Antitrust & Competition Policy Blog

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

Friday, November 9, 2007

Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools

Posted by D. Daniel Sokol

Pedro Pita Barros ( Wissenschaftszentrum Berlin für Sozialforschung), Joseph A. Clougherty (Wissenschaftszentrum Berlin für Sozialforschung) and Jo  Seldeslachts (New University of Lisbon) bring us Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools.

ABSTRACT: Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions ? Prohibitions, Remedies, and Monitorings ? to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find merger prohibitions to lead to decreased merger notifications in subsequent periods, and remedies to weakly increase future merger notifications: in other words, prohibitions involve a deterrence effect but remedies do not.

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

Thursday, November 8, 2007

Merger Control in Colombia

Posted by D. Daniel Sokol

A paper by Alfonso Londoño and Juan Gutierrez of Pontificia Universidad Javeriana's Law School remind us of the growing internationalization of merger control in their paper Merger Control in Colombia.

ABSTRACT: Merger review is one of the most important aspects of Competition Law. This tool allows competition authorities (when the review is ex ante as in the Colombian case) to hinder the transactions that unduly restrict competition or authorize them under certain conditions - through merger remedies - which guarantees the preservation of free competition in the markets.

The purpose of this document is to present the Colombian merger control regime, determine its nature, its structure, identify the different doctrinal positions adopted by the Superintendency of Industry and Commerce and its evolution in the last years.

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

The Chicago School Virus

Posted by D. Daniel Sokol

WallerPerhaps the most provocative paper this year comes from Spencer Waller of Loyola University of Chicago School of Law.  In homage perhaps to the 1986 Sylvester Stallone movie Cobra (tagline "Crime is a Disease.  Meet the Cure."), Spencer likens the Chicago School of economic analysis of the law to a viral infection in The Chicago School Virus.

ABSTRACT: The Chicago School of Law and Economics is a leading example of a highly successful legal ideology. As one recent commentator has noted: “[T]he basic characteristic of the Chicago School is the belief that free markets and the price mechanism are the most effective and desirable ways for a society to organize production and economic life in general.” The Chicago School of Law and Economics applies these insights to legal questions and views the creation and enforcement of legal rules primarily in terms of how legal rules and institutions promote allocative efficiency and wealth maximization.

While much ink has been spilled in chronicling the strengths and weaknesses of a Chicago School approach to particular legal problems, there has been far less analysis of why certain fields of law and legal jurisdiction have been prone to adopt a Chicago School approach and why others have been resistant.

This essay is the first step to analyze the successes and failures of the Chicago School in terms of the institutional characteristics of the fields of law where the Chicago School has had the most influence and those where it has encountered the most resistance. I argue that the institutional characteristics of the field of law are a more significant determinant of whether the Chicago School takes hold or is rejected than the correctness or the error of the substance of the analysis that it offers or the interests that it serves or opposes.

I use the metaphor of the virus to capture the dynamics of how the Chicago School has spread by penetrating a new area of the law, replicating itself, and transmitting itself to adjacent bodies of law and where it has been rejected. The viral metaphor is particularly apt as a tool to analyze the spread or rejection of legal ideology because it both describes and predicts how an outside influence gains entrance into a host body of law, uses the host to reproduce and spread within that body of law, and later expresses the now multiplied virus to other near by hosts.

This essay proceeds as follows. I first briefly summarize the development of the Chicago School of law and economics, analyze the importance and necessity of metaphoric reasoning in law, and explore the nature of the virus with an emphasis on how it attaches itself to and enters its hosts, replicates itself many times over using the host's own cellular structure to do so, and then expresses itself to carry on the process again and again with new hosts.

Part IV uses the viral metaphor to suggest two tentative hypotheses to explain the relative successes of the Chicago School in some fields and its relative failures to dominate the discourse in other fields. First, I contend that the more centralized the host body of law, the greater likelihood of success of a successful infection and the adoption of the new ideology. Second, I contend that the presence of a strong competing first principle in the host body of law will act as an effective antibody immunizing the host from the successful introduction of a new ideology, be it the Chicago School or other way of thinking and speaking about law.

I then test these hypotheses by examining a wide range of legal discourse where the Chicago School has been introduced. Examples drawn from US and European antitrust law, consumer protection, child and family law, and even Catholic Social Thought illustrate how my hypotheses help explain where the Chicago School has succeeded or failed in changing the legal discourse, or where it is simply too soon to tell. Part VI concludes with my reflections on how the viral metaphor can be extended as well as some ironies that the metaphor suggests about the future influence of the Chicago School itself.

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

Wednesday, November 7, 2007

The Future of Monopoly and Monopolization

Posted by D. Daniel Sokol

University of Wisconsin Law Review/AAI Conference on The Future of Monopoly and Monopolization
November 15, 2007

Schedule of Events

8:00 Registration

8:30 Introduction

Bert Foer, American Antitrust Institute

8:45 An Overview of Section 2 Enforcement and Developments
Bonny Sweeney, Coughlin Stoia Geller Rudman & Robbins LLP

9:15 The Meaning of a Global Market for Monopoly
Henry Thumann, O’Melvany & Myers

9:45 Abuse of Dominance in the Context of Developing Countries
Philippe Brusick, Chairman, PRB International

10:15 False Positives in Identifying Liability for Exclusionary Conduct: Conceptual Error, Business Reality, and Aspen
Peter Carstensen, University of Wisconsin Law School 10:45 Morning Panel

12:00 Lunch

1:15 Under Threat: Competition in the Automotive Service Aftermarkets
Norm Hawker, Western Michigan University

1:45 Revitalizing Essential Facilities
Spencer Waller, Loyola University Chicago School of Law

2:15 Legal Standards for Exclusionary Bundled Discounts
Jonathan Rubin, Patton Boggs

2:45 Is There a Consensus on the Antitrust Treatment of  Single Firm Conduct?
William Comanor, Economist, UCLA and UC Santa Barbara 3:30 Afternoon Panel

4:30 Closing Remarks

Location: University of Wisconsin, Madison, WI.

The University of Wisconsin Law Review and the American Antitrust Institute will co-host this one-day conference on the Future of Monopoly and Monopolization. The agenda largely replicates AAI's June 2007 Annual Conference and includes many of the same speakers. The University of Wisconsin Law Review will be publishing the papers. For further information, contact Britta V. Lindberg at the University of Wisconsin Law Review at

November 7, 2007 | Permalink | Comments (0) | TrackBack (0)

Competition in the Postal Sector

Posted by D. Daniel Sokol

Last week, the Canadian parliament introduced Bill C-14 to amend the Canada Post Corporation Act.  The purpose of the bill is to remove international letters from Canada Post’s reserved (monopoly) sector and introduce competition in international letters.  This bill is part of a move worldwide (see recent moved in the EU and believe it or not, even the US) to reduce the monopoly power of the postal service, given that competition in this sector can yield impressive savings for consumers.  This move also comes in the wake of the NAFTA case by UPS against Canada Post.

HT - Antitrust & Trade Regulation Daily.

November 7, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 6, 2007

Competition in Freight Railways: "Above the Rail" Operators in Central Europe and Russia

Posted by D. Daniel Sokol

The team of Russell Pittman (Director of Economic Research DOJ Antitrust), Oana Diaconu (Department of Economics and Management, Polytechnic University of Bucharest), Emanual Sip (Special Advisor, Viamont, a.s.), Anna Tomová (Faculty of Operation and Economics of Transport and Communications, University of Zilina), and Jerzy Wronka (Professor in Economic Sciences, University of Szczecin) have undertaken an analysis of antitrust railroad issues in their article Competition in Freight Railways: "Above the Rail" Operators in Central Europe and Russia.

ABSTRACT: The railways of Russia and the Central and Eastern European countries are in the process of restructuring. In most cases, the "vertical separation" reform model is being pursued, and reformers are seeking to introduce competition among freight train operators through the provision of "open access" to the monopoly infrastructure. This paper shows that, in two countries, Poland and Romania, a good deal of competition has been created by the entry of new freight operators, many of them either large shippers integrating upstream or former freight forwarders. However, in other countries, the incumbent freight operators retain virtually 100 percent of the market. In particular, Russia has taken only the very first steps toward creating competition in this sector, and new freight train operators face significant barriers to competing with the incumbent.

November 6, 2007 | Permalink | Comments (0) | TrackBack (0)

Categorical Analysis in Antitrust Jurisprudence

Posted by D. Daniel Sokol

Mark Lemley of Stanford Law School and Christopher Leslie of Chicago Kent Law School bring us work on Categorical Analysis in Antitrust Jurisprudence.

ABSTRACT: Legal doctrines vary in the extent to which they apply either detailed, categorical rules or broad, open-ended standards that allow for case-specific adjudication. Antitrust law is generally thought of as inhabiting the standards end of this spectrum. In fact, however, despite the generality of the enabling statutes antitrust law is rife with categorical distinctions.

In Part I, we explore not only the well-known distinction between conduct that is per se illegal and conduct judged under the rule of reason, but also a number of categorical distinctions the courts draw, either to help delineate the scope of the per se rule or to create distinctions within the scope of the rule of reason itself. By and large these rules don't come from the antitrust statutes. They are created by courts, who are in effect converting case-specific standards en masse into categorical rules.

In Part II, we identify a number of problems with these distinctions. One problem is administrative: courts spend a great deal of time trying to parse conduct in order to put it on one side or another of the lines they have created. Indeed, in many cases courts spend more time on categorization than they do on actual economic analysis of the case itself. Second, judicial antitrust categories are subject to manipulation. Parties go to great lengths to fit into a box that will give them more favorable treatment, sometimes by legal argument, sometimes by restructuring a transaction, and sometimes by concealing or misrepresenting the facts of that transaction. Third, a number of the categories the courts have created make no sense, whether because they have lost their meaning over time, because their boundaries have eroded, because they actually tell us very little of relevance to the competitive effects of the transaction, or because they are simply dumb. The net result is a mess. Categories have become conclusions, displacing the fact-specific economic analysis in which antitrust law is supposed to be engaging.

In Part III, we argue that there is a better way. We evaluate the costs and benefits of the judicial creation of categories, and contend that the complex of antitrust boxes the courts have created today does more harm than good. We don't mean to suggest there is no value to categories, and that everything must be thrown into a pure cost-benefit analysis. Some rules (the per se rule against price fixing, for instance) make sense. Rather, the important thing is to make sure that the categories we use have empirical support, and that they are communicating valuable information to courts about the competitive effects of a general practice. We think the courts have gone too far in the creation of rules in a variety of cases. Finally, we suggest that courts make more use than they do of certain tools ? the doctrine of direct economic effect and empirical evidence ? as powerful filters for distinguishing good from bad antitrust claims.

November 6, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, November 5, 2007

UK Supermarket Report - An Opportunity to Respond

Posted by D. Daniel Sokol

The UK Competition Commission released its provisional findings on grocery competition.  In its news release, the CC reported:

In its provisional findings report, published today, the CC states that a lack of competition in certain local markets not only disadvantages consumers in those areas but also allows retailers to weaken their offer to consumers nationally. Further, some retailer land holdings and other practices, such as restrictive covenants, mean that competition is not as effective as it could be in a number of areas.

The CC is also concerned about the ability of grocery retailers to transfer excessive risk and costs to suppliers through various purchasing practices, such as retrospective changes to supply agreements. The CC considers that these practices could damage investment and innovation in the supply chain to the ultimate detriment of consumers.

The CC will now consider a range of measures to address these concerns before deciding on its final remedies. Options under consideration include the lifting of restrictive covenants and exclusivity arrangements, sales of land holdings, and recommending changes to the planning system to place greater weight on competition and choice. The CC will also consider changes to the Supermarkets Code of Practice (SCOP), which regulates retailer-supplier relationships.

The CC has identified findings regarding market definition, concentration, barriers to entry, effects on convenience stores and small retailers, coordination between grocery stores, supply chain issues, and remedies.  Moreover, the CC has asked interested parties to respond.  Hopefully the UK experience will have lots to teach those in other countries thinking about supermarket issues. 

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

How Do You Like That Coffee? Antitrust and the Use of Scanner Data for Upstream Merger Analysis

Posted by D. Daniel Sokol

Sofia Berto Villas-Boas of Berkeley's Department of Agricultural and Resource Economics has an interesting new article Using Retail Data For Upstream Merger Analysis in the current issue of the Journal of Competition Law and Economics.

ABSTRACT: The typical situation that antitrust authorities face is to analyze a proposed manufacturer merger using scanner data at retail level. I start with a benchmark model of manufacturers' and retailers' sequential pricing behavior. Then I perform counterfactual experiments to explore the relationship between downstream retailer pricing models and the resulting estimates of upstream mergers, in the absence of wholesale prices. Looking at scanner data for the ground coffee category sold at several retail chains in Germany, I find that not considering retail pricing explicitly when analyzing the potential consequences of an upstream merger results in simulated changes in welfare that are significantly different given the underlying model of retail pricing behavior. These findings are relevant for competition policy, and authorities should consider incorporating the role of retailers in upstream merger analyses, especially in the presence of increasingly consolidated retail food markets.

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

Innovation and Monopolization: Will the New Chinese Antimonopoly Law Follow U.S. and EU Precedents?

Posted by D. Daniel Sokol

Now that the Chinese Ant-Monopoly Law is coming into force, we have a number of antitrust lawyers trying to make sense of the law for their clients.  The team of Michael N. SohnLuc  Gyselen and  Jonathan  Gleklen at Arnold & Porter provide their thoughts in the article Innovation and Monopolization:  Will the New Chinese Antimonopoly Law Follow U.S. and EU Precedents? which appeared initially in the BNA Antitrust and Trade Regulation Report.

ABSTRACT: In both the U.S. and the EU there is an extensive body of legal precedent addressing the tension between (a) encouraging innovation by dominant firms which benefits consumers; and (b) discouraging efforts to maintain or enhance market power through product changes of dubious value aimed at disadvantaging smaller rivals and ultimately harming consumers. Litigation now pending under existing Chinese laws could provide a glimpse into how this issue will be dealt with under the Anti-Monopoly Law when it comes into force.

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

Sunday, November 4, 2007

RPM Back From the Grave

Posted by D. Daniel Sokol

Sen. Kohl introduced a bill on Tuesday, S. 2261, that is intended to restore the restrictions on minimum resale price maintenance.  Here are links to the press release and the proposed legislation.

November 4, 2007 | Permalink | Comments (1) | TrackBack (0)