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 12, 2008

Georgetown Global Antitrust Enforcement Symposium

Posted by D. Daniel Sokol

Georgetown Law Center will host a Global Antitrust Enforcement Symposium on September 23, 2008 sponsored by Howrey, Compass Lexecon and Freshfields.  The program can be found here

July 12, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, July 11, 2008

Analyzing the Impact of Antitrust Laws and Enforcement on Small Business

Posted by D. Daniel Sokol

According to a study by the Small Business Administration, federal antitrust enforcement has little impact on small firms.

ABSTRACT: Looking at two industries (retail grocery and timber), the researchers find that, independent of the type of enforcement activity, the number of small grocery retailers declined over time. In the timber industry, the vertically integrated dominant firm hoarded the input of its small competitors downstream, forcing their exit.

July 11, 2008 | Permalink | Comments (0) | TrackBack (0)

Maximizing Incentives to Innovate Under China's Anti-Monopoly Law: Some Fundamental Principles

Posted by D. Daniel Sokol

Jim O'Connell of DOJ Antitrust recently gave a speech on Maximizing Incentives to Innovate Under China's Anti-Monopoly Law: Some Fundamental Principles.  His big message to the Chinese authorities is:

  • Innovation drives economic growth in developed economies because it promotes consumer welfare and economic efficiency through technological change in at least three important ways.  First, innovation can lower costs through the creation of more efficient methods of production, distribution to markets, and delivery to consumers.  Second, the introduction of new and better products can stimulate economic growth if they are products that consumers wish to buy.  And third, the development of new technologies that leap over existing technologies can facilitate the entry of new competitors seeking to take the place of today's dominant firm. 

July 11, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 10, 2008

The Merger of Delta Air Lines and Northwest Airlines: An Antitrust White Paper

Posted by D. Daniel Sokol

The American Antitrust Institute has just released a white paper in opposition to the Delta/Northwestern merger titled The Merger of Delta Air Lines and Northwest Airlines: An Antitrust White Paper.  I am very interested in the merger given that Delta is one of two airlines (US Air is the other) that flies in and out of Gainesville.

July 10, 2008 | Permalink | Comments (1) | TrackBack (0)

Collusion in the Private Health Insurance Market: Empirical Evidence for Chile

Posted by D. Daniel Sokol

Claudio Agostini (Universidad Alberto Hurtado - Economics), Eduardo Saavedra (Universidad Alberto Hurtado - Economics) and Manuel Willington (Universidad Alberto Hurtado - Economics) discuss Collusion in the Private Health Insurance Market: Empirical Evidence for Chile.

ABSTRACT: In September 2005, the Chilean Competition Authority filed a complaint against the 5 largest private health insurance providers for violation of antitrust laws. The 5 providers were accused of colluding to reduce the coverage of the plans offered to customers between March 2002 and March 2003. The main fact is that during that period these 5 providers reduced the coverage offered from 100% for hospitalization and 80% for ambulatory care to 90% and 70% respectively. As usual the observation of parallel conduct is not enough to infer collusion and it is required to observe additional factors that allow us to reject the hypothesis of providers behaving competitively. In this paper, we show that some specific characteristics of the health insurance markets generate barriers to entry and switching costs that allow the possibility of a collusive agreement. Then, we adapt an imperfect competition model of product differentiation to derive some testable propositions that allow us to distinguish between competition and collusion outcomes in the health insurance market in Chile. Finally, we show econometric evidence consistent with a collusive agreement among the 5 largest providers and inconsistent with a competitive equilibrium. In particular, by comparing the prosecuted and non-prosecuted open Isapres before and during the collusive period, we show that sales efforts of the accused Isapres were reduced during the transition period toward lower-quality plans, that the profitability of the two groups of Isapres increased, and that the rate of transfers within the group of accused Isapres fell during the transition period.

July 10, 2008 | Permalink | Comments (1) | TrackBack (0)

Unilateral Refusals to Deal and the Antitrust Modernization Commission Report

Posted by D. Daniel Sokol

Keith Hylton of BU Law School brings us Unilateral Refusals to Deal and the Antitrust Modernization Commission Report.

ABSTRACT: The Antitrust Modernization Commission recommends that refusals to deal with rivals in the same market should rarely, if ever, be unlawful. I will focus on the principles that should determine the legal standard governing unilateral refusals to deal. A legal test that is strongly biased in favor of defendants, as the Commission recommends, is desirable as a default rule and especially in cases in which the essential facility at the core of the refusal to deal dispute is efficiency enhancing. However, there is another set of cases in which the defendant gains control of an essential market portal. In these cases, a legal test that is less biased toward defendants may be preferable to the Commission's suggested approach.

July 10, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 9, 2008

Brazilian Senate Approves Three New CADE Commissioners

Posted by D. Daniel Sokol

Today's Gazeta Mercantil reports that the Brazilian Senate has approved three new CADE Commissioners- Carlos Ragazzo (general coordinator at SEAE), Olavo Chinaglia (professor of law at Fundação Armando Álvares Penteado) and Vinícius de Carvalho (professor of law at Fundação Getúlio Vargas,  where I helped to organize what I think was a very successful conference on Latin American Competition Policy in April).  They will replace CADE members Luiz Carlos Prado, Ricardo Villas Boas Cueva and Luiz Fernando Rigato Vasconcellos. 

For the moment, the position of Chair (to replace Elizabeth Farina) remains unfilled.

July 9, 2008 | Permalink | Comments (0) | TrackBack (0)

Coming July 15 To A Bookstore Near You….

   posted by Shubha Ghosh       

              Michael Heller’s The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation and Costs Lives synthesizes over a decade of scholarly work on property rights and markets into an easily digestible and nourishing morsel.  For those not familiar with Professor Heller’s work, Basic Books has done a major service in publishing this must read (and more importantly must buy) volume. 

                Heller, currently Lawrence A. Wien Professor of Real Estate Law at Columbia Law School, highlights an underappreciated problem: too many owners can be as problematic for well-functioning markets and other institutions, as too few.   His work has added the tragedy of the anti-commons to the lexicon of legal theorists and policy makers to contrast with the more familiar tragedy of the commons.   While the latter tragedy is the result of overuse from ill-defined property rights, the tragedy of the anti-commons leads to underuse because too many rights holders have claims that prevent  the efficient and innovative use of scarce resources.  Too many rights holders, in other words, lead to gridlocks in markets, politics, and social relationships.

                  Examples spill over from the book.  Life-saving drugs are denied to the sick because too many patent owners prevent drug development and distribution.    Airports fail to be built because developers face the transaction costs of negotiating with too many landowners.    Wealth fails to be accumulated among families in the South as landholdings become increasingly divided across generations.   In terms of sheer number of eye-catching and head turning examples,   this book has to take the award and is worth the cover price alone.

                For readers of this blog,  Professor Heller also has something to say. According to Heller,   in many instances, well-defined and concentrated ownership may be the solution to the anti-commons.  Aggressive antitrust enforcement may actually exacerbate the problem of too much ownership in the name of promoting competition.   Although his proposed solution of creating a Protrust Division of the DoJ is somewhat at the outer limits of farfetched,  Professor Heller has a point in suggesting that the name antitrust in US law be replaced with the European term, competition policy. The name change may also lead to a change in attitude against large concentrated companies and a focus on identifying the legal conditions for competition and innovation.   Devoted readers of this blog may note that we are one step ahead of Professor Heller on this front; we added Competition Policy to the name of this previously labeled Antitrust Blog about a year ago.

                I am a big fan of Professor Heller’s work, and he has shaped my thinking in many positive ways.  So it is a delight to see his ideas distilled in such a fresh and exciting package (i.e. without the footnotes and eternal reinvention of the wheel that is the stuff of law reviews).   For those first encountering the tragedy of the anti-commons,   one may ask (as I asked myself ten or so years ago): what is the nature of the problem that Professor Heller has identified.  At the surface, it seems to be simply one of identifying another type of transaction cost of bargaining.  Scratching deeper, one may see in the anti-commons the problem of unrealized scale economies.    Thinking within broader jurisprudential terms, Heller’s tragedy of the anti-commons is just a variant of Professor Mary Ann Glendon’s Rights Talk, the idea that American society has devolved into the pursuit of individual rights, at the expense of the community.  (The Supreme Court’s recent  Second Amendment decision in Heller [no relation, I assume]  is perhaps one example of the expansion of rights talk.)  The tragedy of the anti-commons encompasses each of these points and more.

                If I were to put my finger on the source of the tragedy of the anti-commons,  I would characterize the problem as a crisis of decision making.   “Too many cooks spoil the broth,” as Professor Heller himself invokes.  But the problem with too many cooks or too much ownership is that decision making can become cacophonous and anarchic.   A crisis in decision making is what the tragedies of the commons and anti-commons share.   It is well-known that monopoly ownership (a single cook, so to speak) can be one solution to the tragedy of the commons.  Once both tragedies are understood as problems with decision making, it isn't surprising that monopoly turns up as a solution to the tragedy of the anti-commons as well.  But monopoly concentration has its own problems.  The solution to both tragedies seems to lie in creating institutions that give voice to individual participation in an ordered, communal manner without slipping into the perils of dictatorship.   The market can be one such institution; participatory democracy, another.    What Professor Heller’s new book invites us to do is start thinking of how to design institutions in order to meet these ends.  Not a bad invitation for this pivotal election year!

July 9, 2008 | Permalink | Comments (0) | TrackBack (0)

Twombly and the Evolution of Telecom Regulation

Posted by D. Daniel Sokol

Celeste K. Carruthers (University of Florida - Economics) discusses Twombly and the Evolution of Telecom Regulation in a new working paper.

ABSTRACT: The plaintiffs in Twombly v. Bell Atlantic alleged that the nation's largest incumbent telephone service providers violated § 1 of the Sherman Act by conspiring to hinder competition in their regional markets. More specifically, each firm chose not to compete outside of its region (with another incumbent), even though doing so may have been profitable. In May of 2007, the United States Supreme Court ruled 7-2 in favor of the incumbents, effectively striking down the latest antitrust action against the telecommunications industry and raising the pleading standard for future cases. The Twombly outcome, along with other recent developments in the telecommunications industry, signals a re-consolidation of the wireline firms who were divested from AT&T in 1984. This paper describes where Twombly fits in the evolving regulation of telephony, discusses an economic rationale for the incumbents' parallel conduct, and reviews the antitrust and economic consequences of Twombly.

July 9, 2008 | Permalink | Comments (0) | TrackBack (0)

Capturing the Criminality of Hard Core Cartels: The Australian Proposal

Posted by D. Daniel Sokol

Caron Beaton-Wells (University of Melbourne Law School) has posted the very interesting Capturing the Criminality of Hard Core Cartels: The Australian Proposal

ABSTRACT:  This article reviews the proposal to make serious cartel conduct a criminal offence in Australia. It analyses the extent to which the proposal captures the criminality of the conduct to which it will apply; in particular, its culpability, harmfulness and moral wrongfulness. Two key assumptions underpin this analysis. First, criminalisation makes the morality of serious cartel activity a relevant consideration in the design and application of the new law. Secondly, recognition of the moral dimension will enhance the prospects of the criminal regime securing the support necessary for its effective enforcement. It should also boost the regime's deterrence value by facilitating internalisation of relevant moral norms in the business community. The article concludes that there is still much work to be done in refining and even rethinking aspects of the new offence to ensure that it properly reflects the criminal nature of hard core cartels.

July 9, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 8, 2008

State Antitrust Lawsuits: A Good Way to Balance Costs and Incentives for Patented Drugs

Posted by D. Daniel Sokol

Alexander Okuliar and James P. Kidder of O'Melvany & Meyer have a policy paper for the Washington Legal Foundation titled State Antitrust Lawsuits: A Good Way to Balance Costs and Incentives for Patented Drugs.

July 8, 2008 | Permalink | Comments (0) | TrackBack (0)

How Institutional Design Affects Statutory Implementation: Lessons from Competition Law

Posted by D. Daniel Sokol

William Kovacic (FTC) and David Hyman (University of Illinois Law) discuss How Institutional Design Affects Statutory Implementation: Lessons from Competition Law in their latest paper.

ABSTRACT: It is one thing to pass a law, and entirely another to come up with the necessary institutions to implement it. Yet, institutional design is the Rodney Dangerfield of legal scholarship; it gets no respect. We explore this issue by considering how institutional design has figured in the development and implementation of competition law.
 
Competition law incorporates both antitrust and consumer protection law. In the United States, competition law is enforced by a dual purpose agency enforcing both consumer protection and antitrust law (the Federal Trade Commission), a single-purpose agency enforcing consumer protection law (the Consumer Product Safety Commission), and single-purpose divisions within a multi-purpose agency enforcing antitrust law (the federal Department of Justice, and various state attorneys general) and consumer protection law (state attorneys general).
   
These disparate institutional forms provide a unique test bed with which to assess how institutional design affects statutory implementation, and assess the comparative costs and benefits of different designs. We focus in this article on the domestic experience with competition law.

Internationally, similar patterns of institutional design prevail, with various combinations of competition law enforced by various entities. We plan to address the international experience with competition law in a future article.

July 8, 2008 | Permalink | Comments (0) | TrackBack (0)

Draft of Paraguayan Competition Law

Posted by D. Daniel Sokol

The text of the draft law is available below.

Download paraguay_proyecto_defensa_competencia.pdf

July 8, 2008 | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2008

The Economics of Organizing Economists

Posted by D. Daniel Sokol

Luke Froeb (Vanderbilt University - Owen Graduate School of Management), Paul Pautler (FTC) and Lars-Hendrik Roller (Wissenschaftszentrum Berlin für Sozialforschung ) have an interesting piece on The Economics of Organizing Economists

ABSTRACT: The organizational form of a competition agency affects its decision making. Functional organizations produce higher quality analysis but integrating the analysis into the decision-making process is more difficult than with a divisional form, organized around a specific sector or industry. This paper analyzes the tradeoff, with a particular focus on the role of economists in competition agencies around the world. We conclude that an effective functional organization requires strong horizontal links across the legal and economic bureaus and that an effective divisional organization requires separate economic and attorney recommendations, as well as managers who possess functional expertise in both economics and the law.

July 7, 2008 | Permalink | Comments (0) | TrackBack (0)

Mock Dawn Raids on Cartels a New Service Provided by Law Firms

Posted by D. Daniel Sokol

The Europeans are certainly doing something right regarding cartel enforcement.  Firms are reacting to what has become a very successful European anti-cartel enforcement effort with law firms now marketing mock dawn raids to clients.  An article in today's Wall Street Journal states, "Linklaters LLP, a law firm with headquarters in London, carried out more than 20 mock raids in Europe in 2007, or four times as many as in 2004."

July 7, 2008 | Permalink | Comments (0) | TrackBack (0)

Patent Continuations, Patent Deception, and Standard Setting: The Rambus and Broadcom Decisions

Posted by D. Daniel Sokol

Herberthovenkampphp Herb Hovenkamp of the University of Iowa Law School writes on Patent Continuations, Patent Deception, and Standard Setting: The Rambus and Broadcom Decisions in his latest working paper.

ABSTRACT: This paper explores the implications of two recent Federal Circuit Court decisions involving patent holdup in the standard setting process. While the Rambus decision can be defended as a matter of antitrust policy, it exposes serious deficiencies in the patent continuation process that can legally permit anticompetitive holdup to occur. Broadcom, by contrast, is arguably not about antitrust policy at all, but rather the law of contract or equitable estoppel.

July 7, 2008 | Permalink | Comments (0) | TrackBack (0)

Sunday, July 6, 2008

Reinvigoration of Regulatory Reform in Japan

Posted by D. Daniel Sokol

USTR has called for Reinvigoration of Regulatory Reform in Japan as part of the U.S.-Japan Regulatory Reform and Competition Policy Initiative.  Specific highlights of Japanese accomplishments include:

  • Liberalizing the sale of insurance products through banks, thereby enabling insurance providers to improve convenience and choice for consumers;
  • Hiring more staff to review product applications for new medical devices and pharmaceuticals and giving candidates more opportunities to discuss their applications with regulators, helping to further reduce delays in bringing medical products to market in Japan;
  • Eliminating overtime service charges and streamlining customs clearance procedures, thus making the customs declaration process more efficient;
  • Approving new food additives for use in Japan that are already accepted throughout the world, facilitating further trade in safe agricultural products and processed food;
  • Affirming that equivalent conditions of competition should always be ensured in expanding the business scope of Japan’s postal financial institutions;
  • Agreeing to eliminate mobile handset subsidies that Japan's dominant mobile phone carrier has sought to recover from interconnecting operators, which should help reduce high mobile termination rates that have impeded competition;
  • Committing to review comprehensively in FY2008 the administrative examination system of Japan's competition policy body with a view to ensuring procedural fairness; and

July 6, 2008 | Permalink | Comments (0) | TrackBack (0)