Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, June 23, 2007

Defining Exclusionary Conduct Under Section 2: The Case for Non-Universal Standards

Posted by D. Daniel Sokol

Marina Lao of Seton Hall Law School takes on the difficult task of coming up with a conherent approach to liability under Sherman Section 2 in her new chapter titled Defining Exclusionary Conduct Under Section 2: The Case for Non-Universal Standards in the latest edited volume of the proceedings of the the annual Fordham antitrust conference that Barry Hawk organizes.

ABSTRACT: Recent antitrust cases, such as Trinko, Microsoft, LePage's, and AMR, have focused attention on the uncertain "exclusionary conduct" doctrine under section 2 of the Sherman Act, leading to a renewed debate on the appropriate legal standards to define such conduct, and the proposal of several competing liability standards. Most of the proposed tests offer a single standard to govern all exclusionary conduct.

Although the idea of a universal test is attractive initially, for reasons addressed in the paper, the application of any single standard to all allegedly exclusionary conduct would lead to dangers of either false positives or false negatives, and would necessarily either overdeter competitive conduct or underdeter anticompetitive conduct. This paper discusses the three main proposed tests - the "no economic sense" variant of the "profit sacrifice" test, the "excluding equally efficient competitor" test, and the consumer welfare test - and explains that, while each of these tests may be effective for some types of exclusionary conduct, it would be inappropriate as a universal test.

This paper proposes, instead, a workable and theoretically reasonable approach that uses different tests for different types of exclusionary conduct. The challenge in fashioning a non-universal approach is to ensure coherence and practicality, and minimize uncertainty. This paper offers a theoretically based and workable method for accomplishing that. The approach takes into account a few factors relevant to how tolerant or intolerant an antitrust rule should be: false positives and false negatives; expected benefits from antitrust remedy; and overdeterrence and underdeterrence. Finally, the paper addresses a few objections that are likely to be made to a non-universal approach.

June 23, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday, June 22, 2007

Mexican Antitrust Seminar

Posted by D. Daniel Sokol

The Mexican Antitrust Bar has two programs of interest:
Download Competencia__Economica.pdf

1. Monthly Session (June)
Date: 26-June-2007
Time: 8:35am
Place: University Club
Topic: Competition in telecommunications
Conference by: Germán Saldivar

2. Antitrust Seminar (see attachment)
Date: 6-July-2007
Time: 9 a 14 hours
Place: University Club
Topic: From a year of the changes to the Mexican Competition Law
Conference by: 

Minister Margarita Beatriz Luna Ramos                      
Minister José Ramón Cossío
Executive Secretary from the Federal Competition Commission Ali Haddou
Lic. Fabián Aguinaco Bravo
Lic. Francisco Xavier Cortina Cortina
Lic. Ignacio Orendain Kunhardt

Barra Mexicana Colegio de Abogados
Comité de Competencia Económica

------

A todos los Barristas interesados,
A los miembros de la Comisión de Derecho Administrativo,
A los miembros del Comité de Competencia Económica,
Y a todos los interesados,

El Comité de Competencia Económica convoca a la Sesión-Desayuno extraordinaria que se llevará a cabo el MARTES 26 DE JUNIO DE 2007 a las 8:35am en el University Club, ubicado en Reforma 150, Colonia Juárez, 06600 México, D.F., la cual se realizará de acuerdo al siguiente:

ORDEN DEL DIA

I.- Informe de actividades del Colegio por parte del Consejo Directivo.
II.- Presentación de nuestro compañero barrista Germán Saldivar Osorio, con el tema:
“Las Telecomunicaciones a la luz de la Competencia Económica”
III.- Debate del tema.
IV.- Cierre de la sesión.

Es indispensable confirmar su asistencia a las oficinas de nuestro Colegio a los teléfonos: 5208-3115, 5208-3117, 5525-2485. Y su puntual presencia.

June 22, 2007 | Permalink | Comments (0) | TrackBack (0)

Call for Papers for Romanian Competition Journal

Posted by D. Daniel Sokol

The Romanian Competition Council is looking for contributors to write on issues of competition law and economics for its quarterly review titled Competition Survey Journal.   Please email Ovidiu Felecan, Senior Inspector of the Romanian Competition Council with English or French submissions.

The latest issue is available below.  I take particular pride in this request for submissions since I have one Romanian grandmother.

Download Competition_Survey_Journal_-_english.doc

June 22, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 21, 2007

Whole Foods CEO Blogs About FTC and Proposed Merger

Posted by D. Daniel Sokol

For those of you following the Whole Foods/Wild Oats merger saga (and if you normally read this blog, you have been), a new twist is the delicious comments (you think that the FTC is the only party allowed to make bad puns about this case?) of Whole Foods CEO John Mackey on the FTC action on his blog.  Some of the questions he answers are:

Why does the FTC believe this merger is anti-competitive?

What about the competition in the supermarket industry as a whole is the FTC failing to recognize here?

What about this quote from you that the FTC released in its complaint?

Will customers be harmed by this merger?

Will Wild Oats employees benefit from this merger?

How are Whole Foods Market's product suppliers reacting to the possible merger?

Will vendors be disadvantaged in negotiating with Whole Foods as a result of this merger?

What is Whole Foods Market's strategy for fighting the FTC's attempt to block the merger?

How long are you willing to fight this fight?

In the Company's history, has Whole Foods Market had more success with acquisitions than with organic growth?

Why has the media compared this deal with the failed Staples-Office Depot merger from a decade ago? Is this similar?

What is Whole Foods Market's continued growth plan if this merger doesn't go through?

How important is this merger to Whole Foods Market?

What is Whole Foods Market seeking out of this merger?

If Wild Oats is not your primary competitor, which companies are?

Many of his answers make sense.  However, I wonder if Mackey might be better off not commenting about the proposed transaction and leaving it to his lawyers and economic experts.

June 21, 2007 | Permalink | Comments (0) | TrackBack (0)

Some Good News From Washington - Someone Else Recognizes that Price Controls Are a Bad Idea

Posted by D. Daniel Sokol

The President's Council of Economic Advisers released a report yesterday blasting Gasoline “Price Gouging” Legislation.  Thank goodness someone in government other than the FTC recognizes that price controls are a bad idea.  The Council provides two primary reasons for why such legislation is a bad idea:

1.  “Price gouging” legislation that effectively places controls on prices exacerbates shortages and potentially increases lines at gasoline stations.

2.  The difficulty in defining “price gouging” would create an unnecessary regulatory regime with potentially high litigation costs and great uncertainty for sellers, enforcement agencies, and the courts.  These added costs and uncertainties would deter investment in new supply, increasing prices in the long run.

June 21, 2007 | Permalink | Comments (0) | TrackBack (0)

What Can Antitrust Contribute to the Network Neutrality Debate?

Posted by D. Daniel Sokol

Yoo Christopher Yoo of Vanderbilt and U. Penn asks What Can Antitrust Contribute to the Network Neutrality Debate?

ABSTRACT: Over the course of the last year, policymakers have begun to consider whether antitrust can play a constructive role in the network neutrality debate. A review of both the theory and the practice of antitrust suggests that it does have something to contribute. As an initial matter, antitrust underscores that standardization and interoperability are not always beneficial and provides a framework for determining the optimal level of standardization. In addition, the economic literature and legal doctrine on vertical exclusion reveal how compelling network neutrality could reduce static efficiency and show how mandating network neutrality could impair dynamic efficiency by deterring investment in alternative last-mile technologies. As such, network neutrality is better suited to the ex post, case-by-case approach associated with the rule of reason than the ex ante, categorical approach associated with per se illegality and regulation. To say that the substantive principles of antitrust offer insights that can inform the debate is not to say that antitrust courts represent the ideal institutional locus for enforcing a network neutrality mandate. Lingering questions about courts' institutional competence to supervise access regimes suggest that to the extent that antitrust enforcement authorities wish to take a more active role with respect to network neutrality, they would be better served by focusing their efforts on disclosure and consumer education rather than attempting to use antitrust to impose access requirements on network owners.

June 21, 2007 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 20, 2007

Whole Foods/Wild Oats: We Have An Upfront Buyer

Poste by D. Daniel Sokol

Geoff Manne over at Truth on the Market recently discussed the newest "smoking guns" in the FTC's battle against the Whole Foods/Wild Oats merger.  We have yet another development.  The Wall Street Journal reports that the upfront buyer of any stores divested in a successful Whole Foods/Wild Oats merger will be private equity firm Apollo Management Holding LP.

June 20, 2007 | Permalink | Comments (1) | TrackBack (0)

The Competitive Implications of Generic Biologics

Posted by D. Daniel Sokol

Harbour_oval_146x183 FTC Commissioner Pamela Jones Harbour recently delivered a speech on The Competitive Implications of Generic Biologics at the recent ABA Antitrust-IP conference in California.   In her speech, Jones Harbour outlines two important reasons why we should care about this issue:

First, I want to ensure that the dialogue on generic biologics includes a principled and
rigorous analysis of competition dynamics, especially from the perspective of consumers. I will sketch out a framework of key questions that should be considered. Even if you do not practice in the biotech sector, these big-picture questions are fascinating – especially because, ultimately, we and our loved ones will be affected as consumers of these drugs.

Second, I want to ensure that the Federal Trade Commission is an integral part of the dialogue on generic biologics. For years, the Commission has been intimately involved in shaping competition law and policy relating to generic drugs. The FTC’s expertise is unique and valuable. It should be tapped further, as generic biologics move to center stage in the drama of American healthcare.

June 20, 2007 | Permalink | Comments (0) | TrackBack (0)

Competition Policy in Free Trade Agreements- NAFTA Chapter 15 Decision in UPS Canada is Out

Posted by D. Daniel Sokol

In what I believe is the first publicly known dispute involving a competition policy chapter in a trade agreement, a three person NAFTA panel ruled against UPS Canada in its dispute with Canada Post.  This decision shows some of the limitations of using trade based reasoning in competition issues.  Note the interesting dissent of Ron Cass.  The decision is available here.

June 20, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 19, 2007

Some thoughts on Billing and Sector Based Antitrust Immunities

Posted by D. Daniel Sokol

In recent Supreme Court decisions, we have seen a shift from antitrust to sector regulation in a number of sectors- postal (Flamingo), telecom (Trinko) and now securities (Billing).  On the one hand, there is merit to large parts of all of these decisions.  On the other hand, the choice of sector regulation over antitrust through what is in effect an immunity that could be broadened over time should leave us a bit concerned.

In yesterday's opinion, Jutice Breyer writes, "antitrust courts are likely to makeunusually serious mistakes" vis-a-vis sector regulators who have industry knowledge (slip opinion at 16).  There is no one optimal system for how to divide up regulatory competencies between antitrust and sector regulators in regulated industries. The optimal mix depends on the costs and benefits of each institution, its capabilities and effectiveness.  However, when antitrust is excluded, we should be more concerned about the potential of capture of sector regulators by interest groups.  Because antitrust is a law of general applicability, it has fewer problems of capture than sector regulators.  As sector regulation focuses on a specific industry, agency capture is a potential problem of sector regulation and more severe among sector regulators than at antitrust agencies. Repeat players in sector regulation are those in a particular industry with a vested interest in sector outcomes. This repeat play within a narrow band of interests may make sector regulators more prone to capture than antitrust regulators, whose oversights exposes them to many industries and interest groups.

The effects of an immunity from antitrust could be significant.  The extent of sector regulation and the decision-making of sector regulators define the parameters for business regulation. Thus, a sector regulator that sets high barriers to entry affects the competitiveness of a market and the ability of antitrust to function as a policy tool to correct market failures.  Moreover, empirical work on the effects of sector immunities from antitrust on regulated industries suggest industries in which there is no competition fare poorly when compared to those in which there is competition.  As the ICN Report in Seoul notes "breaking up antitrust enforcement into different sectoral branches is somewhat at odds with the objectictive of making non-competitive sectors subject to common antitrust law."

Sector immunities is one of the few areas of agreement across the political spectrum of antitrust scholars.  In short, all agree that sector immunities should be narrowly tailored to fit a particular end.  Ideally, there would be a sunset provision for such immunities so as to revisit the debate at a later time and the better to prevent the unwarranted expansion of such immunities.  On judicially created imminuties, this is tougher so we should always keep on the lookout for judicial over-reaching that expands immunities (which the judiciary is prone to do-- see the FTC State Action Task Force Report for a nice analysis).

 

June 19, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, June 18, 2007

Credit Suisse/Billing Supreme Court Opinion is Out

Posted by D. Daniel Sokol

The Supreme Court released its decision in the Credit Suisse/Billing case.   The slip opinion is available at http://www.supremecourtus.gov/opinions/06pdf/05-1157.pdf.  I will try to blog about it tomorrow after I read the opinion and get some other things done (with a new infant in the mix along with a 2 year old, things are moving slowly this summer in the Sokol household).

June 18, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 17, 2007

TOP 10 Most Downloaded Papers for Antitrust Law & Policy June 2007

Posted by D. Daniel Sokol

Below are the TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy on SSRN for April 18, 2007
to June 17, 2007:

1. Expert Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc.
J. Gregory Sidak,
Georgetown University Law Center,

2.  Behavioral Economists at the Gate: Antitrust in the 21st Century
Maurice E. Stucke,
U.S. Department of Justice - Antitrust Division,

3.  Mandating Access to Telecom and the Internet: The Hidden Side of Trinko
Daniel F. Spulber
, Christopher S. Yoo,
Northwestern - Kellogg School of Management, University of Pennsylvania Law School,

Competition Law and Copyright Misuse
John T. Cross, Peter K. Yu,
University of Louisville - Louis D. Brandeis School of Law, Michigan State University College of Law,

5.  Authorized Generics: A Prescription for Hatch-Waxman Reform
Tom Chen,
University of Virginia,

6.  Two Puzzles Resolved: Of the Schumpeter - Arrow Stalemate and Pharmaceutical Innovation Markets
Michael A. Carrier,
Rutgers University School of Law - Camden,

7.  Mergers when Firms Compete by Choosing both Price and Promotion
Luke Froeb, Steven Tenn, Steven Tschantz,
Vanderbilt University - Owen Graduate School of Management, Federal Trade Commission - Bureau of Economics, Vanderbilt University - Department of Mathematics,

8.  The Empirics of Antitrust in Two-Sided Markets
Marc Rysman, Boston University - Department of Economics,

9.  Hanging Up on Carterfone: The Economic Case Against Access Regulation in Mobile Wireless
Marius Schwartz, Federico Mini,
Georgetown University, Bates White, LLC,

10.  Property, Liability and Market Power: The Antitrust Side of Copyright
Antonio Nicita, G.B. Ramello,
University of Siena - Department of Economics, University of Eastern Piedmont - A. Avogadro - Department of Public Policy & Public Choice Polis.

June 17, 2007 | Permalink | Comments (0) | TrackBack (0)

Market Analysis in the Presence of Indirect Constraints and Captive Sales

Posted by D. Daniel Sokol

Roman Inderst of Goethe University Frankfurt and London School of Economics and Tommaso M. Valletti of Imperial College London and University of Rome have a fascinating forthcoming article in the Journal of Competition Law and Economics on how to analyze issues of indirect constraints and captive sales titled Market Analysis in the Presence of Indirect Constraints and Captive Sales.

ABSTRACT: In antitrust cases as well as for regulated industries, the question of how to treat indirect constraint and captive sales correctly has become of major importance in Europe. The (im-)proper treatment of indirect constraints has lead the CFI to overturn the Commission's decision in the proposed merger of Schneider and Legrand. Moreover, with regards to the definition of wholesale broadband access markets, there is an ongoing controversy between the Commission and some National Regulatory Authorities, centering on the question of whether to incorporate indirect constraints already at the stage of market definition. To inform this debate, we present in this article some of the insights from a detailed formal analysis into markets with indirect constraints and captive sales. We show how indirect constraints are appropriately taken into account through the elasticity of derived demand and comment also on the informativeness of concentration measures on both the wholesale and retail market. We further derive insights into when indirect constraints may be more or less important compared with direct constraints. Finally, we also discuss the more practical difficulties that are encountered when analyzing (or estimating) market structures where forward integrated firms also sell to other, competing retail firms.

June 17, 2007 | Permalink | Comments (0) | TrackBack (0)