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 20, 2008

Bundeskartellamt 14th International Conference on Competition

Posted by D. Daniel Sokol

Bundeskartellamt 14th International Conference on Competition

Sunday, 26 April 2009

 

from 13.00 h
Registration at Hotel GRAND ELYSEE, Hamburg


Programme of social events
15.00 h
City and harbour sightseeing tour

Evening programme18.00 h
Dinner on board the museum ship "Cap San Diego"


Monday, 27 April 2009

 

from 09.00 h
Registration at Hotel GRAND ELYSEE, Hamburg

10.00 h
Opening of the 14th International Conference on Competition

Dominant Companies - The Thin Line between Regulation and Competition Law

Opening address
Dr Bernhard Heitzer;   President of the Bundeskartellamt

10.15 h
Welcoming address
Ole von Beust; First Mayor and President of the Senate of the Free and Hanseatic City of Hamburg

10.30 h
Speech
Michael Glos; Federal Minister of Economics and Technology

11.00 h
Coffee break

11.30 h
Speech
Neelie Kroes; Member of the European Commission

12.00 h
Speech
Dr Wulf Bernotat; CEO, E.ON AG

12.30 h
Lunch

14.00 h
Panel I: Release from Regulatory Control - When and How?

Moderator
Dr Karen Horn;  Head of the Berlin office of the Institut der deutschen Wirtschaft Köln

Statements
Ralph Dommermuth; CEO, United Internet AG 

Matthias Kurth; President of the Federal Network Agency 

René Obermann; CEO, Deutsche Telekom AG 

Dr A. Jorge Padilla; Managing Director, LECG Corporation 

Sheridan Scott; Commissioner of Competition, Competition Bureau, Canada
(to be confirmed)

15.30 h
Coffee break

16.00 h
Panel discussion

19.30 h
Evening programme at Restaurant Suellberg, Hamburg

Reception

Dinner


Tuesday, 28 April 2009

 

09.30 h
Panel II: "Dominant Company" – What Now? Consequences of a Categorisation under Competition Law

Moderator
Dr Frank Montag;  Chairman of the Competition Lawyers' Association

Kurzreferate
Achim Berg; CEO, Microsoft Deutschland GmbH 

Stefan H. Lauer; Member of the Executive Board, Deutsche Lufthansa AG  

Philip Lowe; Director General for Competition, European Commission 

Louise Pentland; Chief Legal Officer and Senior Vice President for Legal and IPR, Nokia Corporation 

N.N.; Assistant Attorney General, US Department of Justice
  (to be confirmed)

11.00 h
Coffee break

11.30 h
Panel discussion

12.45 h
Closing speech
Dr Bernhard Heitzer; President of the Bundeskartellamt 

December 20, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, December 19, 2008

Wintel: Cooperation and Conflict

Posted by D. Daniel Sokol

Ramon Casadesus-Masanell, Harvard Business School and David Yoffie, Harvard  Business School describe Wintel: Cooperation and Conflict.

ABSTRACT: We study competitive interactions between Intel and Microsoft, two producers of complementary products. In a system of complements, like the PC, the value of the final product depends on how the different components work together. This, in turn, depends on the firms' investments in complementary R&D. We ask whether Intel and Microsoft will want to cooperate and make the final product as valuable as possible. Contrary to the popular view that two tight complements will generally have well aligned incentives, we demonstrate that natural conflicts emerge over pricing, the timing of new product releases, and who captures the greatest value at different phases of product generations.

December 19, 2008 | Permalink | Comments (0) | TrackBack (0)

Commission adopts temporary framework for Member States to tackle effects of credit squeeze on real economy

Posted by D. Daniel Sokol

In a press release, the European Commission has outlined how to address the financial crisis. As the press release reports, "All measures are limited until the end of 2010 and subject to conditions. Based on Member States' reports, the Commission will evaluate whether the measures should be maintained beyond 2010, depending on whether the crisis continues."

The Framework is available on the Commission's website.

December 19, 2008 | Permalink | Comments (0) | TrackBack (0)

Innovation, Imitation and Open Source

Posted by D. Daniel Sokol

Rufus Pollock (Research Fellow, University of Cambridge), has written on Innovation, Imitation and Open Source.

ABSTRACT: An extensive empirical literature indicates that, even without formal intellectual property rights, innovators enjoy a variety of first-mover advantages and that `imitation' is itself a costly activity. There is also accumulating evidence that an `open' approach to knowledge production can deliver substantial efficiency advantages. This paper introduces a formal framework incorporating all of these factors. We examine the relative performance of an `open' versus a `closed' (proprietary) regime, and explicitly characterise the circumstances in which an open approach, despite its effect on facilitating imitation, results in a higher level of innovation.

December 19, 2008 | Permalink | Comments (0) | TrackBack (0)

Commitment Decisions under Art. 9 of Regulation 1/2003: The Developing EC Practice and Case Law

Posted by D. Daniel Sokol

Schweitzer Heike Schweitzer of the European University Institute - Department of Law addresses Commitment Decisions under Art. 9 of Regulation 1/2003: The Developing EC Practice and Case Law in her latest working paper.

ABSTRACT: The so-called "commitment decision" procedure, introduced into European competition law with Art. 9 of Regulation 1/2003, was meant to provide the Commission with the possibility to dispose of competition law cases by way of a kind of formal settlement, roughly analogous to the US consent decree. It has quickly become an important instrument of European competition law enforcement. Since May 2004, roughly 50 % of all Commission decisions applying Art. 81 or Art. 82 in non-hardcore-cartel cases have been taken under Art. 9 of Reg. 1/2003. However, the CFI's Alrosa judgment of 11 July 2007 calls into question the Commission's commitment decision practice in various respects. Alrosa does not conceive commitment decisions as "settlements" proper, but treats them as public law enforcement largely analogous to infringement decisions under Art. 7 of Reg. 1/2003. It emphasizes the Commission's duty to investigate and clearly formulate the competitive concern, insists on a full judicial review of the proportionality of the commitments and underlines the full judicial protection of the concerned undertakings' procedural rights, namely the right to access to the file and the right to be heard. This paper provides an overview of the Commission's commitment decision practice since Art. 9 of Reg. 1/2003 has entered into force, discusses the concerns that this practice has raised and the implications of the Alrosa judgment, should it be upheld by the ECJ. According to the author, the Alrosa judgment fundamentally re-conceptualizes the function and structure of commitment decision procedures, with likely repercussions on analogous provisions in national competition laws. It creates important safeguards against the real risk that the Commission's incentives to settle cases may diverge from the public interest in effective protection of competition.

December 19, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 18, 2008

Duopoly Competition in Supermarket Industry: The Case of Seattle-Tacoma Milk Market

Posted by D. Daniel Sokol

Members of the antitrust community certainly have noticed a relatively high price of milk.  A new paper, Duopoly Competition in Supermarket Industry: The Case of Seattle-Tacoma Milk Market, by Benaissa Chidmi (Texas Tech - Agriculture and Applied Economics) and Olga Murova (Texas Tech - Agriculture and Applied Economics) undertake an an analysis on the reason for this.

ABSTRACT: The Seattle-Tacoma consumers have been paying higher prices for fresh milk than consumers in other Western states of United States. For instance, the retail price for whole milk averaged $3.27/gallon during the period of April 1999- April 2003 in Seattle-Tacoma, while it did not go beyond $2.86/gallon in most of the large metropolitan areas in Western U.S, during the same period (Carman and Sexton, 2006). In addition, retail prices in Seattle-Tacoma do not respond similarly to farm price increases and decreases. Supermarkets are prompt to pass on to consumers any increase in farm price, while they do not pass or lag behind when farm price decreases. The present study attempts to analyze the pricing conduct of supermarket chains in a duopoly setting using a structural model of consumers and firms behavior. In this paper, we examine the pricing conduct of two supermarket chains using retail supermarket-level data on! sales and prices from Seattle-Tacoma market area.

December 18, 2008 | Permalink | Comments (0) | TrackBack (0)

'Consumer' Versus 'Customer': the Devil in the Detail

Posted by D. Daniel Sokol

Pinar_akman3 Pinar Akman (Centre for Competition Policy, University of East Anglia) writes on 'Consumer' Versus 'Customer': the Devil in the Detail.

ABSTRACT: The ultimate objective of EC competition rules is arguably the enhancement of ‘consumer welfare’. In EC competition law, however, ‘consumer’ merely means ‘customer’. Not being limited to final consumers, the concept also encompasses intermediate customers. Moreover, according to the EC Commission, under Article 82EC, harm to intermediate customers is generally presumed to create harm to consumers and where intermediate customers are not competitors of the dominant undertaking, there is no requisite to assess the effects of conduct on users further downstream. This paper questions the appropriateness of this presumption in light of recent advances in economics, specifically that of vertical restraints and in particular non-linear pricing. It uses this literature to show that there are many instances where an increase (decrease) in ‘customer welfare’ does not cause an increase (decrease) in ‘consumer welfare’. In these cases, the presumption is devoid of economic justification and likely to lead to decisional errors. The paper concludes that if the law is to serve the interests of ‘real’ consumers, the EC Commission should reconsider this presumption and its interpretation of the ‘consumer’ in ‘consumer welfare’. Until then, it remains questionable and objectionable whose interests EC competition law and in particular, Article 82EC, serve.

December 18, 2008 | Permalink | Comments (0) | TrackBack (0)

The Financial Crisis and Competition Policy: Some Economics

Posted by D. Daniel Sokol

John Vickers
of the University of Oxford Economics Department provides some critical insights into The Financial Crisis and Competition Policy: Some Economics.

ABSTRACT: It is a familiar pattern that when the going gets tough, some of the not-so-tough seek exemptions from competition law. But might they have a point, especially when they are banks in an unprecedented financial crisis?

This note reviews some of the basic economics of the crisis before concluding that October’s systemic bank rescue package is not unduly competition-threatening, whereas the waiver of merger policy for the Lloyds TSB acquisition of HBOS was probably a policy mistake.

December 18, 2008 | Permalink | Comments (0) | TrackBack (0)

The UK Cartel Offence: Lame Duck or Black Mamba?

Posted by D. Daniel Sokol

Andreas Stephan of the University of East Anglia Centre for Competition Policy offers his thoughts on The UK Cartel Offence: Lame Duck or Black Mamba?

ABSTRACT: A criminal offence requiring Ghosh dishonesty was introduced in the UK by the Enterprise Act 2002, primarily to enhance cartel deterrence as a complement to corporate fines. Yet the first convictions resulted from a US plea bargain in 2008. This paper identifies three obstacles to enhancing deterrence through the cartel offence. First, Norris v USA and a public survey suggest relatively weak perceptions of cartels persist in the UK. It was envisaged that convictions would remedy this, but prosecutors will continue to be very selective about the cases they bring to trial if there are doubts as to whether price fixing alone is viewed as objectively dishonest. Secondly, any increase in criminal enforcement risks discouraging leniency applications to the European Commission, because corporate immunity granted on the Community level does not automatically protect employees from criminal prosecution in national courts. There is also no conclusive mechanism for direct settlement, as there is in the US. Thirdly, sizeable benefits and purportedly low detection rates mean deterrence may be weak if custodial sentences do not become the norm. Further sanctions such as Director Disqualification Orders can play an important role in ensuring cartelists do not seek immediate reemployment at a high level.

December 18, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 17, 2008

Presenting Complex Economic Theories to Judges

Posted by D. Daniel Sokol

The OECD has published Presenting Complex Economic Theories to Judges.

December 17, 2008 | Permalink | Comments (0) | TrackBack (0)

The Intellectual Property-Antitrust Interface

Posted by D. Daniel Sokol

Herberthovenkampphp Herb Hovenkamp,University of Iowa College of Law, has a new piece on The Intellectual Property-Antitrust Interface.

ABSTRACT: This historical overview examines the relationship between antitrust policy and intellectual property in the United States since 1890. Over most of this history, judges imagined far greater conflicts between antitrust policy and intellectual property rights than actually existed, or else relied on sweeping generalizations rather than close analysis. For example, they often assumed that the presence of an intellectual property right led to anticompetitive effects where there was no basis for finding any injury to competition at all. At the other extreme, they often concluded that an intellectual property right immunized seriously anticompetitive conduct even when the intellectual property statute at issue did not authorize the challenged practice. True conflicts between antitrust and intellectual property rights are relatively rare.

December 17, 2008 | Permalink | Comments (0) | TrackBack (0)

Preserving Competition After the Banking Meltdown

Posted by D. Daniel Sokol

Bert Foer of the American Antitrust Institute has written on Preserving Competition After the Banking Meltdown.

ABSTRACT: The Great Banking Meltdown of 2008, which may yet metastasize into the Even Greater Depression, has already resulted in an unprecedented rearrangement of the financial services sector. Merrill Lynch and Countrywide Financial are now part of the Bank of America; Bear Stearns and Washington Mutual are now part of JPMorgan Chase; and Wachovia is now part of Wells Fargo. Goldman Sachs, Morgan Stanley, and American Express have become bank holding companies. Who knows what comes next? We seem to be moving at warp speed toward a highly concentrated system of capital allocation dominated by conglomerated financial services firms which will likely have substantial political as well as economic clout.

This essay offers some thoughts on the implications of the sea change in the U.S. financial industry in terms of domestic and international competition and the transformed role of domestic and international regulation.

December 17, 2008 | Permalink | Comments (0) | TrackBack (0)

Incentives and China's New Antimonopoly Law

Posted by D. Daniel Sokol

Fei Deng (NERA) and Gregory K. Leonard (NERA) discuss Incentives and China's New Antimonopoly Law.

ABSTRACT: The People's Republic of China recently enacted a new, comprehensive Antimonopoly Law (AML) that will go into effect in August 2008. As written, the AML is largely consistent with the antitrust laws of the United States and European Union, with a few exceptions. However, the AML only articulates the broad principles that will guide antitrust enforcement in China. The details of how antitrust enforcement will actually be implemented were left for future development. Thus, a number of questions remain open, some of which arise out of the idiosyncratic nature of the Chinese political and economic environment. Who will be responsible for antitrust enforcement? Will the Chinese antitrust enforcers be able to cope with administrative monopolies? Will the AML be used to disadvantage multinational companies rather than to enhance competition? To what extent will the AML and its penalties deter companies from engaging in anticompetitive conduct? Central to the answer to each of these questions are the underlying incentives - to companies and the Chinese antitrust enforcers - that have either been created by the AML, or were a motivation for developing the AML in the first place.

December 17, 2008 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 16, 2008

What Bank Mergers Mean for Credit Cards

Posted by D. Daniel Sokol

Balto David Balto (Center for American Progress)has written on What Bank Mergers Mean for Credit Cards.

ABSTRACT: The continuing financial crisis has led to calls for greater financial services consolidation—under the premise that consolidation will enable at least some banks to survive—and for the ramping down of antitrust enforcement to permit it. In the case of credit card issuers, however, ramping down antitrust enforcement is a mistake—a merger is forever and the cost of increased concentration in terms of higher prices and lower quality service for consumers will last far longer than the economic downturn, however severe.

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

The Effectiveness of Mobile Wireless Service as a Competitive Constraint on Landline Pricing: Was the DOJ Wrong?

Posted by D. Daniel Sokol

William E. Taylor (NERA) and Harold Ware (NERA) ask about The Effectiveness of Mobile Wireless Service as a Competitive Constraint on Landline Pricing: Was the DOJ Wrong?

ABSTRACT: The US Department of Justice (DOJ) recently concluded that "the available evidence does not establish that mobile services currently represent an effective competitive constraint on landline access pricing." However, two NERA experts -- Dr. William E. Taylor, Senior Vice President and Communications Group Head, and Dr. Harold Ware, Vice President -- disagree with this conclusion. In this paper, Dr. Taylor and Dr. Ware argue that data on price trends and substitution of wireless for landline services clearly demonstrate that mobile services represent an effective competitive constraint on landline pricing. The authors contend that for some (perhaps many) customers, an increase in wireline prices will cause them to shift to wireless services exclusively. Thus any competitive analysis of wireline access service must take wireless services into account -- as wireline carriers obviously do -- together with cable and VoIP competitors.

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

Antitrust Enforcement During National Crises: An Unhappy History

Posted by D. Daniel Sokol

Thumb_faculty_crane_danjpg Daniel Crane of Cardozo Law School offers insightful analysis Antitrust Enforcement During National Crises: An Unhappy History.

ABSTRACT: In 1940, while head of the Justice Department’s Antitrust Division ("DOJ"), Thurman Arnold published The Bottlenecks of Business, a book that defended reinvigorated antitrust enforcement. He entitled Chapter IV A Free Market in Times of National Emergency or War. Arnold wrote that “[t]he antitrust laws must constantly defend the ideal of industrial democracy against all sorts of pressures.” With the prospect of war on his horizon, Arnold observed that “these pressures increase when the government is suddenly forced to buy huge quantities of defense materials from closely controlled sources of supply.” He further noted that “[t]he temptation to exploit consumers and the government through domination of a suddenly expanding market is almost irresistible, and usually prevails unless it is curbed.”

Arnold turned out to be writing his own political obituary. As Spencer Waller has detailed in his excellent biography, Arnold began to face the “wholesale repeal or practical nullification of antitrust in the face of the war planning and production leading up to the U.S. entry into World War II.” Consistent with the themes laid out in Bottlenecks, Arnold continued to push aggressive antitrust enforcement as an aid rather than obstacle to the war effort. But the handwriting was on the wall. In 1942, when Arnold tried to indict political luminary Averell Harriman, the chairman of the Union Pacific railroad, for price-fixing, he was quietly forced out of the Justice Department. Antitrust was simply a luxury that the nation could not enforce in wartime.

Indeed, antitrust seems to be a luxury that the country cannot afford in any crisis. Or at least this is the lesson one would draw from observing our national behavior during moments of economic crisis or war. Throughout our national history, wars and financial panics have been opportunities for consolidation of industrial power. Arguments that competition policy is a help rather than a hindrance fall on deaf ears in the face of panic.

The history of the 2008 (and beyond?) financial crisis has yet to be written. But already the familiar telltale signs are appearing. The Treasury Department is reportedly pushing consolidation as a remedy for bank illiquidity, Chrysler and General Motors have discussed merger without any appearance of antitrust objection, and the failure of corporate titans like Lehman Brothers leaves little doubt that the industrial landscape will emerge considerably more concentrated than it was before.

In this essay, I have the gloomy task of mapping the failure of competition policy during periods of crisis. For purposes of the historical narrative, I conflate war and financial crisis. The strong tendency toward abandonment of competition principles arises in both circumstances. I will argue, however, that not all crises are created equal when it comes to the suspension of antitrust.

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

On the French Mobile Phone Cartel

Posted by D. Daniel Sokol

Louis de Mesnard, University of Burgundy provides his thoughts On the French Mobile Phone Cartel.

ABSTRACT: France Telecom (FT), SFR and Bouygues Telecom (BT) have been fined by France's Conseil de la Concurrence (CC) for organizing a mobile phone cartel with stable market shares (one-half, one-third and one-sixth respectively) and for directly exchanging commercial information. While not contesting the legal decision, it is argued here that the economic reasoning is flawed. 1) As the CC made much of the firms' stable market shares, we have first followed this line of reasoning by considering that the market shares are quotas under uniform costs. Even if there is a general incentive to form a monopolistic cartel, BT was too small for it to be worth its while to join it; it is not necessary to exchange information directly to coordinate market shares and prices effectively, while stable uniform high prices may simply ensue from the fear of a price war. 2) We then considered that the non-uniform market shares are explained by the costs in Cournot competition which can be deduced from the observed market shares by assuming that the costs are kept the same when switching from Cournot competition to any form of cartel. We deduced that market shares cannot be other than stable and non-uniform; any monopoly is unlikely to come about, because FT has negative incentives to form a monopolistic cartel; no partial cartels of two operators are viable because at least one member would lose out; Cournot competition is the only arrangement that guarantees no losses to all operators.

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

Article 82 and Section 2: Abuse and Monopolizing Conduct

Posted by D. Daniel Sokol

Hawk Barry E. Hawk (Skadden and Fordham Law) provides his thoughts on Article 82 and Section 2: Abuse and Monopolizing Conduct.  Barry is among those uniquely situated to provide this sort of comparative perspective.  Barry taught EC Competition Law at Fordham long before all but a handful of European schools did.  Reading through nearly all of the volumes of his annual international antitrust conference, which I recently did, provides an excellent snapshot as to what the key international issues were in antitrust in a given year.  One can get an excellent sense of what issues have been central to discussion and which issues have gone out of fashion.

When I think of the early figures in international antitrust who remain active today, Barry and Eleanor Fox of NYU were the trailblazers who opened this field for the rest of us.  We owe both of them and  "newbie" Bill Kovacic (at least relative to Barry and Eleanor) a debt of gratitude for their contributions to establishing this field.

ABSTRACT: Differing historical contexts, such as the greater role of public companies and state-created monopolies in the EU, differing policy considerations such as the EU's traditional embrace of fairness, and differing underlying economic and juridical assumptions about, among others, market erosion and the capability of authorities and courts to identify and remedy anticompetitive conduct, all explain the traditionally broader scope of Article 82 compared with Section 2. However, the EU's increasing acceptance of mainstream economics, welfare analysis and an effects-oriented inquiry, together with the declining influence of the Ordoliberals, should narrow (but not eliminate) the present gap between Section 2 and Article 82.

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

Monday, December 15, 2008

Competition ... in Law School

Posted by D. Daniel Sokol

I am in the midst of grading final exams.   Some students have really amazed me with their grasp of the material.   

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

The Transmission of Price Trends from Consumers to Producers and Tests of Market Power

Posted by D. Daniel Sokol

Driss Lkassbi, Gale E. West, and J. Stephen Clark (all of Laval University - Nova Scotia Agricultural College) have a new paper on The Transmission of Price Trends from Consumers to Producers and Tests of Market Power.

ABSTRACT: This study examines the competitiveness of four Canadian agricultural industries (eggs, milk, chicken and turkey) using a general equilibrium farm to retail pricing model developed by Wohlgenant (1989). The model generates retail and farm pricing equations that are estimated using maximum likelihood developed by Johansen (1992). The results indicate that in all cases, long-run constant returns is rejected, indicating market power within the Canadian retail to farm marketing sector. The model also finds more cointegrating vectors than predicted by theory, also inconsistent with competitive markets. Results are based on commercial disappearance as a proxy for consumer demand and therefore confounding between uncompetitive markets and quality differences may be indicated. Less ambiguous results would be obtained if consumer expenditures rather than commercial disappearance data were available. Still, results are rath! er emphatic in rejection of competitive markets in food markets in Canada. More competitive markets are indicated in the United States using similar methods.

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