Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, July 5, 2008

2008 Annual Fall Conference on Competition Law

Posted by D. Daniel Sokol

The Canadian Bar Association hosts the 2008 Annual Fall Conference on Competition Law from September 18-19, 2008 at the Hilton Lac Leamy Hotel in Gatineau, Quebec.

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

Friday, July 4, 2008

Israeli Antitrust Authority Promotes a Legislative Amendment to Deal with Oligopolies

Posted by D. Daniel Sokol

The Israeli Antitrust Authority has proposed an amendment to the Israeli Restrictive Trade Practices Law to address oligopolies.

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

Analysis of the Korean Supreme Court decision concerning “unreasonableness” in the abuse of a market dominant position case involving Posco

Posted by D. Daniel Sokol

Joseph Hur (Yoon Yang) has posted an Analysis of the Korean Supreme Court decision concerning “unreasonableness” in the abuse of a market dominant position case involving Posco.

ABSTRACT: On Nov. 22, 2007, Korea's Supreme Court rendered its decision in the market dominant position case against Posco. The significance of the Court's decision will be made clearer as the KFTC turns to other market dominance investigations such as those of the major foreign companies Intel and Qualcomm.

This paper reviews the trends in the KFTC’s latest regulations and policies on abuse of a market dominant position, and analyzes the statutes, regulations, KFTC Guidelines, and court standards regarding determination of abuse of a market dominant position in light of latest global trends. It then summarizes the major points of the Posco decision, and presents the impacts of the Posco decision on KFTC’s enforcement activities and the implications on major companies conducting business in Korea.

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

Thursday, July 3, 2008

Electricity Restructuring: What Has Worked, What Has Not, and What is Next

Posted by D. Daniel Sokol

Jeff Lien (DOJ Antitrust) provides some answers on Electricity Restructuring: What Has Worked, What Has Not, and What is Next.

ABSTRACT: In the 1990s and early 2000s, a series of state and federal initiatives restructured electric markets. In many areas of the country generation was unbundled from transmission and distribution and competitive markets for energy generation were established. A decade has now passed since many of these market reforms were implemented, and increasing energy prices have re-focused attention on these reforms. In particular, commentators are blaming the reforms for the rising energy prices and, in several states, legislators are now considering re-imposing regulation. In this paper I discuss some successful features of industry restructuring, and consider areas where further reform may be warranted. It appears that market restructuring is now producing significant tangible benefits in the areas of the country where it has been most fully implemented. Calls for the reimposition of heavyhanded regulation should be resisted.

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

Interactions between Competition and Consumer Policy

Posted by D. Daniel Sokol

Mark Armstrong (University College London Department of Economics) has written on Interactions between Competition and Consumer Policy.

ABSTRACT: This paper discusses complementarities and tensions between competition policies and consumer protection policies.

The paper argues that markets will often supply adequate customer protection without the need for extra public intervention. Special areas where intervention might be needed are discussed, including the need to combat deceptive marketing and the need to provide additional market transparency (about both headline prices and shrouded product attributes).

A few instances are presented of how more intense competition can worsen the outcomes for some consumers. Situations in which poorly designed consumer policies can harm consumers are discussed, including how they can be used to protect incumbent suppliers, how they can relax competition between oligopolists, how they can reduce consumer choice, how they can focus on one aspect of market performance at the expense of others, and how they can lead consumers to take insufficient care in the market.

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

Measuring Compliance with Compulsory Licensing Remedies in the American Microsoft Case

Posted by D. Daniel Sokol

William Page of the University of Florida Levin College of Law and Seldon Childers have authored the excellent forthcoming Measuring Compliance with Compulsory Licensing Remedies in the American Microsoft Case.

ABSTRACT:  Section III.E of the final judgments in the American Microsoft case requires Microsoft to "make available" to software developers certain communications protocols that Windows client operating systems use to interoperate with Microsoft's server operating systems. This provision has been by far the most difficult and costly to implement, primarily because of questions about the quality of Microsoft's documentation of the protocols. The plaintiffs' technical experts, in testing the documentation, have found numerous "issues," which they have asked Microsoft to resolve. Because of accumulation of unresolved issues, the parties agreed in 2006 to extend ý III.E for up to five more years. Microsoft's continuing failure to resolve the plaintiffs' issues, despite its commitment of enormous resources to the project, led the district judge in January 2008 to extend the other provisions in judgments for at least two years. Paradoxically, however, there is no evidence that software developers cannot use the protocols because of the issues generated in the plaintiffs' testing program. In this article, we argue that the court abandon the unresolved issues as its standard of compliance and ask instead whether Microsoft has provided documentation and technical support that meet the standards of the market and needs of real-world developers.

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

Wednesday, July 2, 2008

Antitrust Analysis of Tying Arrangements and Exclusive Dealing

Posted by D. Daniel Sokol

Alden Abbott  (FTC) and Josh Wright (George Mason Law) provide an Antitrust Analysis of Tying Arrangements and Exclusive Dealing in a forthcoming book chapter.

ABSTRACT: This chapter surveys the legal and economic literatures on the antitrust analysis of tying arrangements and exclusive dealing contracts. We review the analytical framework applied under U.S. antitrust law to tying, bundling and exclusive dealing arrangements as well as the existing theoretical and empirical literatures.

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

DOJ to Investigate Google-Yahoo Deal

Posted by D. Daniel Sokol

In an important new move, news reports state that the DOJ is to investigate the Google-Yahoo advertising deal.  One thing this suggests is that the market changes quickly in the IT sector.  Maybe the Europeans should remember that as they continue to give Microsoft a hard time.

July 2, 2008 | Permalink | Comments (1) | TrackBack (0)

2007 Annual Report on Competition Policy – protecting consumers and strengthening Europe's competitiveness

Tuesday, July 1, 2008

Consumer Coordination in the Small and in the Large: Implications for Antitrust in Markets with Network Effects

Posted by D. Daniel Sokol

Spulber_pic_2 Dan Spulber of Northwestern University Kellog School of Business has describes Consumer Coordination in the Small and in the Large: Implications for Antitrust in Markets with Network Effects.

ABSTRACT: Network effects occur in markets when consumers receive mutual benefits from consuming the same good. Markets with network effects that have generated policy concerns particularly include the information and communications technology (ICT) industries. Many economists and legal scholars argue that the presence of network effects creates a form of market failure known as network externalities and recommend new forms of antitrust and regulation targeted at particular firms in the communications and information technology industries. The debate over network effects is likely to have major consequences for these industries, with effects comparable to landmark antitrust cases involving IBM, AT&T, and Microsoft. This article provides a comprehensive examination of network effects that addresses the legal, economic, and technological basis for this phenomenon. The article develops a general framework for examining consumer coordination in markets with network effects. The discussion demonstrates that consumers can coordinate their consumption decisions to obtain the benefits of network effects. When there are small numbers of consumers, as Coase argued, low transactions costs allow the formation of informal agreements and formal contracts that are economically efficient. When there are large numbers of consumers, the market offers many mechanisms of spontaneous order in the sense of Hayek. The article refers to Coasian negotiation as coordination in the small. The article refers to Hayekian spontaneous order as coordination in the large. The discussion demonstrates that consumer coordination, both in the small and in the large, results in efficient consumption of network goods and adoption of new technologies. Market institutions are fully capable of addressing network effects. Antitrust policy based on correcting market failure due to network externalities is likely to impact adversely both competition and innovation. Network effects do not provide a basis for antitrust policy.

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

Antitrust Encyclopedia

Posted by D. Daniel Sokol

A wonderful new (and free) resource has been launched- the Antitrust Encyclopedia.  This is the first on-line encyclopedia on competition laws covering 30 European jurisdictions.  There are 7 National Competitions Authorities partners to this project, together with 8 law firms and 2 UK universities (King's College London and University College London). Other NCAs such as OFT, AGCM, Bundeskartellamt, Conseil are also in the process of contributing to this project.  This project has been designed with the Institute and Competition Law, the Editor of the e-Competitions Bulletin and the Concurrences Review.

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

Thoughts on Theory, Litigation Practice, and Retrospectives

Posted by D. Daniel Sokol

Tom Barnett of DOJ has a thoughtful new presentation on Thoughts on Theory, Litigation Practice, and Retrospectives that he made for the Lewis Bernstein Memorial Lecture.

ABSTRACT: Today, I will address current issues in merger review and enforcement, and how the antitrust agencies are adapting both in substantive analysis and in procedural approaches. In particular, I will spend my time discussing the following challenges that we currently face: (I) substantive merger issues involving unilateral effects, coordinated effects, and differentiated products; (ii) litigation issues; (iii) retrospective studies; and (iv) the efficiency of the review process.

Download Bernstein.pdf

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

Vertical Integration During the Hollywood Studio Era

Posted by D. Daniel Sokol

F. Andrew Hanssen of Montana State University - Bozeman - Department of Agricultural Economics and Economics writes on Vertical Integration During the Hollywood Studio Era

ABSTRACT: The Hollywood "studio system" - with production, distribution, and exhibition vertically integrated - flourished from the late teens until 1948, when the U.S. Supreme Court issued its famous Paramount decision. The Paramount consent decrees required the divestiture of affiliated theater chains and the abandonment of a number of vertical practices. Although many of the banned practices have since been posited to have increased efficiency, an efficiency-enhancing rationale for ownership of theater chains has not been developed. This paper explores the hypothesis that theater chain ownership promoted efficient ex post adjustment in the length of film runs. Post-contractual run length adjustments are desirable because demand for a given film is not revealed until the film is actually exhibited. To test the hypothesis, the paper employs a unique data set of cinema booking sheets. It finds that run lengths for releases by vertically integrated (into exhibition) film producers were significantly - economically and statistically - more likely to be altered ex post. The paper also discusses additional contractual practices intended to promote flexibility in run lengths, some of which were instituted following the Paramount divestitures.

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

Monday, June 30, 2008

Regulated Conduct and the Competition Act

Posted by D. Daniel Sokol

Trebilcock Michael Trebilcock of the University of Toronto Faculty of Law has posted Regulated Conduct and the Competition Act.

ABSTRACT: A number of important issues remain unresolved in Canada in defining the scope of the exemption of regulated conduct from the purview of the Competition Act. The Competition Bureau's Information Bulletin on the Regulated Conduct Defence has done little to resolve these issues and the Bureau has recently announced public consultations on this subject. A number of issues are often unhelpfully elided in debates over the scope of the so-called regulated conduct defence. This paper attempts to disaggregate these issues.

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

A Dynamic Oligopoly Structural Model for the Prescription Drug Market after Patent Expiration

Posted by D. Daniel Sokol

Andrew Ching of the University of Toronto - Joseph L. Rotman School of Management discusses A Dynamic Oligopoly Structural Model for the Prescription Drug Market after Patent Expiration in his latest working paper.

ABSTRACT: Motivated by the slow diffusion of generic drugs and the increase in prices of brand-name drugs after generic entry, I incorporate consumer learning and consumer heterogeneity into an empirical dynamic oligopoly model. In the model, firms choose prices to maximize their expected total discounted profits. Moreover, generic firms make their entry decisions before patent expiration. The entry time of generics depends on the FDA random approval process. I apply this model to the market of clonidine. The demand side parameters are estimated in a previous paper (Ching, 2008). The supply side parameters are estimated and calibrated here. The model replicates the stylized facts fairly well. I confirm that consumer heterogeneity in price sensitivity plays an important role in explaining the brand-name pricing pattern. I also apply the model to examine the impact of a policy experiment, which shortens the expected approval time for generics. Although this experiment brings generics to the market sooner, it also reduces the number of generic entrants as the likelihood of entering a crowded market in the early periods increases. Given the change in magnitude of the policy parameter, the experiment improves the rate of learning, and lowers the equilibrium generic prices throughout the period. However, it hardly raises the overall welfare.

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

Competition Policy and the Incentive to Innovate: The Dynamic Effects of Microsoft V. Commission

Posted by D. Daniel Sokol

Spulber_pic Dan Spulber of Northwestern University Kellog School of Business has posted Competition Policy and the Incentive to Innovate: The Dynamic Effects of Microsoft v. Commission.

ABSTRACT: Microsoft v. Commission indicates a shift in competition policy at the expense of protections for intellectual property. The case applies essential facilities arguments to Microsoft's server operating system and tying arguments to its Windows Media Player. The dynamic effects of Microsoft v. Commission pose a substantial risk to the incentive to innovate in several ways. First, mandatory licensing and unbundling of the elements of an invention erode intellectual property rights. Second, the targeting of multinational corporations by the European Union creates barriers to international trade whose impacts extend across the global economy. Third, the interpretation of abuse of a dominant position focuses on market outcomes rather than on anticompetitive conduct, thus penalizing successful innovators and rewarding their competitors. Competition policy based on Microsoft v. Commission diminishes the incentive to innovate.

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

Guidance to Business on Monopolisation and Abuse of Dominance

Posted by D. Daniel Sokol

The OECD has posts its roundtable Guidance to Business on Monopolisation and Abuse of Dominance.

ABSTRACT: This roundtable focused on how competition authorities can provide businesses with effective guidance on monopolization and abuse of dominance. While some uncertainty over the reach of rules prohibiting anticompetitive unilateral conduct is inevitable, authorities responsible for the enforcement of antitrust laws must strive to provide as much transparency as possible as to their enforcement policies so that businesses can plan and invest with some predictability.

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

Sunday, June 29, 2008

More Thoughts on Lawyer Rankings

Posted by D. Daniel Sokol

Following up on my post last week on lawyer rankings in antitrust, one issue that I often debate with practitioner friends is the ease of which it is to have an antitrust practice outside of the five largest legal markets in the United States (DC, NY, San Francisco, Los Angeles and Chicago).  It is very difficult to develop a critical mass of local practitioners in other legal markets in highly specialized areas like antitrust, even when the other legal markets are still quite sizable.  This is not to suggest that there are not excellent antitrust practitioners at law firms outside of the largest legal markets.  Some people that come to mind immediately in a not exhaustive list that have national or international practices include Bruce Hoffman of Hunton & Williams in Miami, FL (and a University of Florida law grad!), Kevin O'Connor of Godfrey & Kahn in Madison, WI, Sean Royall in the Dallas, TX office of Gibson Dunn and Steve Harris of Jones Day's Atlanta office (Steve probably has the best US based Asian antitrust practice).

What does it take to have critical mass?  Let us examine the Chamber USA rankings to see the states that Chambers ranks for antitrust practices.  These states (and largest legal markets) are:

  • California (Los Angeles, San Diego, San Francisco)
  • District of Columbia (Washington)
  • Florida (Miami)
  • Georgia (Atlanta)
  • Illinois (Chicago)
  • Massachusetts (Boston)
  • New York (NY)
  • North Carolina (Charlotte, Raleigh-Durham)
  • Pennsylvania (Philadelphia)
  • Texas (Dallas, Houston)

Interestingly, a number of states with larger cities lack critical mass for antitrust rankings in Chambers (Colorado, Maryland, Michigan, Missouri, Ohio, Washington, Wisconsin).  What gives states critical mass to have an antitrust practice outside of the big 5 US legal markets?  Is it the number of Fortune 500 companies in the state?  Is it the lack of a DC office that siphons the antitrust work?  Is it that practitioners in these other states have a combination of cost advantages and highly specialized antitrust practices?  Is there enough state specific litigation brought by state AGs?

Any thoughts from blog readers?



 

June 29, 2008 | Permalink | Comments (0) | TrackBack (0)