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 13, 2008

Ethics Developments in Antitrust: From the Boardroom to the Outside Lawyers

Posted by D. Daniel Sokol

The ABA Antitrust Section is putting together an interesting tele-seminar on Ethics Developments in Antitrust: From the Boardroom to the Outside Lawyers.

Program Moderator
Robert E. Hauberg, Jr., Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Washington, DC

Program Faculty
Lawton Cummings, George Washington University, Washington, DC
James R. Eiszner, Shook, Hardy & Bacon, Kansas City, MO
Donald C. Klawiter, Mayer Brown, Washington, DC

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

Friday, December 12, 2008

European Wax Cartel Members Will Be Burning the Midnight Oil ... In Jail

Posted by D. Daniel Sokol

The NY Times has a lengthy article on the European wax cartel - a throwback to an earlier era:

Most cartels operate in secrecy, destroying documents, encrypting e-mail messages or using prepaid phone cards to erase communication traces. But the paraffin cartel was rare in that some members kept minutes, and attendance lists. Cartel members e-mailed invitations and sought R.S.V.P.’s. They booked each other’s rooms and played host to open bars.

Documents found when investigators first raided the companies in April 2005 included handwritten notes on stationery from hotels on the cartel’s itinerary: the five-star Kempinski in Budapest or Château de Montvillargenne in the bucolic horse country of Chantilly, France.

December 12, 2008 | Permalink | Comments (1) | TrackBack (0)

Second Annual Antitrust and Competition Policy Blog Best Article of the Year Competition - Save the Date

Posted by D. Daniel Sokol

December 26, 2008 is the date when a group of experts from around the world will present our list of the best antitrust and competition policy articles of the year.  To see last year's list, click on http://lawprofessors.typepad.com/antitrustprof_blog/2007/12/experts-guide-t.html

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

The Economic Approach to Antitrust Damages: Learning from Two Nobel Laureates and Three Common Mistakes

Posted by D. Daniel Sokol

Richardrapp010_web_2 Richard T. Rapp (NERA) provides some lessons on The Economic Approach to Antitrust Damages: Learning from Two Nobel Laureates and Three Common Mistakes.

ABSTRACT: Can it be true that the quality of damage estimation in antitrust cases is better, on average  than in other branches of the law? If so, what explains that? And what accounts for the times when antitrust damages are done badly?

These are interesting questions, and in this issue of Antitrust Insights, Richard Rapp, a Special Consultant in NERA’s New York City office, considers the centrality of economics in solving antitrust problems, including damages, and the difference between economics- based expert testimony and “connoisseur” testimony. Recalling the mistakes that sometimes spoil antitrust damage calculations, Dick reminds us that the best analyses are based on theories of competitive harm that are consistent with case facts and benchmarks that are derived from realistic models of competitive pricing.

Download AT_insights_Winter.pdf

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

Co-ordinated effects - What is the right analytical threshold?

Posted by D. Daniel Sokol

As part of a joint OFT/CC endeavor, you can find the text of an economist roundtable discussion on Co-ordinated effects - What is the right analytical threshold? This is the second of two roundtable discussions co-sponsired by the two British agencies.

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

Non-Horizontal Effects - How far should guidelines go?

Posted by D. Daniel Sokol

As part of a joint OFT/CC endeavor, you can find the text of an economist roundtable discussion on Non-Horizontal Effects - How far should guidelines go?

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

Thursday, December 11, 2008

Competition, Innovation and Distance to Frontier

Posted by D. Daniel Sokol

Bruno Amable (CES - Centre d'économie de la Sorbonne - CNRS, Université Panthéon-Sorbonne - Paris I), Lilas Demmou (DGTPE - Direction Générale du Trésor et de la Politique Economique), and Ivan Ledezma (CES - Centre d'économie de la Sorbonne - CNRS, Université Panthéon-Sorbonne - Paris I) have written on Competition, Innovation and Distance to Frontier.

ABSTRACT: According to a recent literature, the positive effect of competition is supposed to be growing with the proximity to the technological frontier. Using a variety of indicators, the paper tests the effect of competition and regulation on innovative activity measured by patenting. The sample consists of a panel of 15 industries for 17 OECD countries over the period 1979-2003. Results show no evidence of a positive effect of competition growing with the proximity to the frontier. Two main configurations emerge. First, regulation has a positive effect whatever the distance to the frontier and the magnitude of its impact is higher the closer the industry is to the frontier. Second, the effect of regulation is negative far from the frontier and becomes positive (or non significant) when the technology gap decreases. These results contradict the belief in the innovation-boosting effect of product market deregulation such as taken into account in the Lisbon Strategy.

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

Innovation and Optimal Punishment, with Antitrust Applications

Posted by D. Daniel Sokol

Keith N. Hylton, Boston University - School of Law and Haizhen Lin, Indiana University - Kelley School of Business discuss Innovation and Optimal Punishment, with Antitrust Applications in their latest paper.

ABSTRACT: This paper modifies the optimal penalty analysis by incorporating investment incentives with external benefits. In the models examined, the recommendation that the optimal penalty should internalize the marginal social harm is no longer valid as a general rule. We focus on antitrust applications. In light of the benefits from innovation, the optimal policy will punish monopolizing firms more leniently than suggested in the standard static model. It may be optimal not to punish the monopolizing firm at all, or to reward the firm rather than punish it. We examine the precise balance between penalty and reward in the optimal punishment scheme.

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

The Role of the Competition Policy in Forging the European Common Market

Posted by D. Daniel Sokol

Musetescu Radu Cristian, Dima M Alina, and Cristian Paun, all of the Academy of Economic Studies in Bucharest address The Role of the Competition Policy in Forging the European Common Market.

ABSTRACT:

The forging of the Single Market represents the most important dimension of the first pillar of the European Union, which is the European Community. It can be argued that, as compared to the other two pillars (the Common Foreign and Security Policy and the Police and Judicial Cooperation in the Criminal Matters), it has the most powerful impact on the welfare of European citizens. The European policy makers define however the Internal Market as not only an economic area where there are no more state-imposed barriers in the path of the freedom of movement of goods and services at the borders of the member-states but also a single business environment where there are a single currency, coordinated economic policies as well as homogeneous business practices of private undertakings. In this process, despite a large set of common policies, the competition policy has reached the status of the building block of the Common Market.

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

The Relevance of Behavioural Economics in Antitrust

Posted by D. Daniel Sokol

Engel Christoph Engel, Max Planck Institute for Research on Collective Goods has a new paper on The Relevance of Behavioural Economics in Antitrust.

ABSTRACT: Hardly any antitrust lawyer would deny that antitrust needs solid foundations in economics. Antitrust authorities hire economists, if they do not even haven the position of a chief economist. Antitrust not only capitalises on economic theory, but it is equally sensitive to empirical studies, be it case studies or econometrics. Yet antitrust has been much less open to behavioural research, although quite some antitrust issues are reflected in a rich body of experimental evidence.

This paper mainly serves a methodological purpose. Relying on a meta-study of oligopoly experiments published elsewhere, it demonstrates in which way experimental evidence can productively be introduced into the antitrust discourse. To that end, it presents main effects, interaction effects, effect sizes and multivariate statistics, and discusses pertinent doctrinal reflection points. The paper concludes by showing how a new experiment, triggered by a doctrinal issue, can be used to inform the antitrust authorities.

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

Wednesday, December 10, 2008

Inference on Vertical Contracts between Manufacturers and Retailers Allowing for Non Linear Pricing and Resale Price Maintenance

Posted by D. Daniel Sokol

Celine Bonnet, GREMAQ (University of Toulouse) and Pierre Dubois, GREMAQ (University of Toulouse) provide an Inference on Vertical Contracts between Manufacturers and Retailers Allowing for Non Linear Pricing and Resale Price Maintenance.

ABSTRACT: A methodology is presented allowing manufacturers and retailers vertical contracting in their pricing strategies on a differentiated product market to be introduced. This contribution allows price-cost margins to be recovered from estimates of demand parameters both under linear pricing models and two part tariffs. Two types of nonlinear pricing relationships, one where resale price maintenance is used with two part tariffs contracts and one where no resale price maintenance is allowed in two part tariff contracts in particular are considered. The methodology then allows different hypotheses on contracting and pricing relationships between manufacturers and retailers in the supermarket industry to be tested using exogenous variables supposed to shift the marginal costs of production and distribution. This method is applied empirically to study the retail market bottled water in France. Our empirical evidence shows that manufacturers and retailers use nonlinear pricing contracts and in particular two part tariff contracts with resale price maintenance. Finally, using the estimation of our structural model, some simulations of counterfactual policy experiments are introduced.

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

From Walker Process to In re DDAVP: Should Direct Purchasers Have Antitrust Standing in Walker Process Claims?

Posted by D. Daniel Sokol

Aidan Synnott (Paul, Weiss) ponders From Walker Process to In re DDAVP: Should Direct Purchasers Have Antitrust Standing in Walker Process Claims?

ABSTRACT: In In re: DDAVP Direct Purchaser Antitrust Litigation, decided in 2006, the district court held that direct purchasers of a product from a monopolist which secured its monopoly by fraud on the Patent Office do not have standing to bring a Walker Process claim.

I examine the reasoning behind the decision and conclude that the court’s holding is erroneous. Because direct purchasers can clearly be victims of a monopoly obtained by the enforcement of a fraudulently obtained patent, they should have standing to assert a Walker Process claim.

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

"The FTC is using Whole Foods Market as a ‘crash-test dummy’ and it is practicing a double standard."

Posted by D. Daniel Sokol

There are some real zingers in the press conference transcript (the press conference was held yesterday) of WholeFoods CEO John Mackey on the new suit against the FTC.

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

Dynamic Merger Review

Posted by D. Daniel Sokol

In a very interesting paper  Volker Nocke (Oxford - Department of Economics)and Michael D. Whinston (Northwestern - Department of Economics) discuss Dynamic Merger Review.

ABSTRACT: We analyze the optimal dynamic policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger will affect the profitability and welfare effects of potential future mergers, the characteristics of which may not yet be known to the antitrust authority. We show that, in many cases, this apparently difficult problem has a simple resolution: an antitrust authority can maximize discounted consumer surplus by using a completely myopic merger review policy that approves a merger today if and only if it does not lower consumer surplus given the current market structure.

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

Tuesday, December 9, 2008

Striking a Balance between Competition Law Enforcement and Patent Policy: A Developing Country's Perspective

Posted by D. Daniel Sokol

Tcheung Thomas Cheng of the University of Hong Kong - Law provides his thoughts on Striking a Balance between Competition Law Enforcement and Patent Policy: A Developing Country's Perspective.

ABSTRACT: This book chapter examines the tension between competition law enforcement and patent policy in developing countries. Based on the framework proposed by Louis Kaplow in an article in the early 1980s, this book chapter suggests how developing countries should balance consumer welfare against the need to provide incentives to innovate. The book chapter argues that the balance depends on the developing country at issue, in particular on that country's capacity to innovate. For those developing countries with little capacity to innovate, this book chapter suggests that the balance should be tilted towards competition law enforcement. The degree of patent protection should be increased as the country's capacity to innovate improves.

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

Summary of linkLine Supreme Court Oral Argument

Posted by D. Daniel Sokol

BNA has a summary of yesterday's linkLine Supreme Court oral argument.  There was blogging by the Tony Mauro of the Legal Times on it as well.

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

AALS - Antitrust and Economic Regulation Section Meeting in San Diego, CA

Posted by D. Daniel Sokol

The American Association of Law Schools (AALS) annual meeting will be held the first week of January 2009 in San Diego.  Conference details are available here.  Speaking at the all important Antitrust and Economic Regulation Section are:

Emerging Antitrust Regimes: Challenges and Approaches

Business Meeting at Program Conclusion

Speakers
Frank Emmert - IU Indianapolis
Eleanor M. Fox - NYU
William E. Kovacic - George Washington and the Federal Trade Commission
D. Daniel Sokol - University of Florida 

Moderator
Salil K. Mehra - Temple University

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

FTC Violated Rights of Whole Foods According to Lawsuit

Posted by D. Daniel Sokol

The AP has published a news story on how Whole Foods filed a lawsuit yesterday against the FTC for violating procedural rights based on an overly ambitious and quick trial schedule before the FTC ALJ.

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

The Quiet Life Hypothesis in Banking - Evidence from German Savings Banks

Posted by D. Daniel Sokol

Michael Koetter (University of Groningen, Faculty of Economics) and Oliver Vins (Johann-Wolfgang Goethe-Universität Frankfurt, Finance Department) present us with The Quiet Life Hypothesis in Banking - Evidence from German Savings Banks.

ABSTRACT: The "quiet life hypothesis (QLH)" posits that banks enjoy the advantages of market power in terms of foregone revenues or cost savings. We suggest a unied approach to measure competition and efficiency simultaneously to test this hypothesis. We estimate bank-specific Lerner indices as measures of competition and test if cost and profitt efficiency are negatively related to market power in the case of German savings banks. We find that both market power and average revenues declined among these banks between 1996 and 2006. While we find clear evidence supporting the QLH, estimated effects of the QLH are small from an economical perspective.

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

Monday, December 8, 2008

Oligopolies and Collective Dominance: A Solution in Search of a Problem

Posted by D. Daniel Sokol

Barry E. Hawk, (Skadden and Fordham University) and Giorgio A. Motta (Skadden) discuss Oligopolies and Collective Dominance: A Solution in Search of a Problem.

ABSTRACT: This paper discusses the doctrine of collective dominance under Article 82 of the EC Treaty in the context of oligopolies. Section I discusses the essentially economics oligopoly problem defined here as the extent of subcompetitive performance (e.g., higher prices, lower output, lesser quality, etc.) resulting from interdependence among rivals. Sections II and III respectively discuss two competition law (essentially legal) concerns largely from a U.S. perspective: the oligopoly gap (concern that any subcompetitive performance cannot adequately be addressed by legal prohibitions of abusive/monopolistic unilateral conduct (e.g., Article 82 or section 2 of the Sherman Act)) and the unproved cartel gap (concern that oligopolies provide an environment in which cartels succeed without proof of the legal requisite agreement or concert e.g., Article 81 of the EC Treaty (Article 81) or section 1)). Section IV discusses Article 82 and collective dominance in the oligopoly context, particularly to what extent, if any, collective dominance has been used to address either the oligopoly gap or the unproved cartel gap. Section V discusses several Member State judgments applying collective dominance to oligopolies.

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