Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, June 28, 2008

The Political Economy of European Union Competition Policy: A Case Study of the Telecommunications Industry

Posted by D. Daniel Sokol

New from Routledge Press is The Political Economy of European Union Competition Policy: A Case Study of the Telecommunications Industry by Tuna Baskoy (Department of Politics and Public Administration at Ryerson University).

ABSTRACT: In the European Union (EU), competition policy occupies a central place amongst other EU public policies and is the first truly supranational public policy regulating market competition. One of the stated objectives of EU competition policy is to prevent excessive concentration of economic power in the hands of a few. This book investigates the political economy of EU competition policy by taking the European telecommunications industry as a case study. Baskoy argues that the EU competition policy has failed to achieve its objectives of preventing excessive market concentration in the telecommunications industry over the past quarter-century. He takes the controversial view that EU competition policy foremost promotes an industrial policy that fosters the profitability of European firms. Moreover, Baskoy argues that EU competition policy is short of adequate theoretical and conceptual capacities to comprehend the working dynamics of market competition and the market behavior of firms. This exceptional book will be of interest to scholars of Politics, Economics, Business, and International Relations and Policies.

June 28, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, June 27, 2008

The Potential Impact of Twombly on Antitrust Class Actions

Posted by D. Daniel Sokol

Wendy Bloom (Kirkland & Ellis) & James Langenfeld (LECG and Loyola Chicago Law) discuss The Potential Impact of Twombly on Antitrust Class Actions.

ABSTRACT: Just over a year ago, the U.S. Supreme Court issued its decision in Bell Atlantic Corp. v. Twombly which arguably changed the pleading standards required for all complaints filed in federal court. Twombly has particular relevance to antitrust class actions, however, because the complaint at issue in Twombly was an antitrust class action.

While it is too early to assess the full impact Twombly will have on antitrust class actions, we believe that, as a result of Twombly, economic analysis now matters at the earliest stages of an antitrust class action. It is no longer sufficient for plaintiffs to file complaints with bare bones Sherman Act Section 1 allegations, and await summary judgment to proffer a coherent economic theory after learning the facts through discovery.

June 27, 2008 | Permalink | Comments (0) | TrackBack (0)

Class Interpleader: The Antitrust Modernization Commission's Recommendation to Overrule Illinois Brick

Posted by D. Daniel Sokol

Page_big Bill Page of the University of Florida Levin College of Law takes on the AMC in his paper Class Interpleader: The Antitrust Modernization Commission's Recommendation to Overrule Illinois Brick.

ABSTRACT: The Antitrust Modernization Commission has proposed that Congress abandon the thirty-year-old federal policy of Illinois Brick. The proposal would weaken the federal right of action for direct purchasers by reviving the passing-on defense, but would create a new federal right of action for indirect purchasers. Although federal rights of action under the proposed regime would not be exclusive, state law claims would be subject to expanded federal jurisdiction to allow consolidation of all claims in a single court for both discovery and trial. All recoveries in the consolidated actions would be limited to the initial overcharge, trebled. Congress should not adopt these proposals, for two primary reasons. First, a pure direct purchaser regime would provide the most efficient means of imposing a deterrent penalty equal to three times the overcharge. Second, even if compensation is an appropriate goal, indirect purchaser suits is will not achieve it. We are all indirect purchasers of goods that are more expensive because of antitrust violations; most of us have even received notice that we were members of putative or certified classes. But our harms are usually too diffuse, too individualized, and too small for the courts to calculate and distribute efficiently. The legal system should focus its energies on imposing the appropriate deterrent penalty for antitrust violations at the lowest possible direct cost.

June 27, 2008 | Permalink | Comments (0) | TrackBack (0)

False Positives in Identifying Liability for Exclusionary Conduct: Conceptual Error, Business Reality, and Aspen

Posted by D. Daniel Sokol

Carstensen Peter Carstensen of the University of Wisconsin Law School has posted False Positives in Identifying Liability for Exclusionary Conduct: Conceptual Error, Business Reality, and Aspen.

ABSTRACT: The decisions in Aspen and Trinko point the law of monopolization in different directions. Aspen offered a nuanced standard that focused on balancing the risks to competition from exclusionary conduct against the potential legitimate business needs of a monopolist to engage in such behavior. Trinko, in contrast, celebrates the right of the monopolist to exploit the market by excluding competition in the interest of, apparently, encouraging technological innovation rewarded by monopoly profits. Moreover, the case expresses great concern about false-positive decisions finding violations when in fact none exist. The Trinko Court and supportive commentators assume that such decisions are common and very harmful to economic efficiency.

This Paper argues that Aspen and the cases following it provide the better approach to exclusionary monopolistic conduct. Monopoly is economically undesirable from both static and dynamic perspectives. The concern for false positives rests on incorrect and implausible assumptions while false negatives in fact create a more serious risk to the competitive process. Hence, the law of monopolization should embrace the stricter scrutiny mandated by Aspen, or if there are real risks of inefficient results, monopoly law should return to its historic mission of dissipating the monopoly power itself by dissolution of the monopolist or some other remedy that would in fact eliminate the undesirable and unnecessary
monopoly power.

June 27, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 26, 2008

Broadband Access Policy: The Role of Antitrust

Posted by D. Daniel Sokol

FTC Commissioner Tom Rosch recently spoke about Broadband Access Policy: The Role of Antitrust.  He concludes:

  • In conclusion, let me stress that I consider the current debate about net neutrality to be a legitimate debate. But I have concerns that we not over-promise what antitrust enforcement can contribute to that debate. That said, I am also concerned that legislation based on speculation or misinformation may surrender to the law of unintended consequences. For the moment, perhaps the best course is rigorous enforcement of our consumer protection laws requiring upfront disclosure of all material facts.

June 26, 2008 | Permalink | Comments (0) | TrackBack (0)

Canada's Competition Review Panel Report is Out

Posted by D. Daniel Sokol

Competition Policy Review Panel issued its long awaited report to the Minister of Industry. A summary of the report is available at:

http://www.ic.gc.ca/epic/site/cprp-gepmc.nsf/en/home.

The full report is available at

http://www.ic.gc.ca/epic/site/cprp-gepmc.nsf/vwapj/Compete_to_Win.pdf/$FILE/Compete_to_Win.pdf.

Specific policy  recommendations to the federal government include:

  • Amending the Investment Canada Act to reduce barriers to foreign investment by increasing review thresholds; reversing the onus to require the government to demonstrate that an investment would be contrary to the national interest before disallowing a transaction; increasing transparency and predictability; and preserving a distinct approach for the cultural sector while also initiating a broad review of Canada’s cultural policies;
  • Liberalizing investment restrictions in the Canadian air transport, uranium mining, and telecommunications and broadcasting sectors, and removing the de facto ban on mergers in the financial services sector;
  • Updating and modernizing the Competition Act in line with best practices internationally;
  • Creating a Canadian Competitiveness Council to give voice to and advocate for competition in Canada, and ensure sustained attention by governments on national competitiveness.

June 26, 2008 | Permalink | Comments (0) | TrackBack (0)

Audio Recordings from AAI’s Annual National Conference

Posted by D. Daniel Sokol

You can listen to audio recordings from AAI’s Annual National Conference here.

June 26, 2008 | Permalink | Comments (0) | TrackBack (0)

The Waterbed Effect: Where Buying and Selling Power Come Together

Posted by D. Daniel Sokol

Paul Dobson (Loughborough University Business School) and Roman Inderst (Economics and Finance, University of Frankfurt and London School of Economics) discuss The Waterbed Effect: Where Buying and Selling Power Come Together.

ABSTRACT: This Paper considers the competition effects of differential buyer power. The central question addressed is whether the increasing buying power of big retail chains can harm competition to the extent that it makes consumers worse off. This possibility runs counter to the often-made presumption that increasing retail-buyer power serves to countervail supplier power, allowing retailers to obtain increased discounts that are then (at least in part) passed on to consumers through lower retail prices. However, with retailers differing in their ability to exercise buyer power, there is the possibility of a “waterbed effect,” whereby better terms for more powerful buyers lead to a worsening of the terms of supply for less powerful buyers, which in turn may lessen downstream (i.e., retail) competition and harm consumer welfare. This Paper offers guidance on the market mechanisms and precise circumstances that may give rise to such a waterbed effect and the extent to which this may distort downstream competition and impact on consumers.

June 26, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 25, 2008

2-to-1 Mergers: Impossible to Clear?

Posted by D. Daniel Sokol

The competition policy team over Oxera offers advice on 2-to-1 Mergers: Impossible to Clear?

ABSTRACT: A number of (seemingly) 2-to-1 mergers, as well as other mergers in concentrated markets, have been allowed by competition authorities in recent years. Given that the aim of these authorities is to promote effective competition—which is generally found in markets with many companies—how were these mergers allowed? This article presents a number of justifications, which have been, or could be, used in such mergers.

June 25, 2008 | Permalink | Comments (0) | TrackBack (0)

Europe and Globalisation of Antitrust

Posted by D. Daniel Sokol

A great conference will be held June 30 to July 1 by the IBA Antitrust and Trade Law Section and the Studienvereinigung Kartellrecht, and supported by the IBA European Regional Forum on Europe and Globalisation of Antitrust.

June 25, 2008 | Permalink | Comments (0) | TrackBack (0)

Competition Enforcement in an Innovative Economy

Posted by D. Daniel Sokol

Tom Barnett of DOJ Antitrust recently gave a speech titled Competition Enforcement in an Innovative Economy.

June 25, 2008 | Permalink | Comments (0) | TrackBack (0)

Competition and Regulation European Summer School and Conference

Posted by D. Daniel Sokol

The Third Annual Competition and Regulation European Summer School and Conference (CRESSE) will take place from the 28th of June to the 10th of July (Conference: 4-5 July), in the seaside resort area of Anavyssos, south of Athens.  See here for details.

June 25, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 24, 2008

Merger Stability in a Cost Asymmetric Industry

Posted by D. Daniel Sokol

Margarida Catalao Lopes Technical University of Lisbon of the Technical University of Lisbon has posted Merger Stability in a Cost Asymmetric Industry.

ABSTRACT: This paper analyzes the formation and stability of mergers involving asymmetric firms, as a function of efficiency differences and fixed cost savings. Mergers are allowed to include any number of participants, out of an n-firm industry. Attention is restricted to individual movements and the focus is on the identity of insiders, with predictions on which mergers are more likely to survive perturbations or estimation errors by proponents and/or by the regulatory authority across the parameter space.

June 24, 2008 | Permalink | Comments (0) | TrackBack (0)

Regulation, Allocative Efficiency and Productivity in OECD Countries: Industry and Firm-level Evidence

Posted by D. Daniel Sokol

A newly posted OECD document, Regulation, Allocative Efficiency and Productivity in OECD Countries: Industry and Firm-level Evidence provides some interesting new evidence.

ABSTRACT: We first show, by means of an original set of OECD indicators of the “knock-on” effects of non-manufacturing regulation, that the burden of inappropriate regulations has been disproportionately high in ICT-using sectors of many continental EU countries. Then, relying on existing industry-level econometric results, we show that these regulatory burdens have led to slower productivity growth in the ICT-using industries of these countries. Finally, using harmonised industry-level and firm-level data we provide new evidence on the relationship between regulation and the efficiency of resource allocation across sectors and firms in countries for which these data are available. This leads to several conclusions:
• First, there is a significant heterogeneity of productivity performance across sectors in OECD countries and, within each of them, across firms. This heterogeneity, in turn, highlights the importance of an efficient allocation of resources to promote aggregate productivity growth.
• Second, across industries (and especially within the ICT-using set) resources are allocated less efficiently where anti-competitive regulations are severe.
• Third, anti-competitive regulations tend to be associated with a weaker ability of sectors and countries to allocate resources to the most dynamic and productive firms.
• Finally, the negative effects of anti-competitive product market regulations on firm productivity are concentrated in ICT-using sectors, with a particularly pronounced effect on firms that are in the process of catching up to the technology frontier and that are not far from international best practice. In other words, regulations hurt in particular those firms that have the potential to excel in domestic and  international markets.

The rest of the paper is organised as follows. In Section 2, we review the theoretical linkages between anti-competitive product market regulations, investment, resource reallocation, innovation and ultimately productivity growth. Relying on OECD indicators, we also briefly discuss how differences across countries in these regulations have evolved over time and hit differently ICT-using sectors. We then move in Section 3 to the evidence on the regulation-productivity linkage at the aggregate, sectoral and firm levels. After a brief reminder of cross-country growth patterns, we show how differences in regulation have interacted with the ICT supply shock to shape divergence in growth performances over the past two decades, focusing on ICT investment and the performance of ICT-using sectors. We then examine more in detail how differential growth performances have been affected by the ability of OECD economies to reallocate resources to fast growing sectors and firms. In this context, we present new econometric evidence on how product market regulations affect productivity performance of different firms in a sample of EU countries. Section 4 provides some concluding remarks.

June 24, 2008 | Permalink | Comments (0) | TrackBack (0)

Dynamics and Regulation of the Asian Pharmaceutical Industry: A Critical Review

Posted by D. Daniel Sokol

F.M. Scherer of Harvard's Kennedy School of Government discusses Dynamics and Regulation of the Asian Pharmaceutical Industry: A Critical Review in his latest working paper.

ABSTRACT: This paper provides an overview on 18 papers presented at a Stanford University conference on the Asian pharmaceutical industries. It begins by putting the contributions and growth of individual national industries in quantitative perspective. Several substantive issues are then addressed: (1) the distortions introduced by the system prevalent in many Asian nations for physicians to secure much of their compensation through the profits from drugs they directly dispense: (2) the effects of government price controls, which among other things encourage emphasis on proliferating minor improvements to existing drugs; (3) the fragmentation of manufacturing industry structure, which leaves too many firms lacking the economies of scale required inter alia to sustain high levels of quality control and which makes regulatory monitoring difficult; (4) the implications of World Trade Organization rules requiring nations to begin issuing pharmaceutical product patents where previously their industries could free-ride on the technological advances of industrialized nations; and (5) whether more Asian pharmaceutical firms can overcome the hurdles to becoming significant

June 24, 2008 | Permalink | Comments (0) | TrackBack (0)

Monday, June 23, 2008

FTC Submits Staff Comment to FAA on Proposed Congestion Management Rule for LaGuardia Airport

Posted by D. Daniel Sokol

This is travel season and the FTC is on top of this important issue.  To make our lives a bit better, the FTC has approved a staff comment to the Federal Aviation Administration (FAA) on a proposed congestion management rule for LaGuardia Airport

June 23, 2008 | Permalink | Comments (0) | TrackBack (0)

Discount Policies in US and EU Antitrust Enforcement Models: Protecting Competition, Competitors or Consumer Welfare?

Posted by D. Daniel Sokol

Vito Auricchio of Italian law firm Legance has posted his article Discount Policies in US and EU Antitrust Enforcement Models: Protecting Competition, Competitors or Consumer Welfare?

ABSTRACT:  The paper deals with the issue of the standard of enforcement for rebates applied by firms holding market power. The analysis is based on both the US and the EU case-law and on the recent Discussion Paper published by the European Commission on the application of Article 82 of the EC Treaty to exclusionary abuses. In particular, the paper analyses the US case-law and discusses the difference in the approach between the first decisions and the most recent ones, such as Le Page. In addition, when examining the EU decision practice and case-law reference is made to some recent decisions of the Court of Justice of the European Communities and of the European Commission that have left open issues on the appropriateness of the rules used at EU level to scrutinize exclusionary rebates.

June 23, 2008 | Permalink | Comments (0) | TrackBack (0)

Mergers, Asymmetries and Collusion: Experimental Evidence

Posted by D. Daniel Sokol

Miguel A. Fonseca (University of Exeter School of Business) and Hans-Theo Normann (University of London - Department of Economics) write on Mergers, Asymmetries and Collusion: Experimental Evidence.

ABSTRACT:  We analyze the impact of mergers in experimental Bertrand-Edgeworth oligopolies. Treatment variables are the number of firms (two, three) and the distribution of industry capacity (symmetric, asymmetric). Consistent with a dynamic collusion model, we find that, even though they are more concentrated, asymmetric markets exhibit lower prices than symmetric markets with the same number of firms. Consistent with the static Nash prediction, duopolies charge higher prices than triopolies when we control for (a)symmetry. The overall impact of a merger (which comprises both fewer firms and an asymmetry) is anti-competitive but the price increase is not significant.

June 23, 2008 | Permalink | Comments (0) | TrackBack (0)

The Best US Antitrust Practitioners?

Posted by D. Daniel Sokol

In looking at the individual rankings from the recently released Chambers 2008 US rankings for both DC and NY, one striking difference between the two lists is that the DC rankings are heavily populated by former agency people (and indeed former senior ranking agency people) while the New York list has far fewer people with ANY agency experience.

How important is agency experience, and in particular senior agency experience?  If I was a general counsel and I had a complex merger that raised serious pontetial antitrust issues (and I think that it is particularly the case with mergers), I would in almost every case want to hire someone with agency experience for a number of reasons: 1. former agency people may have better credibility before the agencies, 2. former agency people may have a bit more of an insider's sense of the agencies in terms of understanding the agency's thought process and perhaps could better reassue me as the client, 3. if the deal goes bad because of antitrust concerns, I would want to be able to cover myself to my superiors in my company by saying that I had hired someone with lots of experience dealing with the agencies who know the US antitrust agencies inside and out.  I think that none of these reasons cannot be overcome by someone who is really good and has never worked at an agency (and there are a number of people with agency experience who seem to be less good than those that have it), but is is striking how nearly all of the best practitioners in DC have agency experience.  This raises a larger question of whether or not if a deal goesfor competitive bid and there are complex antitrust issues, do GCs nearly automatically choose a separate DC antitrust practice for the legal work even if they choose a NY firm for deal work?  My suspicion in talking to general counsels is that this happens quite a bit.  If so, the big question to me is, given the per partner profits of NY based firms, why don't NY firms plug in senior antitrust agency people into their practices more often either poaching directly from government or via lateral hires?

June 23, 2008 | Permalink | Comments (1) | TrackBack (0)

Sunday, June 22, 2008

Section 2 Remedies: What to Do After Catching the Tiger by the Tail

Posted by D. Daniel Sokol

Tom Barnett's comments  Section 2 Remedies: What to Do After Catching the Tiger by the Tail, which he presented at the American Bar Association Antitrust Section's Conference on Monopolization Remedies are up on the DOJ website.

June 22, 2008 | Permalink | Comments (0) | TrackBack (0)