Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, December 6, 2008

FTC Issues New Update of Horizontal Merger Investigation Data Report

Posted by D. Daniel Sokol

The FTC has issued a new update of Horizontal Merger Investigation Data Report.

The new data contain tabulated concentration levels associated with the FTC’s investigations in 1,154 markets over the 12-year period and reflect results from 210 merger investigations. The data tabulations use the two market share concentration statistics described in the agency’s Horizontal Merger Guidelines – the post-merger Herfindahl-Hirschman Index (HHI) and the change in the HHI – along with the number of significant competitors. The number of “significant competitors” is defined relative to the competitive effects theory that was the most plausible basis for the investigation. Data on HHIs are available for 1,150 markets and data on “significant competitors” are presented for 925 markets.

   

For a subset of investigations – those with three or fewer markets – the FTC staff also retrieved information on whether or not Commission staff identified “hot documents” or “strong customer complaints”during the investigation. The staff tabulated the Commission’s enforcement decisions based on the presence or absence of these variables. Information for 198 markets is reviewed in the hot document tabulation, and data from 177 markets are tabulated in the strong customer complaint analysis.

 

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

Friday, December 5, 2008

Antitrust Injury in Robinson-Patman Cases: What’s Left?

Posted by D. Daniel Sokol

Scott Martin (Weil, Gotshal & Manges) asks Antitrust Injury in Robinson-Patman Cases: What’s Left?

ABSTRACT: Although government challenges to alleged price discrimination under the Robinson-Patman Act (“RPA”) have been all but extinct for over two decades, and the RPA itself has suffered calls for repeal from various quarters and by successive generations of antitrust lawyers, the Act has not only endured but also, from time to time, provoked interesting commentary from the Supreme Court. Perhaps most notably, the landmark Brooke Group standard that has sounded the death knell to so many predatory pricing cases over the last 15 years had the relatively humble origin of a primary-line (competition among sellers) RPA lawsuit.

The Court’s latest foray into the RPA, the 7-2 Volvo decision authored by Justice Ginsburg (with the intriguing tandem of Justices Stevens and Thomas in dissent), and particularly its reflective coda in Part IV of the opinion, is one from which RPA defendants might justifiably draw comfort when arguing that antitrust injury is absent in a price discrimination lawsuit.

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

Damages Actions Against the EU Institutions Following the CFI’s Judgment in My Travel vs. Commission

Posted by D. Daniel Sokol

provuides insghits into Damages Actions Against the EU Institutions Following the CFI’s Judgment in My Travel vs. Commission.

In this paper, the authors argue that following MyTravel, the prospects for success of damages’ actions based on the Commission’s noncontractual liability in merger cases are very remote. It seems unlikely that the Commission may, in the future, commit completely unjustifiable errors of substantive assessment resulting in a “grave and manifest disregard of the limits of its discretion” and thus capable of triggering a “serious breach of a law conferring rights to individuals” within the meaning of art. 288 of the EC Treaty; all the more so in view of the progress which has been made in recent years in the understanding of the economic theories underlying merger control analysis and following the introduction of a number of additional “checks-and-balances” in the Commission’s internal decision-making process.

What scope remains then for damages actions brought against the Commission in merger control cases?

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

Merging is Such Sweet Sorrow

Posted by D. Daniel Sokol

The text of the speech that Peter Freeman, Chairman of the Competition Commission gave at the BIICL Mergers Conference on November 13, 2008 titled Merging is Such Sweet Sorrow is now available online.

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

Thursday, December 4, 2008

Antitrust: Commission consults on review of rules for assessing horizontal cooperation agreements

Posted by D. Daniel Sokol

In a press release, the Commission announced, "The European Commission has launched a public consultation on the functioning of the current regime for the assessment of horizontal cooperation agreements under EU antitrust rules, in particular the Specialisation and Research & Development Block Exemption Regulations and the Horizontal Guidelines. The purpose of the review is to evaluate how these rules have worked in practice. The Commission welcomes comments up to 30th January 2009."

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

We Almost Had the Biggest DOJ Antitrust Litigation of the Bush Administration

Posted by D. Daniel Sokol

The American Lawyer has a great interview with Sandy Litvak, who discussed just how close (3 hours) DOJ Antitrust came to taking Google to trial.

HT: The Tech Chronicles

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

Economic Aspects of the Microsoft Case: Networks, Interoperability and Competition

Posted by D. Daniel Sokol

Mjgm1 Maria J. Gil-Moltó of University of Leicester Department of Economics discusses Economic Aspects of the Microsoft Case: Networks, Interoperability and Competition.

ABSTRACT: In this paper, we discuss the main economic aspects of the European Microsoft case; in particular, Microsoft’s refusal to supply the necessary information to make the competitors’ work group server systems interoperable with Windows Operating System. The case can be seen as an example of competition between networks. We review the relevant economics literature with the objective of understanding the motivations behind Microsoft’s strategies.

December 4, 2008 | Permalink | Comments (1) | TrackBack (0)

Uncertainty Quality, Product Variety and Price Competition

Posted by D. Daniel Sokol

Jean J. Gabszewicz (Université catholique de Louvain - Economics) and Joana Resende (Université catholique de Louvain - Economics) have a new paper out on Uncertainty Quality, Product Variety and Price Competition.

ABSTRACT: This paper analyses price competition under product differentiation when goods are defined in a two dimensional characteristic space, and consumers do not know which firm sells which quality. Equilibrium prices consist of two additive terms, which balance consumers' relative valuation of goods' expected quality and consumers' preferences for variety. However the relative importance of these terms differ under vertical and horizontal dominance.

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

Semi-Collusive Advertising and Pricing in Experimental Duopolies

Posted by D. Daniel Sokol

Andreas Nicklisch, Max Planck Institute of Research on Collective Goods has a new piece on Semi-Collusive Advertising and Pricing in Experimental Duopolies.

ABSTRACT: This article tests experimentally whether a high degree of collusion on advertisement expenditures facilitate tacit price collusion in duopoly markets. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results show that the competitiveness of advertising and prices are significantly higher when the advertising spillover is higher than the price spillover than when advertising spillover is lower than the price spillover. In the second environment, a higher degree of advertising collusion leads for experienced players to a higher degree of price collusion. In the first environment, players behave at most semi-collusively, that is, if at all, they collude on advertising, but compete over prices.

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

Wednesday, December 3, 2008

General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America

Posted by D. Daniel Sokol

General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America by Mariam Dayoub, World Bank and Esperanza Lasagabaster, World Bank provides some interesting insights into the world of pension reform and competition policy.

ABSTRACT: Following Chile's pension reform in 1981, a wave of multi-pillar pension reforms took place in Latin America (LAC). Their implementation has revealed new policy challenges. To shed light on these issues, this paper reviews the structure and performance of mandatory DC pillars in LAC. The review highlights three important points. First, it suggests overall positive outcomes from reforms in the LAC countries that implemented multi-pillar pension systems. There is, however, scope for increasing efficiency. Second, management fees have declined but remain relatively high whereas decreases in operational costs have only been partially passed through to consumers reflecting inadequate competition. Limits on transfers and related measures have been ineffective in curtailing management fees but created new barriers to entry. In recent years, a few countries in LAC introduced or are in the process of introducing a combination of new measures that focus more directly on the two root causes of inadequate competition - the inelasticity of demand to fees and selective elimination of barriers to entry by facilitating unbundling of services. These new measures show some promise. Third, the paper's review indicates that a greater diversification of pension fund portfolios in LAC appears to be necessary. Portfolio concentration owes to the adoption of strict quantitative investment regulations, underdeveloped capital markets and volatile macroeconomic environments. A gradual relaxation of these restrictions is now in progress in several countries. Regulators have become more conscious of the costs imposed by such regulations and macroeconomic conditions have improved. Greater overseas diversification seems inevitable given the development stage of local capital markets.

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

Breaking News: Italianer to Replace Lowe at DG Comp

Posted by D. Daniel Sokol

The Global Competition Review has just broken the story that "Alexander Italianer, the deputy secretary general of the European Commission, will replace Philip Lowe as the director general of DG Comp by the end of the current commission's mandate - signalling what could be the end of Neelie Kroes' term as commissioner of competition."

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

The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction

Posted by D. Daniel Sokol

Steven Tenn of the FTC's Bureau of Economics has written a merger retrospective working paper on The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction.

ABSTRACT: We conduct a retrospective study of the Sutter-Summit hospital merger to assess whether antitrust enforcement in this matter was appropriate. This consummated merger combined two hospitals located close together in the Oakland-Berkeley region of the San Francisco Bay Area. The greater metropolitan area contained many other hospitals that offered a similar range of services, but which were located farther away. A central issue raised by the Sutter-Summit transaction was whether travel costs were low enough such that these hospitals were a sufficient constraint on the merging parties to prevent an anticompetitive price increase. We use detailed claims data from three large health insurers to compare the post-merger price change for the merging parties to the price change for a set of control group hospitals. Our results show that Summit’s price increase was among the largest of any comparable hospital in California, indicating this transaction may have been anticompetitive.

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

Guidance on the Commission's Enforcement Priorities in Applying Article 82 EC Treaty

Posted by D. Daniel Sokol

In an important development, "The Commission has published on 3 December 2008 guidance on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings. The Commission also issued a press release  and a question and answers memo."

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

The Effects of Competition on Investment - Towards a Taxonomy

Posted by D. Daniel Sokol

Armin Schmutzler, University of Zurich - Socioeconomic Institute (SOI) writes on The Effects of Competition on Investment - Towards a Taxonomy.

ABSTRACT: Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow concepts of increasing competition. The paper also shows that competition is more likely to increase the investments of leaders than those of laggards. When R&D-spillovers are strong, competition is less likely to increase investments. The paper also identifies conditions under which low initial levels of competition make a positive effects of competition on investment more likely.

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

Tuesday, December 2, 2008

Vertical Restraints Under Asymmetric Information: On the Role of Participation Constraints

Posted by D. Daniel Sokol

Antonio Acconcia, University of Naples Federico II - Department of Economics and Riccardo Martina, University of Naples Federico II - Department of Economics analyze Vertical Restraints Under Asymmetric Information: On the Role of Participation Constraints.

ABSTRACT: The impact on vertical contracting of a type-dependent reservation utility is investigated within a sequential monopolies environment with asymmetric information. The welfare and private properties of contracts controlling both the retail price and the sales level are compared with those restricting only sales. When firms choose contracts non-cooperatively, retail price restrictions are desirable for the upstream supplier although detrimental to consumers, whenever the retailer reservation utility has a relevant impact on optimal contracts. If this impact is relatively weak and contracts are chosen cooperatively, vertical price control fails to maximize firms' joint-profit although it would be beneficial to consumers.

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

Efficiency Gains and Mergers

Posted by D. Daniel Sokol

Giuseppe De Feo (University of Strathclyde  - Business School) has a paper on Efficiency Gains and Mergers.

ABSTRACT: In the theoretical literature, strong arguments have been provided in support of the efficiency defense in antitrust merger policy. One of the most often cited results is due to Williamson (1968) that shows how relatively small reduction in cost could offset the deadweight loss of a large price increase. Furthermore, Salant et al. (1983) demonstrate that (not for monopoly) mergers are unprofitable absent efficiency gains. The general result, drawn in a Cournot framework by Farrell and Shapiro (1990), is that (not too large) mergers that are profitable are always welfare improving. In the present work we challenge the conclusions of this literature in two aspects. First, we show that Williamson's results underestimate the welfare loss due to a price increase and overestimate the effect of efficiency gains. Then, we prove that the conditions for welfare improving mergers defined by Farrell and Shapiro (1990) hold true only when consumers are adversely affected. This seems an argument to disregard their policy prescriptions when antitrust authorities are more "consumers-oriented". In this respect, we provide a necessary and sufficient condition for a consumer surplus improving merger: in a two firm merger, efficiency gains must be larger than the pre-merger average markup.

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

Chambers Latin America 2009 Rankings: Brazil Antitrust

Posted by D. Daniel Sokol

Rankings in Brazil for antitrust reveals a new pecking order for antitrust competition policy.

Band 1
• Advocacia José Del Chiaro
• Franceschini e Miranda - Advogados
• Magalhães, Ferraz e Nery - Advocacia

Band 2
• Levy & Salomão Advogados
• Machado, Meyer, Sendacz e Opice
• Pedro Dutra Advogados
• Pinheiro Neto Advogados
• TozziniFreire Advogados
• Trench, Rossi e Watanabe (Baker & McKenzie)

Band 3
• Barbosa, Müssnich & Aragão
• Barcellos Tucunduva Advogados
• Demarest e Almeida
• Lobo & de Rizzo Advogados
• Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados

Band 4
• Lino, Beraldi, Bueno e Belluzzo Advogados
• Mattos Muriel Kestener Advogados

Band 5
• Felsberg e Associados
• Fontes Tarso Ribeiro Advogados
• Lefosse Advogados, in cooperation with Linklaters
• Veirano Advogados
• Vieira, Rezende, Barbosa e Guerreiro
• Xavier Bernardes e Bragança

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

Brand and Price Advertising in Online Markets

Posted by D. Daniel Sokol

Michael R. Baye of the Kelly School of Business at Indiana University and John Morgan of the Haas School of Business at Berkeley have an interesting new paper on Brand and Price Advertising in Online Markets.

ABSTRACT: We model an environment where e-retailers sell similar products and endogenously engage in both brand advertising (to create loyal customers) and price advertising (to attract “shoppers”). In contrast to models where loyalty is exogenous, endogenizing the creation of loyal customers by allowing …rms to engage in brand advertising leads to a continuum of symmetric equilibria; however, there is a unique equilibrium in secure strategies, and the set of equilibria converges to this unique equilibrium as the number of potential e-retailers grows arbitrarily large. Price dispersion is a key feature of all of these equilibria, including the limit equilibrium. Branding tightens the range of prices and reduces the value of the price information provided by a comparison site, and this reduces pro…ts for platforms (such as an Internet price comparison site) where …rms advertise prices. Data from a leading price comparison site are shown to be consistent with several predictions of the model.

Download branding3.pdf

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

Monday, December 1, 2008

Qualcomm v. Broadcom Decision Out!

Posted by D. Daniel Sokol

A major decision is out in Qualcomm v. Broadcom - the Federal Circuit affirmed the district court on Qualcomm's duty to disclose the patents to the SSO.  It reversed on the scope of the unenforceability penalty.

Download qualcomm.broadcom.pdf

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

Achieving Self-sustaining Competition in Telecommunications

Posted by D. Daniel Sokol

Neelie Kroes (European Commissioner for Competition) gave a speech at the 9th Annual ECTA Regulatory Conference in Brussels on November 27, 2008 on Achieving Self-sustaining Competition in Telecommunications.

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