Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, April 5, 2008

An Analysis of Price-based Tests of Antitrust Market Delineation

Posted by D. Daniel Sokol

Patrick J. Coe (Department of Economics, Carleton University) and David Krause (Economic Analysis, Bell Canada) undertake An Analysis of Price-based Tests of Antitrust Market Delineation in their newest article.

ABSTRACT: There are well-known theoretical concerns regarding the use of price correlations to determine antitrust markets. However, this has not deterred their use or the application of Granger causality, stationarity, and cointegration tests in the determination of antitrust markets. In this paper, we explore the empirical performance of these various tests. In particular, we want to know whether these tests are capable of generating the correct inference both when two products are in the same relevant market and when they are not. Our results imply that, in the absence of common shocks, simple price correlations may be capable of providing reliable evidence on market delineation. However, in samples sizes similar to those currently available, the performance of other commonly employed price-based tests suggests that they provide little economically meaningful information to antitrust practitioners.

April 5, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, April 4, 2008

Georgiev's Article on EU Settlements Published by Utah Law Review

Posted by Shubha Ghosh

Last week we posted that George Stephanov Georgiev's article on US style antitrust settlements in the EU won Third Annual Swope Antitrust Prize, sponsored by Jones Day.   We inadvertently failed to include a link to the article and an abstract.  The article can be found here at SSRN.  The abstract is copied below. Once again, our hearty congratulations, Mr. Georgiev.

Contagious Efficiency: The Growing Reliance on U.S.-Style Antitrust Settlements in EU Law

GEORGE STEPHANOV GEORGIEV
Unaffiliated


Utah Law Review, Vol. 2007, No. 4, pp. 971-1037, 2007
Abstract:     
This Article analyzes the impact of the introduction of U.S.-style antitrust settlement procedures in EU law, which occurred in 2004 as part of an ambitious antitrust modernisation program. After documenting the lack of a settlement tradition in the EU legal system or the legal systems of EU member states, I argue that the new procedures were transplanted from U.S. law and that this was done without sufficient tailoring. Relying on lessons from the longstanding U.S. experience with antitrust settlements and on emerging evidence about the EU's own approach since 2004, I analyze the effects from the introduction of settlements at three interconnected levels of antitrust enforcement: the EU level, the member-state level, and the level of transatlantic antitrust cooperation. I demonstrate that when compared to the standard prohibition decision procedure, the conclusion of cases by settlement is more attractive both to the antitrust authority and to companies under investigation. The resulting reliance on settlements can lead to distortions in enforcement incentives and a reduction in the degree of legal certainty and accountability within the EU antitrust system. Most importantly, the growing use of settlements threatens to shift the system towards further bureaucratization and could interfere with many of the original goals of the antitrust modernisation program. I suggest that the EU should revisit those goals and evaluate whether the U.S. cost/benefit calculus for antitrust settlements is compatible with the EU's own legal regime and societal preferences. The immediate practical and theoretical insights of the Article relate primarily to EU antitrust law; viewed more broadly and from the vantage point of comparative administrative law, the Article also represents a detailed case study of the negative effects stemming from the untailored transplantation of legal rules and regulatory approaches across dissimilar legal systems.
Keywords: antitrust, EU law, comparative competition law, comparative administrative law

April 4, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 3, 2008

The Law and Economics of Innovation: Patents and the Commercialization of Innovation

Posted by D. Daniel Sokol

George Mason University School of Law and Microsoft Corporation

announce the second in an annual series of conferences

The Law and Economics of Innovation:

Patents and the Commercialization of Innovation

May 15, 2008, Arlington, VA 

The George Mason/Microsoft Conference Series on the Law and Economics of Innovation will bring together leading academics to present and discuss new scholarship touching on diverse aspects of a key question affecting the technology industry and the process of innovation. Each conference will conclude with a roundtable discussion among top technology industry representatives and regulators to begin to assess the concrete implications of the scholarship for the development of innovative industries.

This second conference in the series will address the role of patents in the commercialization of innovation—an area of significant and enduring controversy.  In particular, the conference will focus on three interrelated aspects of the debate over the law and economics of patents:  The intersection of patents and antitrust, particularly in technology standards; the economics of the patent system and patent reform; and the proper understanding (and implications) of patents as property.

Presenters at this year’s conference include:

  • Richard Epstein, University of Chicago Law School
    Keynote Address
  • Scott Baker, University of North Carolina Law School
  • Luigi Franzoni, University of Bologna Faculty of Economics
  • Damien Geradin, Tilburg University Law & Economics, Howrey LLP and the College of Europe
  • Scott Kieff, Washington University in St. Louis Law School and the Hoover Institution
  • Bruce Kobayashi, George Mason University School of Law
  • Michael Meurer, Boston University School of Law
  • Adam Mossoff, George Mason University School of Law (Currently Michigan State University Law School)
  • Greg Sidak, Criterion Economics
  • Henry Smith, Yale Law School
  • David Teece, Haas Business School (U.C. Berkeley) and LECG

Commenters/Moderators: 

  • Michael Carrier, Rutgers University School of Law
  • George Cary, Cleary Gottlieb Steen & Hamilton
  • Eric Claeys, George Mason University School of Law
  • John Golden, University of Texas Law School
  • Roy Hoffinger, Qualcomm
  • Geoffrey Manne, Microsoft and Lewis & Clark Law School
  • Jason Mendelson, Foundry Group
  • Dick Wilder, Microsoft
  • Others, TBD

Hilton Arlington*
950 North Stafford Street
Arlington, VA 703-528-6000

*Because of construction at GMU, the event site has been moved 3 blocks from Law School. The Hilton is connected to the Ballston Metro – Orange Line

Participation is free of charge. Registration is required and lunch is included followed by closing reception.

Please register early. Space is limited.

Application for approval for 4.0 Virginia CLE credit hours (0.0 ethics) is pending with the Virginia Mandatory Continuing Legal Education Board.

For more information or to register, please go to http://innovationforum.gmu.edu/

For further information, contact Kristine at lawconf@gmu.edu.

April 3, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 2, 2008

The Fundamental Goal of Antitrust: Protecting Consumers, Not Increasing Efficiency

Posted by D. Daniel Sokol

Robert Lande (University of Balimore Law) and John Kirkwood (Seattle University Law) argue The Fundamental Goal of Antitrust: Protecting Consumers, Not Increasing Efficiency.

ABSTRACT: The conventional wisdom in the antitrust community is that the purpose of the antitrust laws is to promote economic efficiency. That view is incorrect. As this article shows, the fundamental goal of antitrust law is to protect consumers.

This article defines the relevant economic concepts, summarizes the legislative histories, analyzes recent case law in more depth than any prior article, and explores the most likely bases for current popular support of the antitrust laws. All these factors indicate that the ultimate goal of antitrust is not to increase the total wealth of society, but to protect consumers from behavior that deprives them of the benefits of competition. When conduct presents a conflict between protecting consumers and improving the efficiency of the economy (e.g., a merger that raises prices but reduces costs), no court in recent years has chosen efficiency over consumer protection.

The only exception is the law's determination to protect small sellers from price fixing and other anticompetitive behavior by buyers. This limited concern, however, is just the mirror image of Congress' desire to protect consumers from exploitation. In both buy-side and sell-side cases, the overarching goal is the same - preventing firms that have unfairly acquired power from imposing noncompetitive prices or other terms on their trading partners, thereby transferring wealth from the trading partners to themselves. This conclusion supports a more aggressive approach to many areas of antitrust enforcement, including mergers and joint ventures.

April 2, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 1, 2008

Competition Law Enforcement and Intellectual Property Rights

Posted by D. Daniel Sokol

Alberto Heimler, Chief Economist of Italy's Autorita Garante della Concorrenza e del Mercato discusses Competition Law Enforcement and Intellectual Property Rights in his latest working paper.

ABSTRACT: Antitrust violations in the field of intellectual property rights are particularly difficult to detect because practices like cross licensing, patent pools or refusal to deal are not prohibited as such. Furthermore, more than in any other field of antitrust enforcement, decisions by competition authorities may directly affect the incentive to innovate and therefore antitrust authorities have to exercise great care in what they do. Antitrust laws prohibit behavior that go beyond what patents, copyright and trademarks generally allow. For example price fixing, coordinated output restrictions or foreclosure of innovation are the most important practices to be prohibited by antitrust provisions. Among these, foreclosure of innovation is the most controversial. For example the European Commission in a number of recent cases has suggested that a dominant company abuses its dominant position by refusing access to an essential facility (protected by an intellectual property right) in circumstances when a new product is denied to consumers. The case law developed so far in Europe does not identify precise criteria for defining what is actually "new". From the existing case law, it is only possible to conclude that the Commission does not impose an obligation to license only when the licensee would produce just a replica of the IP protected product/service. Much more straight forward are situations where market foreclosure originates from practices that directly impede the entry of competitors, especially at times when intellectual property rights are no longer available. The problem that arises is the extent of the use of presumptions. However there are no reasons to abandon the general approach that there is a proof of a violation when there is no other explanation for a given behavior than its abusive (exclusionary) objective. For example, this may be the case for reverse payments so common in pharmaceuticals that have no other explanation than to avoid a judgment of patent nullity.

April 1, 2008 | Permalink | Comments (0) | TrackBack (0)

Lessons From the Recent Stock Exchange Merger Activity

Posted by D. Daniel Sokol

Ioannis Kokkoris (OFT) and Rodrigo Olivares-Caminal (Warwick School of Law) offer Lessons From the Recent Stock Exchange Merger Activity.

ABSTRACT: Stock markets across the globe have been the subject of merger discussions following pressure to cut costs and become more competitive. Cross-border mergers trigger a series of different issues to be analyzed. From a transactional point of view, some of these aspects include the synergies that a merger creates, the complexities in achieving an optimal financial structure, protection of minority shareholders, etc. From a regulatory standpoint, there is an array of issues that should also be considered. This article provides an overview of competition issues affecting financial entities—because if there is a breach of competition laws the whole merger might not take place. This will be the pillar of our analysis in this paper.

April 1, 2008 | Permalink | Comments (1) | TrackBack (0)

Monday, March 31, 2008

Paulson's Financial Reorg-- Should We Rethink the Structure of US Antitrust Agencies?

Posted by D. Daniel Sokol

Treasury Secretary Henry Paulson has urged a substantial and fundamental reorganization of American oversight of the US financial system.  Here is the report, and here's the text of Paulson's speech.

I wonder if it might not be time to rethink whether or not we need two federal antitrust agencies and for that matter if regulatory agencies should be able to separately review mergers based on a "public interest"  standard.  If we were starting from scratch, I do not think that the current design of competition policy is one that anyone would pick.

March 31, 2008 | Permalink | Comments (0) | TrackBack (0)

Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions

Posted by D. Daniel Sokol

An interesting new paper is Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions by Thomas J. Holmes (Department of Economics, University of Minnesota), David K. Levine (Department of Economics Washington University), James A. Schmitz, Jr. (Research Department Federal Reserve Bank of Minneapolis).

ABSTRACT: When considering the incentive of a monopolist to adopt an innovation, the textbook model assumes that it can instantaneously and seamlessly introduce the new technology. In fact, firms often face major problems in integrating new technologies. In some cases, firms have to (temporarily) produce at levels substantially below capacity upon adoption. We call such phenomena switchover disruptions, and present extensive evidence on them. If firms face switchover disruptions, then they may temporarily lose some unit sales upon adoption. If the firm loses unit sales, then a cost of adoption is the foregone rents on the sales of those units. Hence, greater market power will mean higher prices on those lost units of output, and hence a reduced incentive to innovate. We introduce switchover disruptions into some standard models in the literature, show they can overturn some famous results, and then show they can help explain evidence that firms in more competitive environments are more likely to adopt technologies and increase productivity.

March 31, 2008 | Permalink | Comments (0) | TrackBack (0)

The Implementation of the European Commission's Merger Regulation 2004: An Empirical Analysis

Posted by D. Daniel Sokol

Borja Martinez Fernández (Staffordshire University), Iraj Hashi (Staffordshire University) and Marc Jegers (Vrije Universiteit Brussel) present some interesting findings in their article The Implementation of the European Commission's Merger Regulation 2004: An Empirical Analysis.

ABSTRACT: The factors influencing the European Commission's decisions under the 2004 Merger Regulation are assessed on a sample of 50 cases. Probit analysis results in the finding that the probability of nonclearance in phase I of the procedure is significantly affected by the estimated market share increase due to the proposed merger, the contestability of the market, and the presence of barriers to entry. Furthermore, there is some evidence that the Commission's decisions are biased against market leaders involved in proposed mergers.

March 31, 2008 | Permalink | Comments (0) | TrackBack (0)

Sunday, March 30, 2008

The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies

Posted by D. Daniel Sokol

Orley Ashenfelter (Princeton Department of Economics) and Daniel Hosken (FTC) bring us The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies.

ABSTRACT: In this paper we propose a method to evaluate the effectiveness of U.S. horizontal merger policy and apply it to the study of five recent consumer product mergers. We selected the mergers from those that, from the public record, seemed to be most problematic for the antitrust agencies. Thus we estimate an upper bound on the likely price effect of completed mergers. Our study employs retail scanner data and uses familiar panel data program evaluation procedures to measure price changes. Our results indicate that four of the five mergers resulted in some increases in consumer prices, while the fifth merger had little effect.

March 30, 2008 | Permalink | Comments (0) | TrackBack (0)