Antitrust & Competition Policy Blog

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

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Saturday, August 16, 2008

Was the Change of the Test for Merger Control in Europe Justified? An Assessment (Four Years after the Introduction of SIEC)

Posted by D. Daniel Sokol

Alberto Heimler of the Autorita Garante della Concorrenza e del Mercato (Italy) asks, Was the Change of the Test for Merger Control in Europe Justified? An Assessment (Four Years after the Introduction of SIEC).

ABSTRACT: Under the 1989 EEC Merger Regulation, a merger was prohibited when it led to the creation and strengthening of a dominant position such that effective competition was impeded in the common market. After a very long debate (and the annulment by the Court of First Instance (CFI) of three prohibition decisions by the Commission), in 2004 the Regulation was revised and a new substantive test was introduced. Now a merger is prohibited when it would "significantly impede effective competition (SIEC) in the common market, in particular as a result of the creation or strengthening of a dominant position". The change was considered necessary to address mergers in differentiated market oligopolies where, it was argued, a merger may lead to a restriction of competition short of dominance.

In the course of that debate I defended the dominance test. The main arguments that I used are still valid, especially after the experience of these years when, to my knowledge, no use has ever been made of the significant impediment of effective competition test in differentiated product oligopolies. In particular, I argue in this paper that the significant impediment of effective competition test adds very little to the dominance test (in terms of the risk of false negatives), but may add a lot in terms of the risk of false positives.

Contrary to what I argued in 2003, when I thought that the characterization of joint dominance was the same as coordinated effects in the US, the change in the test can indeed bring some needed flexibility in the treatment of coordinated effects, stiffened today by the tight checklist proposed by the CFI in the Airtours/First Choice judgment.

August 16, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, August 15, 2008

Excessive Prices, Unfair Prices and Economic Value: The Law of Excesive Pricing Under Article 82 Ec and the Chapter II Prohibition

Posted by D. Daniel Sokol

Mark M. Furse (University of Glascow School of Law) has provided some thoughts on Excessive Prices, Unfair Prices and Economic Value: The Law of Excesive Pricing Under Article 82 Ec and the Chapter II Prohibition.

ABSTRACT: It is a fundamental tenet of competition law in the European Community (EC) and the UK that monopoly itself is not condemned. In the EC and the UK (and the other member states that have adopted arts 81 and 82 EC as the model for domestic competition law) it is the "abuse" committed by the undertaking in a dominant position that falls to be condemned. However, both Article 82 EC and section 18 of the Competition Act 1998 (CA98) make reference, in the list of potentially abusive conduct, to "directly or indirectly imposing unfair purchase or selling prices". In a number of cases this rubric has been extended to cover situations in which dominant undertakings have been attacked for charging "excessive prices". As has been long recognised, there are significant problems in applying this rubric, particularly given the terminology employed both in Article 82 EC and in the early case law. Neither the EC Commission nor the European Court of Justice, or the relevant UK authorities, has provided a robust working method of determining when a price is to be held to be excessive. Recent cases which appear on their face to provide a clearer methodology, and which have recognised the necessary separation of the core ingredients of making a finding of abuse in respect of an excessive price, have further complicated matters by accepting that, in part at least, whether a price is fair or unfair may depend on the demand for the product. The logical problems such an approach raises are dealt with in this paper.

August 15, 2008 | Permalink | Comments (1) | TrackBack (0)

Unilateral Competitive Effects and the Test for Merger Control

Posted by D. Daniel Sokol

Greg Werden (DOJ) has some thoughts on Unilateral Competitive Effects and the Test for Merger Control.

ABSTRACT: The EC Merger Regulation (ECMR) was revised in 2004 to make the substantive test for merger control whether the merger would "significantly impede effective competition [SIEC] in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position". This SIEC test, which replaced the prior dominance test, was intended to work much like the substantial lessening of competition (SLC) test used in Australia, Ireland, the UK and the US.

Alberto Heimler explains that the change in the substantive merger test filled a perceived gap with respect to unilateral effects. He argues, however, that the gap was only imagined. In the context of two models giving rise to unilateral effects, he contends that significant anticompetitive effects arise only if the merged firm reasonably could be viewed as dominant. He also argues that the change in the substantive test has not led to additional prohibitions premised on unilateral effects, but it did create a danger of excessive enforcement.

My analysis of the models Heimler mentions indicates that the gap was real and potentially important. Moreover, stretching the concept of dominance to reach all significant anticompetitive effects from mergers would divorce the concept from the plain meaning of the word "dominance" and thereby create a serious risk of excessive enforcement under Article 82. In contrast, I doubt that the risk of excessive merger enforcement is substantial and think it worth taking.

August 15, 2008 | Permalink | Comments (0) | TrackBack (0)

$10,000 Swope Antitrust Writing Prize Competition Now Open!

Posted by D. Daniel Sokol

The international law firm Jones Day announced that entries for the $10,000 William E. Swope Antitrust Writing Prize will be accepted until December 31, 2008.

The competition, which honors former Antitrust Division official and Jones Day partner Bill Swope's pioneering ability to clarify abstract and complex issues, is open to students currently enrolled in full- or part-time juris doctorate or more advanced degree programs at U.S. law schools accredited by AALS and non-U.S. schools of equivalent standing, to current judicial clerks who have graduated from such programs, and to practicing lawyers who graduated from such degree programs in May 2003 or later.

One $10,000 prize and two $1,500 honorable mention prizes will be awarded. Winners will attend the 2009 Spring Meeting of the American Bar Association Antitrust Section in Washington as guests of Jones Day and be guests of honor at a Firm reception.

Judges will be looking for work that demonstrates the application of practical analysis to antitrust problems. Eligible papers will also be judged on quality of research, writing, and scholarship; originality;
practicality; and relevance to the understanding and application of antitrust law and policy.

Papers must be the product of a single author's original thought and scholarship. Their length should be appropriate to the subject matter being addressed and must not exceed 15,000 words, including footnotes. Papers used for academic credit or submitted to law reviews or other journals are permitted, but they must have been submitted or published no earlier than than one year prior to the December 31, 2008 deadline. An individual may submit only one entry.

The first page of each submission should include the paper's title, the author's full contact information, and an abstract of approximately 100 words. If the paper or a version of the paper was previously published, submitted for publication, or written for a course, details should be provided.

Papers should be submitted electronically to [email protected]. Entrants should attach the paper in Word, Word-Perfect, or PDF format and include full contact information in body of the e-mail body as well as on the attachment's title page. Receipt will be acknowledged by return e-mail. Winners will be notified on March 2, 2009.

Additional information and copies of previous winning papers are available at www.jonesday.com/swope.

August 15, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 14, 2008

Most Downloaded Antitrust Law Professors in the Past Year

Posted by D. Daniel Sokol

The Top 10 most downloaded US based antitrust law professors (based on at least two papers in the last year on antitrust topics):

Rank  Name  School  Downloads

  1. Spencer Waller – Chicago Loyola 2,307
  2. Keith Hylton – Boston University 1,851
  3. Richard Epstein – University of Chicago 1,730
  4. John Baker – American University 1,714
  5. Herb Hovenkamp – University of Iowa 1,707
  6. Josh Wright – George Mason 1,652
  7. Phil Weiser – University of Colorado 1,506
  8. Bruce Kobayashi – George Mason 1,472
  9. Randy Picker, University of Chicago 1,454
  10. Robert Lande – University of Baltimore 1,086

And the two profs who would top this list but are affiliated with European universities:

  1. Damien Geradin – Tilburg University 4,961
  2. David Evans – University College London 3,560

August 14, 2008 | Permalink | Comments (0) | TrackBack (0)

Aftermarkets, Systems, and Antitrust: A Primer

Posted by D. Daniel Sokol

Gregory T. Gundlach (University of North Florida Coggin College of Business) has posted Aftermarkets, Systems, and Antitrust: A Primer.

ABSTRACT: The American Antitrust Institute's Invitational Symposium on the Future of Aftermarkets in Systems Competition is extremely timely in light of a number of developments in business theory and practice and in antitrust law. (1) For those unfamiliar with the area, some of the questions that may initially come to mind when aftermarkets, systems, systems competition, and antitrust are considered include: What is an "aftermarket"? What is a "system" and how do aftermarkets relate to "systems competition"? How are aftermarkets, systems, and systems competition relevant to antitrust? Why is the study of the antitrust aspects of aftermarkets important now? What are some examples of current developments in aftermarkets and their antitrust concerns? What features of aftermarkets and systems competition complicate their antitrust analysis? How do (should) these features affect the antitrust analysis of aftermarkets? Given my introductory objective, each of these questions is addressed in a manner that provides background and initial understanding rather than in-depth insights and extended analysis. Other articles, including those appearing in this special issue, from which this overview draws, provide more depth and analysis on many of these topics.

August 14, 2008 | Permalink | Comments (0) | TrackBack (0)

The Increasing Role of Antitrust Principles in Defining Patent Rights

Posted by D. Daniel Sokol

Deb Garza (DOJ) recently gave a speech on The Increasing Role of Antitrust Principles in Defining Patent Rights.

August 14, 2008 | Permalink | Comments (0) | TrackBack (0)

Competition Law and Policy in Ukraine

Posted by D. Daniel Sokol

The OECD has released a Policy Brief on Competition Law and Policy in Ukraine.

ABSTRACT: In 2008, the OECD issued a peer review report assessing the development and application of competition law and policy in Ukraine, focusing on the previous five years (2003-07). The report concludes that Ukraine has a comprehensive and well-designed competition law and, in the AMC, an effectively managed and well-regarded agency to enforce it. The report also identifies problems confronting Ukraine and proposes remedies. Recommendations concerning the AMC cover its budget allocation, autonomy, investigative tools, transparency, enforcement priorities and relationships with other law enforcement agencies. Other recommendations focus on merger notification requirements and procedures, state aid legislation, penalties for unlawful conduct and penalty collection procedures, competition advocacy, harmonization with the European Union’s competition laws and the elimination of conflicting provisions in Ukraine’s Commercial Code.

August 14, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 13, 2008

A Note on Competing Merger Simulation Models in Antitrust Cases: Can the Best Be Identified?

Posted by D. Daniel Sokol

Oliver Budzinski of the University of Marburg offers A Note on Competing Merger Simulation Models in Antitrust Cases: Can the Best Be Identified?

ABSTRACT: Advanced economic instruments like simulation models are enjoying an increased popularity in practical antitrust. There is hope that they - being quantitative predictive economic evidence - can substitute for qualitative structural analysis and lead to unambiguous results. This paper demonstrates that it can be theoretically impossible to identify the most appropriate simulation model for any given merger proposal. Due to the inevitable necessity to reduce real-world complexity and multi-parameter character of merger cases, the comparative fit of proposed merger simulation models with mutually incompatible predictions can be the same. This is valid even if an ideal antitrust procedure is assumed. This insight is important regarding two aspects. First, the scope for partisan economic evidence cannot be completely eroded in merger control. Second, simulation cannot eliminate or substitute for qualitative reasoning and economically informed common sense. 

August 13, 2008 | Permalink | Comments (0) | TrackBack (0)

A Short Guide to the Prosecution of “Market Manipulation” in the Energy Industry: CFTC, FERC, and FTC

Posted by D. Daniel Sokol

Layne Kruse (Fulbright & Jaworski) & Amy Garzon (Fulbright & Jaworski) provide A Short Guide to the Prosecution of “Market Manipulation” in the Energy Industry: CFTC, FERC, and FTC.

ABSTRACT: "Market manipulation” has been a potential target for U.S. prosecutors for over seventy years. However, the focus on market manipulation in the energy industry is more recent, and now the U.S. Federal Trade Commission has joined the Commodity Futures Trading Commission and Federal Energy Regulatory Commission with statutory authority to police market manipulation in the energy industry. With three federal agencies, the lines of authority are far from clear. This article provides a brief guide to the statutory framework for the three agencies and explains the similarities and differences in their authority.

August 13, 2008 | Permalink | Comments (0) | TrackBack (0)

Perspectives for Private Enforcement in European Antitrust Law

Posted by D. Daniel Sokol

Christian Kersting of Heinrich Heine University of Duesseldorf - Faculty of Law provides some Perspectives for Private Enforcement in European Antitrust Law.

ABSTRACT: In April 2008 the European Commission published a "White Paper on Damages actions for breach of the EC antitrust rules" (COM2008 (165) final). This article focuses mainly on two issues: the passing-on defence and standing of indirect purchasers and the compatibility of efforts to enhance the effectiveness of private actions for damages with leniency programmes offered by the EC Commission and national competition authorities.

As regards the passing-on defence and the standing of indirect purchasers, it is argued that the EC Commission's approach in the white paper is in theory the best solution. Yet, due to practical reasons it is suggested that in principle the passing-on defence should not be accepted and that indirect purchasers should not be encouraged to sue. In order to avoid a conflict with the ECJ's decisions in Courage und Manfredi, indirect purchasers should however not be categorically denied standing but only be discouraged from claiming damages by, for example, not alleviating their burden of proof.

Regarding the compatibility of the efforts to promote private enforcement with the leniency programmes, the EC Commission's suggestion to limit "the civil liability of the immunity recipient to claims by his direct and indirect contractual partners" is not considered a viable solution. In this paper it is argued that the best way to avoid a conflict of aims is to modify the way liability is apportioned between the cartel members, i.e. between the infringers of EC competition law who are jointly and severally liable towards the victims.

German law apportions liability equally between joint tortfeasors, unless otherwise provided (section 426 I 1 BGB). This paper shows that for the apportionment of liability between joint tortfeasors, German law can take into account both the cartel member's market share (thus incorporating the EC Commission's approach because the damages suffered by direct and indirect purchasers reflect the cartel member's market share) and the cartel member's contribution to uncovering the cartel. The latter aspect leads to the suggestion that a reduction in the fine imposed on a cartel member should lead to a parallel reduction in the cartel member's share of liability as compared to the other members of the cartel. The joint and several liability of all tortfeasors, including the successful leniency applicants', towards the victims remains unchanged.

De lege ferenda, however, it also seems justified to reduce the successful leniency applicants' liability towards the victims of the cartel accordingly. This conclusion is based upon the fact that the leniency applicants give the victims something in return: the victims receive the information necessary for them to recover their damages.

This approach, that was developed using German law as an example, should also work in other jurisdictions. It is a common legal principle that joint tortfeasors are jointly and severally liable towards their victims and that the liability as between the tortfeasors is apportioned according to the circumstances of the case.

August 13, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 12, 2008

European Antitrust Policy 1957-2004: An Analysis of Commission Decisions

Posted by D. Daniel Sokol

In what I believe is the most important empirical paper to be written about the EU this year so far, Martin Carree, University of Maastricht - Department of Organization & Strategy, Andrea Guenster, University of Maastricht - Department of Organization & Strategy, and Maarten Pieter Schinkel, University of Amsterdam - Amsterdam Center for Law & Economics have produced European Antitrust Policy 1957-2004: An Analysis of Commission Decisions.

ABSTRACT: This paper provides a survey of European antitrust law enforcement since its foundation in the Treaty of Rome of 1957. We present a complete overview and statistical analysis of all 538 formal Commission decisions adopted up to 2004 under Articles 81, 82 and 86 of the European Community Treaty. We report a range of summary statistics concerning report route, investigation duration, length of the decision, decision type, imposed fines, number of parties, sector classification, and Commissioner and Director General responsible. The statistics are linked to changes in legislation and administrative implementation, thereby providing a historical overview that summarizes the Commission's work in the area of antitrust. Against 166 of 538 decisions one or more appeals were lodged. We estimate the determinants of probability that a finding of an infringement is appealed against with the Court of First Instance and/or the European Court of Justice.

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

Competition Law and the WTO: Rethinking the Relationship

Posted by D. Daniel Sokol

Dgerber_web David Gerber of Chicago Kent Law has posted Competition Law and the WTO: Rethinking the Relationship.

ABSTRACT: This essay identifies obstacles to the inclusion of a competition law regime in the WTO and suggests changes that are likely to be necessary if competition law is to become an effective part of the WTO. Two obstacles have impeded inclusion of competition law in the WTO's legal regime and are likely to continue to do so. They are (i) a lack of confidence that the norms, practices and procedures of the WTO rest on a robust conception of community and (ii) uncertainty and concern about what form of competition law might be included and what its role in the WTO would be. In order to reduce the first of these obstacles, the institutions and members of the WTO will need to develop a conception of community that engenders widespread confidence in the WTO's basic modes of operation. Eliminating the second obstacle would require clarification of the kind of competition law that would be acceptable within the WTO, and this, in turn, is likely to require development of a form of competition law that is specifically designed for the WTO and that can elicit the long-term support of all categories of members. The essay suggests that the competition law issue is intricately interwoven with the future of the WTO. The changes that would be necessary to introduce and successfully implement competition law in the WTO are to a large extent the same as those that the institution will need to make if it is to enrich its role as an institution.

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

New Argentine National Commission for the Defense of Competition (CNDC) President

Posted by D. Daniel Sokol

Julián Peña, Professor of Competition Law at the University of Buenos Aires, Director of the graduate program on Consumer Protection and Competition Law at the University of Buenos Aires, a partner at law firm Allende Brea and a visiting professor this spring at the University of Florida Levin College of Law, informed me that Pursuant to Decree N° 1310/2008, published last Friday at the Official Journal, Ricardo Napolitani has been appointed the new President of Argentina's National Commission for the Defense of Competition (CNDC), replacing José Sbattella who had been in office since March 2006.  Currently the CNDC has three members out of the five established by law. Besides Napolitani, there are two commissioners: Diego Póvolo (whose term expires next February) and Humberto Guardia Mendonca (whose term expires next October), who have been appointed Vice-Presidents by Resolution N° 70/2008 of the Secretary of Domestic Trade, Guillermo Moreno. With the appointment of Napolitani, all three members of the CNDC are lawyers.  This is the fourth CNDC head in a row that has not had an antitrust background.

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

Monday, August 11, 2008

The European Commission’s Reexamination of the SonyBMG Merger: A Precedent-Setting Attempt to Jump the Fence

Posted by D. Daniel Sokol

Ben Van Rompuy (Institute for European Studies (Free University of Brussels)) & Caroline Pauwels (IBBT-SMIT (Free University of Brussels)) discuss The European Commission’s Reexamination of the SonyBMG Merger: A Precedent-Setting Attempt to Jump the Fence.

ABSTRACT: On July 13, 2006, the European Court of First Instance annulled the European Commission’s decision authorizing the creation of Sony BMG, a joint venture incorporating the worldwide recorded music businesses of Sony and Bertelsmann. In its 2004 clearance decision, the Commission had concluded that the merger would not create or strengthen a collective dominance position on the part of the majors (i.e., Universal, Sony BMG, Warner, and EMI). In Impala v. Commission, however, the CFI harshly criticized the decision because it found that the evidence relied on by the Commission was not capable of substantiating this conclusion.

Notwithstanding the fact that the European Court of Justice has now set aside Impala because of a number of identified errors of law, the judgment continues to raise fundamental questions about the standard of proof incumbent on the Commission when dealing with merger cases. The 2004 Sony/BMG decision indeed should be seen in light of the CFI’s consecutive annulment of three prohibition decisions in 2002: Airtours v. Commission, Schneider Electric v. Commission,  and Tetra Laval v. Commission. The resoluteness by which the CFI criticized the Commission for its analysis of the evidence and questioned the rigor of its decisions in these judgments was unprecedented. The three judgments, which were delivered over a five-month period, gave rise to a flood of criticism of the Commission’s merger analysis and opened a debate about the economic soundness of its decisions.

[ . . . ]

This article analyzes the new clearance decision in light of the Impala judgment and, subsequently, assesses whether or not Impala is imposing too high of a standard of proof on the Commission. It argues that the Commission has made a successful attempt to meet the Community Court’s standard, but that it is questionable that the Commission will be able to jump the fence again in a similar fashion under normal procedural circumstances. First, the article gives a brief overview of the previous case law on the standard of proof incumbent on the Commission in EC merger control. Second, the CFI’s criticisms on 2004 clearance decision are discussed, as well as the wider implications of Impala for the Commission’s evidentiary burden in the context of EC merger control. Third, the second clearance decision is analyzed in light of the Impala judgment.

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

Interview with William E. Kovacic, Chairman, Federal Trade Commission

Posted by D. Daniel Sokol

The Antitrust Source interviews FTC Chairman Bill Kovacic in its current issue.

August 11, 2008 | Permalink | Comments (1) | TrackBack (0)

The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

Posted by D. Daniel Sokol

Robert M. Adams and Dean F. Amel, both of the Federal Reserve Board, discuss The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry in their latest working paper.

ABSTRACT: The threat of entry is an important factor in the evaluation of the potential competitive effects of proposed mergers and acquisitions. In the evaluation of proposed bank mergers, a high probability of entry, or strong potential competition, is often found to mitigate the potential anticompetitive effect of a proposed horizontal merger. Because the probability of entry is not directly observed for each local market, variables such as per capita income, population growth and past entry are typically used to predict the probability of future entry. This study extends previous research on the determinants of entry into local banking markets. In addition to variables considered by past research, such as market demographic characteristics, branching deregulation and past merger activity, this study considers the effects on future entry of past entry and strategic barriers to entry, which are proxied by changes in incumbent branching, the presence of small incumbent firms and market concentration. The analysis uses data that allow a broader definition of entry than that used in most past research. In most of the previous studies, bank entry is defined as the creation of a new banking institution. We show that this definition is problematic and misses entry due to branch network extension by existing banks, which is substantial. Results of our analysis are consistent with past research where past research exists. In addition, we find significant negative relationships between strategic barriers to entry and entry. Assessment of the quantitative significance of the results, however, finds that very large changes in the explanatory variables are needed to cause substantial changes in the probability of entry into banking markets.

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

Sunday, August 10, 2008

A Case for Affirmative Action in Competition Policy

Posted by D. Daniel Sokol

Bertrand Villeneuve, National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST), Université de Tours and Vanessa Yanhua Zhang, LECG make A Case for Affirmative Action in Competition Policy.

ABSTRACT: We analyze the trade-off faced by competition authorities envisaging a one-shot structural reform in a capitalistic industry. A structure is (1) a sharing of productive capital at some time and (2) a sharing of sites or any other non-reproducible assets. The latter represent opportunities. These two distinct dimensions of policy illustrate the importance of a dynamic theory in which firms may differ in several respects. Though equalization of endowments and rights is theoretically optimal, realistic constraints force competition authorities to adopt second-best solutions. Affirmative action here appears to explain why helping the disadvantaged contributes maximally to social surplus.

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