Antitrust & Competition Policy Blog

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

Monday, November 24, 2008

Aggregation, Antitrust, and Complex Collusion

Posted by D. Daniel Sokol

Hemphill_c_s_68x91 Scott Hemphill of Columbia Law School continues his patent-antitrust interface work with his article Aggregation, Antitrust, and Complex Collusion.  The value of the article is the new data set that he brings to the discussion on drug settlements.

ABSTRACT: This Article examines the “aggregation deficit” in antitrust—the pervasive lack of information, essential to choosing an optimal antitrust rule, about the frequency and costliness of anticompetitive activity. It lessens the shortfall for an important, unresolved issue in U.S. antitrust policy, patent settlements between a brand-name drug maker and its generic rival. The analysis draws upon a new dataset of 142 settlements.

Taking an aggregate approach helps to set enforcement priorities, select a substantive liability standard, and identify the proper decisionmaker. The analysis uncovers a process of evolution in the means, including a variety of complex “side deals,” by which a brand-name firm can pay a generic firm to delay entry. The analysis supports a presumption of payment where a side deal is reached contemporaneously with delayed entry, and an expanded role for agencies, to take full advantage of non-public information. The aggregate perspective also sustains a pessimistic verdict on antitrust enforcement where, as here, firms can exploit regulatory complexity to disguise collusive activity.

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