Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, February 16, 2008

Dealing with Cartel Risk: Cartels, Leniency and Settlements in an Increasingly Complex Environment

Posted by D. Daniel Sokol

The Dealing with Cartel Risk: Cartels, Leniency and Settlements in an Increasingly Complex Environment conference on February 27, 2008 will bring a number of leading expert practitioners to discuss the latest in cartel issues.

  • John Ratliff, Partner, WilmerHale LLP, Brussels
  • Philip Collins, Chairman, Office of Fair Trading, London
  • Fiona Carlin, Partner, Baker & McKenzie LLP London and Brussels
  • Anne Riley, Associate General Counsel Shell International, London
  • Sven Volcker, Partner, WilmerHale LLP Brussels
  • Hans-Martin Feldkamp, Senior Counsel, Lanxess Germany
  • Annette Schild, Partner, Shearman & Sterling LLP, Brussels
  • Jeffrey Blumenfeld, Partner, Crowell & Moring LLP Washington DC
  • Jean Francois Bellis, Partner, Van Bael & Bellis Brussels
  • Isabelle Kraus, Case Handler, DG Competition, European Commission Brussels
  • Sonya Branch, Senior Director, Markets and Projects, Goods Office of Fair Trading London
  • Sean-Paul Brankin, Counsel, Crowell & Moring LLP Brussels

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

Comment on the EC's Pharmaceutical Dawn Raids

Posted by D. Daniel Sokol

The pharmaceutical industry remains under close examination by antitrust enforcers on both sides of the Atlantic. The U.S. Federal Trade Commission’s (FTC) enforcement activities—challenging both unilateral and concerted action undertaken by pharmaceutical firms—have been ongoing for more than a decade.

Concerns regarding anticompetitive conduct by pharmaceutical firms in Europe contributed to the European Community’s (EC) decision several weeks ago to commence a broad probe into the pharmaceutical industry. The stated purpose of this “sector inquiry” is to determine whether anticompetitive conduct is responsible for either the sharp decline in the launch of new drugs in Europe or the relative hesitancy of generic drug manufacturers to enter the market with cheaper bio-equivalent alternatives to branded drugs that are still on patent.

That the EC has a keen interest in understanding the competitive dynamics of the pharmaceutical industry is hardly exceptional. The EC’s inquiry is unique, however, because it commenced with the seizure of documents and data through targeted dawn raids, without a publicly acknowledged reason to suspect ongoing cartel activity or other exigent circumstances. Naturally, this has left many wondering why the need for the EC to undertake such extreme measures.

February 16, 2008 | Permalink | Comments (1) | TrackBack (0)

Friday, February 15, 2008

Review of UK Competition Commission Merger Guidelines: Call for Submissions

Posted by D. Daniel Sokol

The UK Competition Commission has launched a review of its guidelines for merger references (Merger References: Competition Commission Guidelines, CC2) with a deadline of March 31.  See here for details.

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

Safe Harbors for Quantity Discounts and Bundling

Posted by D. Daniel Sokol

Dennis Carlton (University of Chicago Graduate School of Business ) and Michael Waldman (Cornell University Johnson School of Business) take issue with the AMC Report as it deals with bundling in Safe Harbors for Quantity Discounts and Bundling.

ABSTRACT: The courts and analysts continue to struggle to articulate safe harbors for a wide variety of common business pricing practices in which either a single product is sold at a discount if purchased in bulk or in which multiple products are bundled together at prices different from the ones that would emerge if the products were purchased separately. The phenomenon of tying in which the sale of one product is conditioned on the purchase of another is closely related to bundling. Its analysis relies on the same economics as that used to analyze bundling (see, e.g., Carlton and Waldman (2008)), though the law seems to make a distinction between the two. The need for safe harbors for common business pricing practices arises from the recognition that these practices often are motivated by efficiency and that a broad antitrust attack on them could cause more harm than good. In this essay, we analyze and propose safe harbors for quantity discounts and bundled products. In analyzing the latter case, we discuss the deficiencies of the particular safe harbor proposed in the report of the Antitrust Modernization Commission (2007) (AMC) of which Carlton was a member.

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

Thursday, February 14, 2008

Deadline for $10,000 Compass Lexecon Prize Approaching

Posted by D. Daniel Sokol

The deadline for submissions for the 2008 Compass Lexecon Prizes is soon approaching (February 29, 2008).  There are separate prizes for faculty ($10,000) and graduate students ($5,000) for "economists whose papers make the most significant contributions to the understanding and implementation of competition policy." 

The 2007 co-winners for faculty:
Mark Armstrong of University College London for his paper, published in the RAND Journal of Economics, entitled “Competition in Two-Sided Markets.”

Igal Hendel and Aviv Nevoof Northwestern University for their paper, published in Econometrica, entitled “Measuring the Implications of Sales and Consumer Inventory Behavior.”

The 2007 winner for PhD student:
Nathan Miller of the University of California at Berkeley for his paper, “Can Strategic Leniency Fight Organized Crime? Empirical Evidence from Cartel Enforcement.”

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

BIICL International Cartels Conference

Posted by D. Daniel Sokol

The British Institute of International and Comparative Law (BIICL) will hold an International Cartels Conference on February 26 in London.

Confirmed speakers include:

Simon Williams, Office of Fair Trading

Carolyn Galbreath, Irish Competition Authority

Michael O'Kane, Peters & Peters

Dr Nicholas Green QC, Brick Court Chambers

Lawrence Zweifach, Heller Ehrman LLP

Roxann Henry, Howrey LLP

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

Twombley, Leegin and the Reshaping of Antitrust

Posted by D. Daniel Sokol

Image002 Randy Picker of the University of Chicago Law School has come out with Twombley, Leegin and the Reshaping of Antitrust.

ABSTRACT: This paper considers the four antitrust decisions in the Supreme Court's 2006 Term.

It offers brief discussions of Weyerhaeuser and Credit Suisse. Weyerhaeuser is a small, modest decision. The Court isn't likely to see another predatory bidding case soon and the Court chose to minimize doctrinal complexity by bringing predatory bidding analysis in sync with the Court's prior treatment of predatory pricing in Brooke Group. Credit Suisse too is minimally incremental. In concluding that federal securities law implicitly precluded claims asserting antitrust violations in the sale of new securities, the Court followed its prior decision in Gordon as well as the Court's more recent preference for regulatory schemes over antitrust as seen in Trinko. Pushing antitrust authority toward specialized regulators like the Securities and Exchange Commission broadens the trade-offs that can be made between antitrust concerns and other values and almost certainly expands the circumstances under which industry actors can act collectively. That matters, so Credit Suisse covers more of the economic landscape than Weyerhaeuser, but the decision itself is a small step from prior doctrine.

Twombly and Leegin are each, in their own ways, blockbusters. Twombly will appear in case after case, as antitrust defendants try to rely on its new tougher rules for FRCP 12(b)(6) motions. Twombly represents a preference for blunt instruments over sharp edges. The central problem confronted by Twombly is discovery run amok. The Court has the tools in its hands to control that by rewriting the discovery rules and overturning lower court decisions implementing those rules. Twombly suggests that the Court believes that refinement of those rules will fail in controlling discovery and it is willing to pay the price that private plaintiffs will have no good way to get at the best-hidden antitrust conspiracies.

Finally, Leegin brings to a close - for now or forever? - the 100-year saga of contractual minimum resale price maintenance. Since its decision in 1911 in Dr. Miles, the Court has confronted this issue again and again in the slightly-refined versions that make up the art of institutional design. Over time, the Court has chipped away at Dr. Miles, first in not finding a violation of Section 1 of the Sherman Act for the unilateral minimum RPM in Colgate in 1919 and in then broadly subjecting nonprice vertical restraints to rule-of-reason treatment in Sylvania in 1977. Given that, on what basis would Dr. Miles survive?

That is a question of stare decisis and Leegin ends up in an all-out fight over stare decisis in antitrust. That is new: the Court has been overturning old decisions in antitrust for some time and has done so with little stare decisis fanfare. That suggests that the dispute over stare decisis in Leegin is just a convenient forum for the larger dispute over stare decisis that is percolating through a divided Court. I don't have a full-blown theory of stare decisis but I do suggest why the Court has been mistaken to treat stare decisis in statutory cases differently from that in constitutional cases. The Court has made too little of one of its critical tools in shaping statutes, namely, the power to set a default point for subsequent congressional action. Once we treat the Court's decisions as inputs in subsequent lawmaking, there is greater reason to think that the Court should have a uniform approach to stare decisis across the Constitution and statutes.

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

Wednesday, February 13, 2008

Unilateral Effects Analysis and Litigation Workshop

Posted by D. Daniel Sokol

The transcript and podcast of the FTC's Unilateral Effects Analysis and Litigation Workshop held yesterday are now on the FTC website .

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

International Antitrust and Monopolization

Posted by D. Daniel Sokol

Luke Froeb of Vanderbilt's Owen School of Management provides a podcast interview on his newest paper on the EU Microsoft decision and antitrust in India and China.  One of Luke's best insights in the interview is that Chinese antitrust authorities might take analytical shortcuts instead of working through the nuance of bundling cases because of pressures brought by competitors.  We should all be concerned with false prosecutions in antitrust and it strikes me that for new antitrust agencies, bundling should not be anywhere near the top of the list of priorities.  All to often agencies focus on enforcement where I think that competition advocacy to limit anti-competitive government regulation is crucial, particularly as many new agencies are in countries that have not fully embraced the market as a way to organize the economy.  Enforcement should focus on cartels and addressing the role of state owned enterprises and government granted monopolies.  Nevertheless, there is no one size fits all set of priorities and we need to be careful to match enforcement with the particular set of economic and political circumstances of a given country.  With this caveat, I still cannot think of any new agency around the world that ought to be focusing on bundling.

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

Tuesday, February 12, 2008

The Economics of Article 82 Reform

Posted by D. Daniel Sokol

The Oxford Competition Centre hosted a lecture on The Economics of Article 82 Reform by Helen Jenkins of Oxera Consulting on February 8.

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

Cartel Organization and Antitrust Enforcement

Posted by D. Daniel Sokol

Zhijun Chen, University of East Anglia - Centre for Competition Policy, Zhejiang University - Department of Economics takes a stab at creating optimal cartel enforcement policy in his paper Cartel Organization and Antitrust Enforcement.

ABSTRACT: This paper develops a simple framework to characterize the dual-coalition structure of cartel organization and highlights the interactions between cartel organization and antitrust enforcement. We show that delegation of authority over decision rights can make cartels more robust to deviation, whereas this efficiency gain of cartel organization can be mitigated by the optimal design of leniency policy. In particular, this framework allows us to analyze the optimal design of individual and corporate leniency programs which contributes further to fight collusion.

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

Monday, February 11, 2008

Buyer and Seller Power in Grocery Retailing: Evidence from Italy

Posted by D. Daniel Sokol

On one of my favorite topics of supermarkets, a new paper by Monica Giulietti of Aston University Business School examines Buyer and Seller Power in Grocery Retailing: Evidence from Italy.

ABSTRACT: This work investigates the effect of upstream and downstream market concentration on retailers' price-cost margins using bimonthly data over the period 1989-1992 disaggregated by retailer type and product. In addition to horizontal concentration, differentiation, and cost factors, the analysis includes buyer power amongst the determinants of retailers' profitability, as a result of vertical bargaining. Using a fixed effects model in first differences we find evidence of bargaining activity between large chains and food manufacturers.

Our analysis of price competition at the retail level also reveals some interdependence in the pricing decisions of the largest retail organisations and price leadership by large independent shops.

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

Role of Economics in Antitrust

Posted by D. Daniel Sokol

The Sedona Conference will host a tele-seminar on the Role of Economics in Antitrust on February 13, 2008 from 03:00pm - 04:30pm EST.  Topics to be covered include:

  • Applying Fed. R. Evid. 702 to expert economic testimony in antitrust cases
  • Economic evidence in summary judgment
  • Discovery of draft export reports
  • Economics and proof of concerted action
  • Economics and proof of harm to competition
  • Economics and market definition

Panelists:

David A. Balto
David A. Balto, Esq., Washington, DC

Professor William Comanor
Comanor & Smiley, Los Angeles, CA 

Daniel R. Shulman
Gray Plant Mooty, Minneapolis, MN

Gregory J. Werden
U.S. Dept. of Justice, Washington, D.C.

Kenneth J. Withers
The Sedona Conference, Phoenix, AZ

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

Sunday, February 10, 2008

Australian Consumer and Competition Commission Has Issued its Draft Merger Guidelines 2008 for Public Comment

Posted by D. Daniel Sokol

Details are here.  One important item that the press release mentions is the following,"The Draft Merger Guidelines 2008 do not represent a new approach by the ACCC. The competition test is the same and analysis of the market and merger factors remains a vital element in merger assessment. Rather, they are a better reflection, and more cogent articulation, of the ACCC's current practice in relation to merger analysis."

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