Antitrust & Competition Policy Blog

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

Saturday, December 1, 2007

More FTC Work into Competition in Supermarkets

Posted by D. Daniel Sokol

My apologies for not posting on this earlier but I have been traveling quite a bit (an interesting announcement is forthcoming within the next few weeks).  The FTC has undertaken a new supermarket case-- A&P’s Proposed Acquisition of Pathmark Supermarkets.

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

Friday, November 30, 2007

Competition Law and the Regulation of Cross Border Mergers and Acquisitions: A Story of Conflict, Cooperation and Convergence

Posted by D. Daniel Sokol

Ariel Ezrachi of Oxford's Law Faculty provides his analysis of Competition Law and the Regulation of Cross Border Mergers and Acquisitions: A Story of Conflict, Cooperation and Convergence.

ABSTRACT: Cross-border merger control has traditionally been a difficult subject for multilateral co-operation, let alone harmonization. The multitude of interests at stake and the heterogeneous multilateral environment mean that attempts to reduce inefficiencies stemming out of multi-jurisdictional merger review face resistance at various levels. This paper examines the friction generated by the misfit between national merger control and cross-border economic activity. It considers the domestic nature of merger control and the way it affects the feasibility and effectiveness of cooperation in merger regulation. It explores the contribution and limits of binding and voluntary multilateral initiatives in advancing convergence in this area. It further considers the role of bilateral cooperation in a multilateral setting. The discussion echoes the challenges for undertakings and agencies operating in the current sub-optimal environment of multiple enforcers. It identifies voluntary multilateral frameworks as the most promising vehicle for advancing future convergence, and provides insight as to the catalysts to, and limits of, these voluntary frameworks.

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

Thursday, November 29, 2007

EC’s Non-Horizontal Merger Guidelines Are Out

Posted by D. Daniel Sokol

See here.

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

Tacit Collusion, Firm Asymmetries and Numbers: Evidence from EC Merger Cases

Posted by D. Daniel Sokol

An interesting new paper comes from Stephen Davies and Matt Olczak, both of the University of East Anglia Competition Law Centre, titled Tacit Collusion, Firm Asymmetries and Numbers: Evidence from EC Merger Cases.

ABSTRACT: The purpose of this paper is to identify empirically the implicit structural model, especially the roles of size asymmetries and concentration, used by the European Commission to identify mergers with coordinated effects (i.e. collective dominance). Apart from its obvious policy-relevance, the paper is designed to shed empirical light on the conditions under which tacit collusion is most likely. We construct a database relating to 62 candidate mergers and find that, in the eyes of the Commission, tacit collusion in this context virtually never involves more than two firms and requires close symmetry in the market shares of the two firms.

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

Wednesday, November 28, 2007

The Control of Porting in Two-Sided Markets

Posted by D. Daniel Sokol

A grad student in econ at Cambridge, Rufus Pollock, brings up some interesting points in his working paper The Control of Porting in Two-Sided Markets.

ABSTRACT: A sizable literature has grown up in recent years focusing on two-sided markets in which economies of scale combined with complementarities between a platform and its associated 'software' or 'services' can generate indirect network effects (that is positive feedback between the number of consumers using that platform and the utility of an individual consumer). In this paper we introduce a model of 'porting' in such markets where porting denotes the conversion of 'software' or 'services' developed for one platform to run on another. Focusing on the case where a dominant platform exists we investigate the impact on equilibrium and the consequences for welfare of the ability to control porting. Specifically, we show that the welfare costs associated with the 'control of porting' may be more significant than those arising from pricing alone. This model and its associated results are of particular relevance because of the light they shed on debates about the motivations and effects of actions by a dominant platform owner. Recent examples of such debates include those about Microsoft's behaviour both in relation to its operating system and its media player, Apple's behaviour in relation to its DRM and iTunes platform, and Ebay's use of the cyber-trespass doctrine to prevent access to its site.

November 28, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 27, 2007

Entry, Product Line Expansion, and Predation

Posted by D. Daniel Sokol

A new article by Vincenzo Denicolò (Professor of Economics, University of Bologna), Michele Polo (Professor of Economics, Bocconi University, Milan, Italy) and Piercarlo Zanchettin (Lecturer in Economics, University of Leicester, Leicester, United Kingdom) addresses Entry, Product Line Expansion, and Predation

ABSTRACT: In the Tourist-Caronte case in Italy, the incumbent, Tourist-Caronte, reacted to entry by entrant Diano by starting to supply a "damaged good" in the sense theorized by Deneckere and McAfee in 1996. We argue that in principle this strategy can be predatory, but it can also be an innocent response to entry. Specifically, the strategy of damaging the good leads to fiercer competition in the low segment of the market, which reduces the rents that the incumbent earns in the high segment, but may allow the incumbent to steal some of the entrant's rents. If this business stealing effect in the low segment of the market is sufficiently strong, the incumbent may find it profitable to expand its product line after entry, even if it does not have any predatory intent. We discuss the welfare effects of this strategy, and we contrast it with predation.

November 27, 2007 | Permalink | Comments (0) | TrackBack (0)

A New Route for Predation?

Posted by D. Daniel Sokol

With the ICN unilateral working group focusing on predation this year, I am a bit fixated on any papers on the subject.  Gunnar Niels of Oxera offers insights into the latest British case on the subject in his paper A new route for predation? The High Court ruling in the CCT v Arriva bus case.

ABSTRACT: Predatory pricing cases in the UK bus industry are legendary. Following a trend for commercial disputes to be settled by private actions rather than through competition authorities, Chester City Transport alleged that Arriva’s entry onto a number of its bus routes amounted to predatory behaviour. Earlier in 2007, the High Court found that, on the basis of economic evidence, despite a strong position in the area around Chester, Arriva could not be deemed to be dominant. This ruling has relevance for future Article 82 cases.

November 27, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, November 26, 2007

The Ex Ante Auction Model for the Control of Market Power in Standard Setting Organizations

Posted by D. Daniel Sokol

The ex ante auction model  may have its limits, according to Anne Layne-Farrar (LECG), Damien Geradin (Howrey and Tilburg law and Economics Center), and Jorge Padilla (LECG) in their paper The Ex Ante Auction Model for the Control of Market Power in Standard Setting Organizations.

ABSTRACT: RAND commitments ? i.e., promises to license on reasonable and non-discriminatory terms ? play a key role in standard setting processes. However, the usefulness of those commitments has recently been questioned. The problem allegedly lies in the absence of a generally agreed test to determine whether a particular license satisfies a RAND commitment. Swanson and Baumol have suggested that the concept of a 'reasonable' royalty for purposes of RAND licensing must be defined and implemented by reference to ex ante competition. In their opinion, a royalty should be deemed reasonable when it approximates the outcome of an ex ante auction process where IP owners submit RAND commitments coupled with licensing terms and selection to the standard is based on both technological merit and licensing terms. In this paper we investigate whether the ex ante auction approach proposed by Swanson and Baumol is likely to deliver efficient outcomes, both from static and dynamic standpoints. We find that given the peculiar characteristics of some of the industries where standardization takes place, in particular the many different business models adopted by innovating companies in those industries, the ex ante auction approach proposed by Swanson and Baumol may not always deliver the right outcomes from a social welfare viewpoint.

November 26, 2007 | Permalink | Comments (0) | TrackBack (0)

Revisiting Modernisation: The European Commission, Policy Change and the Reform of EC Competition Policy

Posted by D. Daniel Sokol

According to Hussein Kassim (University of East Anglia, Department of Politics) and Kathryn Wright (University of East Anglia Centre for Competition Policy) in their paper Revisiting Modernisation: The European Commission, Policy Change and the Reform of EC Competition Policy conventional wisdom as to the explanation of recent Modernization efforts of EC competition policy is incorrect.

ABSTRACT: The modernisation of EC antitrust rules timed to coincide with the 2004 enlargement of the European Union is widely recognised as an historic and revolutionary reform. According to the dominant view that has emerged in both law and political science, the change is to be explained in terms of the interest and ability of the European Commission to engineer a reform that, behind the guise of decentralisation to national authorities, has in practice extended its power and influence over the control of anti-competitive agreements. Drawing on original research, this paper contests the conventional wisdom and the image of the Commission as an imperialistic actor that underlines it. It argues that such a view dramatically overstates the Commission's power and that a more sophisticated explanation is required. First, the Commission was motivated more by changes in the thinking within an epistemic community of competition practitioners and lawyers than by an impulse to expand its authority. Second, contrary to the monolithic conception of the Commission on which the dominant view depends, the Commission was internally differentiated and the development of its reform proposals the product of internal negotiation and conflict, rather than the expression of an inner drive to expansionism. Third, scrutiny reveals the Commission to be a constrained organisation, rather than a body able to re-write competition law autonomously.

November 26, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, November 25, 2007

Price Dispersion and Class Certification in Antitrust Cases: An Economic Analysis

Posted by D. Daniel Sokol

James F. Nieberding (LECG) and Robin Cantor (Navigant Consulting) tackle the issue of price dispersion in antitrust litigations in their article Price Dispersion and Class Certification in Antitrust Cases: An Economic Analysis.

ABSTRACT: Differences in prices paid by putative class members (?price dispersion?) often become a focal point for class certification in antitrust matters. This paper discusses how an economic analysis of the existence, extent, and nature of price dispersion faced by plaintiffs seeking class certification may be informative even in matters thought to be particularly appropriate for class treatment (e.g., horizontal price-fixing). The existence of price variability among the products at issue can be addressed within the class framework if such price differences are systematic and able to be controlled for in any ?but-for? pricing analysis.

November 25, 2007 | Permalink | Comments (0) | TrackBack (0)