Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, July 13, 2007

Canada's New Government Creates Competition Policy Review Panel

Posted by D. Daniel Sokol

Just as the United States and EU have recently done, Canada has announced a review of its competition policy.  The press release is available here.  The press release offers the following summary of the scope of the review:

The Panel's core mandate is to review two key pieces of Canadian legislation, the Competition Act and the Investment Canada Act, including the treatment of state-owned enterprises and the possibility of a national security review clause. The Panel will also examine Canada's sectoral restrictions on foreign direct investment, and the competition and investment regimes of other jurisdictions to assess reciprocity between their rules and Canada's. Separately, the Panel will also assess how Canada's policies may further encourage outward investment. The Panel will report to the Minister of Industry, on behalf of the Government of Canada, by June 30, 2008 with concrete recommendations to further enhance competition in Canada.

July 13, 2007 | Permalink | Comments (0) | TrackBack (0)

Summer Reading in Comparative Antitrust- Tony Freyer's Antitrust and Global Capitalism, 1930–2004

Posted by D. Daniel Sokol

This past week we moved to our new home in Columbia, MO where I will be teaching at the University of Missouri School of Law after two years at the University of Wisconsin Law School.  Exhausted from unpacking, I finally had the time to read through Tony Freyer's Antitrust and Global Capitalism, 1930–2004.  Freyer’s book covers the history of antitrust developments in the United States, Europe, Australia and Japan. It also discusses the history of international efforts to address antitrust concerns. Freyer is a preeminent legal historian who has covered a diverse range of issues including the life and jurisprudence of Justice Hugo Black, civil rights in the US south, and the history of US and UK antitrust. Antitrust and Global Capitalism is a continuation of Freyer’s research into the comparative historic development of antitrust and business regulation.

Effective antitrust is essential to prevent monopolies and cartels from dominating economies and undermining growth and development. Increased globalization increases the possibility for anti-competitive behavior across national borders. The past ten years has seen a golden age of cooperation and coordination across antitrust agencies in antitrust enforcement. Freyer’s work is a major contribution to the longstanding debate over the historic development of comparative antitrust systems and how they address issues of business regulation, economic development and cross-border conduct. His work uncovers new insights in particular on post-WWII Japan and German antitrust and builds upon some recent works in understanding the transformation of European and Japanese antitrust.

July 13, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 12, 2007

European Competition Policy in International Markets

Posted by D. Daniel Sokol

Marc Ivaldi of University of Toulouse and Olivier Bertrand of Université Paris I Panthéon-Sorbonne have a new working paper titled European Competition Policy in International Markets.  Determining the appropriate institutional choice for issues of global antitrust is critical and something that I have written about myself here.

ABSTRACT: Changes in the institutional, technological and economic environment raise new challenges to the European competition policy. In this context, it is timely for European authorities to appraise the external dimension of the European competition policy as well as its articulation with current internal reforms. Globalisation can increase the costs of monitoring and seriously reduce the ability of European authorities to tackle cross-border anti-competitive conducts. In addition, conflicts are exacerbated by industrial policy motivations.

As it is unlikely that the sole application of the territoriality and extraterritoriality principles to competition rules could yield an optimal international competition system, globalisation calls for higher levels and types of cooperation. Given that bilateral cooperation and especially the implementation of comity principles could be of no value when laws or interests are sources of international conflicts, three main paths could be therefore encouraged: The continuous harmonization of rules through the joint action of OECD and ICN; the higher cooperation in the confidential information exchange; the establishment of global anti-trust institutions.

Although WTO is legitimate in judging questions related market access and entry barriers, it is less equipped to assess international hard core cartels or M&A reviews. As a substitute for WTO, a multilevel system, like the EU system, could be promoted. For political and pragmatic reasons, it could be composed in a first step of a hard core of countries like the EU, Japan and the U.S. It could be associated with the creation of an international Court of Justice for competition. In addition to these external reforms, some internal reforms could be required.

Competition authorities have to develop further competition advocacy to give a higher priority to competition issues in other EU policies and national regulation. A parallel and complementary reform could consist in making the European competition agency independent from State Members' interference.

July 12, 2007 | Permalink | Comments (0) | TrackBack (0)

Mackey is Not Helping Whole Foods With His Blogging

Posted by D. Daniel Sokol

In continuing excellent coverage on the Whole Foods/Wild Oats merger, David Kesmodel of the WSJ reports that the Whole Foods CEO blogged under the name "Rahodeb" regarding Wild Oats.  If the FTC action to block the merger goes to trial, this is just another way to discredit Mackey's testimony (along with Mackey's blog on the company website about the deal).   

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

Wednesday, July 11, 2007

Antitrust vs. Sector Regulation in Mobile Telecom

Posted by D. Daniel Sokol

Johan Stennek and Thomas Tangeraas of the Research Institute of Industrial Economics in Stockholm have authored a study that address the issue of antitrust vs. sector regulation titled Competition vs. Regulation in Mobile Telecommunications.

ABSTRACT: This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability.

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

Tuesday, July 10, 2007

Measuring the Effectiveness of Competition Policy

Posted by D. Daniel Sokol

The European Commission is undertaking research on the effectiveness of competition policy in 14 OECD countries. The aim of the study is to understand how different features of the legal system that guarantees and promotes competition and the way it is enforced, affect the economic performance of a country.

The questionnaire can be accessed on-line through the following link, http://www.learlab.it/survey.htm.  It takes less than 15 minutes to complete and responses will be treated with the utmost confidentiality.  The Commission has selected Lear, an economic consultancy based in Italy (http://www.learlab.it), to undertake this study.  Hence, Lear is responsible for analyzing all the data that is collected.  If you have any queries relating to the questionnaire or this study, please email: survey@learlab.itIt will be greatly appreciated if you complete the survey no later than July 31, 2007 to allow the Commission to meet its deadline. 

The person responsible for this project at the European Commission is Mr. Roderick Meiklejohn, Head of the Competition Policy Section of the Directorate General for Financial and Economic Affairs (Email: roderick.meiklejohn@ec.europa.eu)

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

Software Development as an Antitrust Remedy

Posted by D. Daniel Sokol

In a provocative new paper, William Page of the University of Florida Levin School of Law and and his student Seldon Childers have penned Software Development as an Antitrust Remedy: Lessons from the Enforcement of the Microsoft Communications Protocol Licensing Requirement.

ABSTRACT: An important provision in each of the final judgments in the government's Microsoft antitrust case requires Microsoft “make available” to software developers the communications protocols that Windows client operating systems use to interoperate “natively” (that is, without adding software) with Microsoft server operating systems in corporate networks or over the Internet. The short-term goal of the provision is to allow licensees of the protocols to write applications for non-Microsoft server operating systems that can interoperate as well with Windows client computers as can applications written for Microsoft servers. The long-term goal is to preserve, in the network context, the “middleware threat” to the Windows monopoly - the possibility that middleware applications running on servers might become a platform that could erode the “applications barrier to entry” as Netscape and Java had threatened to do. The district court singled out this provision as the “most forward-looking” in the final judgments, and as the key to assuring that the other provisions do not become “prematurely obsolete.” The provision has, however, proven to be by far the most difficult to implement. We argue that it has not accomplished its purpose and that courts can draw some hard lessons from the experience.

In 2003, almost a year after Microsoft first disclosed the protocols, only four firms had taken licenses. At the court's urging, both the plaintiffs and Microsoft have undertaken enormous efforts to promote the protocol program to developers, to make the license terms more attractive, to provide technical support, and especially to improve the technical documentation. The efforts have included several ambitious software development projects aimed at testing the adequacy of the documentation. Despite these efforts, as of March 2007, there were only 27 licensees producing 14 products, none of which had apparent platform potential. These results suggest that the program has failed in its primary goal. We argue that the real reason for the dearth of the licensees is that firms developing software applications to run on non-Microsoft servers generally do not need Microsoft's proprietary protocols to interoperate with Windows. They can achieve interoperability by using standard protocols supported in Windows, by adding other protocols, or by developing their own Windows client application.

We draw two primary lessons for courts in future cases. First, court should only impose injunctive relief in response to a proven need. The clearest need is to stop illegal conduct that impedes normal market processes. The protocol licensing requirement, however, did not respond to a proven violation and did not address technologies that were the focus of the liability phase of the case. Nor was there an independent showing of need for a forward-looking provision - evidence taken during the remedial phase of the case did not support compulsory licensing of protocols. Second, the court should avoid regulatory decrees, especially in high-technology markets. The protocol licensing program has become highly regulatory. The plaintiffs have directly supervised the price of the licenses and other terms of dealing. More important, they have regulated the quality of the product through complex testing. If these characteristics appear in future monopolization cases, they should be treated as warning signs.

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

Monday, July 9, 2007

AAI White Paper on Whole Foods/Wild Oats

Posted by D. Daniel Sokol

The American Antitrust Institute has penned a white paper on the proposed Whole Foods/Wild Oats merger.  Highlights include:

● The legality of the proposed merger turns on product market definition. The Commission defines a relevant product market centered on the category of “premium natural and organic supermarkets.” In such a highly concentrated market in 28 geographic regions across the U.S., the merger would eliminate the second largest competitor or a potential competitor. The merging parties make statements that support this market definition. But they also make statements that the relevant market is centered on full-line supermarkets and mass merchandisers selling natural and organic products, in which case the effect of the merger is de  minimis. Given this controversy, the appropriate scope of the relevant market will undoubtedly attract significant attention.

● An analysis of the merging parties’ pricing data in relevant markets should be viewed as complementary to the parties’ statements that the purpose of their merger is to avoid competition. Whole Foods’ John Mackey has made a number of public statements regarding the motives for the merger. Some of these statements reflect legitimate objectives such as cost savings, but others reflect a clear desire to stifle competition. In light of this, “natural experiments” using price data to determine if existing or potential competition discipline pricing by the merging parties should be viewed as a complement to anticompetitive motives in developing evidence that the merger would tend substantially to lessen competition.

● The merger’s effect on eliminating a potential competitor deserves equal attention to the elimination of an existing rival in the relevant market. Whole Foods’ John Mackey clearly acknowledges that one motive for the merger is to eliminate the single competitor which has the scale and brand identity that could serve as a “toe hold” for entry or expansion by a Whole Foods’ rival. This possible effect of the merger deserves significant scrutiny.

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