from securities law, we propose a mechanism that opens antitrust suits to indirect purchasers, consolidates the multiple claims, and designates a presumptive lead plaintiff.

April 29, 2007 | Permalink | Comments (0) | TrackBack (0)