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 23, 2008

Weyerhaeuser, Predatory Bidding, and Error Costs

Posted by D. Daniel Sokol

Hylton Keith Hylton of Boston University Law School suggests that Brooke Group remains the gold standard for predatory bidding in his latest article Weyerhaeuser, Predatory Bidding, and Error Costs.

ABSTRACT: In Weyerhaeuser v. Ross-Simmons the Supreme Court held that the predatory pricing standard adopted in Brooke Group also applies to predatory bidding claims, because the two types of predation are "analytically similar". I argue that predatory bidding is likely to be more harmful to consumer welfare than is predatory pricing. Successful input market predation may lead to a "dual market power" outcome in which the firm has market power in both the input and the output market. In spite of the analytical distinction, consideration of error costs leads me to conclude that Brooke Group remains the best standard to apply to predatory bidding claims.

February 23, 2008 | Permalink | Comments (0) | TrackBack (0)

Friday, February 22, 2008

Transparency of Regulation and Cross-Border Bank Mergers

Posted by D. Daniel Sokol

MkoI love papers on competition in the banking and financial sector. One that caught my eye is Transparency of Regulation and Cross-Border Bank Mergers by Matthias Köhler of the Center for European Economic Research that suggested that merger control is a barrier to much needed cross border consolidation.

ABSTRACT: Although there is anecdotal evidence that merger control may constitute a barrier to the integration of European retail banking markets, systematic empirical evidence is missing until now. This paper aims to fill this gap. Based on a unique dataset on the transparency on merger control in the EU banking sector, we estimate the probability that a bank is taken over as a function of its characteristics, country characteristics and the transparency of merger control in the banking sector. The results indicate that a bank is systematically more likely to be taken over by foreign credit institutions if the regulatory process is transparent. Particularly large banks are less likely to be taken over by foreign credit institutions if merger control lacks transparency. This is in line with the hypothesis that governments may block cross-border bank merger because they want the largest institution in the country to be domestically owned. Domestic mergers are not affected. This suggests that merger control may therefore constitute an important barrier to cross-border consolidation and that further integration of EU banking markets requires a higher degree of transparency of the regulatory process.

February 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Competition Law and Public Policy: Reconsidering an Uneasy Relationship: The Example of Art. 81

Posted by D. Daniel Sokol

Schweitzer Heike Schweitzer of the European University Institute - Department of Law reexamines Article 81 in her paper Competition Law and Public Policy: Reconsidering an Uneasy Relationship: The Example of Art. 81.

ABSTRACT: The EU is currently re-conceptualizing the goals of competition law and their place within the EC Treaty. Whereas the Draft Reform Treaty is emphasizing the weight of public policy goals vis-à-vis the goal of undistorted competition, the EU Commission has made an effort to remove non-competition goals from competition policy in the course of the "decentralization" of EU competition law enforcement and to refocus competition law on the efficiency criterion, namely the consumer welfare goal. This contribution shall discuss the regulation of the interface between competition policy and public policy goals in the interpretation and application of Art. 81 EC under the old and the new enforcement regime. Doctrinally, the debate is led on two levels: With regard to the interpretation of Art. 81(1) the question is raised whether conflicting policy goals can delimit its scope. Art. 81(3) with its broad and general terms, potentially provides an opening of EU competition law for the consideration of noncompetition related policy goals on the level of exemptions. The interpretation of Art. 81(3) EC has gained new relevance since it has been declared directly applicable by Art. 1 of Regulation 1/2003. Whereas, under the former regime, the Commission could regulate the competition-public policy interface case-by-case based on its monopoly for granting exemptions, the direct applicability of Art. 81(3), i.e. its enforcement by national competition authorities and courts, calls for more conceptual guidance. The difficulties to provide such guidance throw some light on the conceptual uncertainties associated with the recent reform of EU competition policy.

February 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Wither American Assistance to Competition Agencies: An FTC-DOJ Workshop

Posted by D. Daniel Sokol

Ken Davidson of the American Antitrust Institute has posted his thoughts on the DOJ/FTC technical assistance workshop in which I participated in two weeks ago.  His piece is titled Wither American Assistance to Competition Agencies: An FTC-DOJ Workshop.

ABSTRACT: This Commentary presents the author’s perspectives on a Workshop sponsored on February 6, 2008 by the US Federal Trade Commission and the Antitrust Division of the US Department of Justice entitled, “Charting the Future Course of International Technical Assistance at the Federal Trade Commission and Department of Justice. The Workshop had 33 participants who represented the two authorities, the European Union, the World Bank and other international agencies, recipients of technical assistance, academics and other staff of nonprofit and governmental institutions, and representatives of private business. This was the first such conference since the American technical assistance program was launched in the early 1990s.

February 22, 2008 | Permalink | Comments (0) | TrackBack (0)

Thursday, February 21, 2008

Duke Hot Topics in Intellectual Property Law Symposium (with an Antitrust Panel)

Posted by D. Daniel Sokol

The Duke Intellectual Property and Cyberlaw Society and the Duke Law and Technology Review are holding their annual Hot Topics in Intellectual Property Law Symposium on February 29.  This year the topics are patent reform and the intersection between antitrust law and intellectual property. 

February 21, 2008 | Permalink | Comments (0) | TrackBack (0)

OECD Seventh Global Forum on Competition

Posted by D. Daniel Sokol

Today the OECD kicks off its Seventh Global Forum on Competition.  Topics for discussion are as follows:

Opening Session - Opening Remarks by Angel GURRIA, OECD Secretary-General

Session I  - Peer Review of Ukraine 
                    [Open only to country representatives and intergovernmental
                     organisations]

                    Note by the Secretariat

Session II - The Challenges of Transition for Competition Law and Policy in
                    China
   
                    [Open only to country representatives and intergovernmental
                     organisations]

                    Note by the Secretariat

                    Presentation by SAIC / MOFCOM, China

Session III - The Role of Consumers in Promoting Pro-Competitive Reforms

                      Note by the Secretariat

                      Note / Presentation by Mr. Samuel Ochieng, Consumers International

                      Mr. Amr Fahim, Consumer Protection Agency, Egypt

                      Note / Presentation by Mr. Pradeep S. Mehta, CUTS International

Opening remarks by Meglena Kuneva, EU Commissioner for Consumer Protection

Session IV - The Interface Between Competition and Consumer Policies

                     Call for Country Contributions

                     Background Note / Note du Secrétariat

Argentina

Australia

Canada

Chile

Chinese Taipei

Costa Rica

EC

El Salvador / Salvador

France / France

Hungary

India

Japan

Jordan

Korea

Malta

Papua New Guinea

Poland

Portugal

Russia

Singapore

Slovak Republic

Switzerland / Suisse

Tunisie

United Kingdom

United States

BIAC

Session V - The Economics of Competition and Consumer Policies

                   Mr. Colin F. Camerer, California Institute of Technology

                    Note / Presentation by Ms. Louise Sylvan, Australian Competition and
                    Consumer Commission

                    Note / Presentation by Ms. Deunden Nikomborirak, Thailand
                    Development Research Institute

                    Introductory Note

                    For Information: Mr. Ian McAuley (Note for the Committee on Consumer
                    Policy)

Session VI - High Switching Costs: A Barrier To Competition and a Detriment to
                     Consumers

                     Note / Presentation by Ms. Jill Johnstone, UK National Consumer Council

                     Mr. Mark Williams, NERA Economic Consulting

Session VII - Breakout Sessions: Sectoral Case Studies

                       Hypothetical Cases             

Final Session

February 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Kroes Speaks Out on the Importance of Competition

Posted by D. Daniel Sokol

Today's Financial Times has a story with a great quote from Neelie Kroes, "We cannot go back to the old inefficient ways just because it suits a narrow political interest from time to time" in response to concerns that EC competition law does not protect European companies.  The purpose of competition law is to protect consumers, not competitors and yet every once in a while there is an enforcement action in the EU that strikes me as overly dogmatic in approach that in fact does not promote greater efficiency.

February 21, 2008 | Permalink | Comments (1) | TrackBack (0)

Competition Law Policy in the Banking Sector

Posted by D. Daniel Sokol

Hemant Batra, of Käden Boriss Consulting Pvt. Ltd addresses Competition Law Policy in the Banking Sector in India.

ABSTRACT: Competition laws are generally designed to combat anti-competitive behavior and unfair business practices. In this paper, the author advocates for a competition policy for banking sector in India. It is argued that in a totally deregulated and globalized banking scenario, there is an imperative need for a regulatory framework to ensure corporate governance and adoption of fair practices.

February 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 20, 2008

Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia

Posted by D. Daniel Sokol

Robert Breunig (Australian National University College of Business and Economics) and Flavio Menezes (University of Quuensland School of Economics) write about Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia in the forthcoming issue of the Journal of Competition law and Economics.

ABSTRACT: This paper develops an empirical strategy to identify maverick-like behavior. This strategy includes measuring two behavioral dimensions: (i) the extent to which particular suppliers underprice rivals; and (ii) the timing of the suppliers' responses to systemic cost changes. This strategy is applied to a dataset that contains interest rates charged by mortgage providers in Australia from January 2003 to October 2006. We then evaluate suppliers' behavior both in terms of the rates that they charge and the time it takes them to change their rates as a response to a systemic increase in costs that follows a change of the cash rate by the Reserve Bank of Australia (RBA). We find that systematic price discounts and the frequency and timing of price increases and decreases are both important, but distinct, components of maverick-like behavior. These empirical observations suggest that the development of a theory for maverick behavior be focused on dynamic, asymmetric models and informed by institutions and market dynamics that are relevant to the case at hand. 

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

The Proper Role of Courts: Why the Supreme Court Got it Wrong in Leegin

Posted by D. Daniel Sokol

Lance McMillian of John Marshall Law School discusses The Proper Role of Courts: Why the Supreme Court Got it Wrong in Leegin in an upcoming issue of the Wisconsin Law Review.

ABSTRACT: Separation of powers matters. Accordingly, each branch of the federal government should remain faithful to its institutional role. However, in the 2007 case of Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court betrayed this founding principle. In Leegin, the Court disturbed nearly 100 years of antitrust jurisprudence by overruling Dr. Miles Medical Co. v. John D. Park & Sons Co. The issue before the Court centered on this question: should minimum resale pricing agreements between manufacturer and distributor be considered per se illegal? Dr. Miles said yes; in Leegin, the Court said no. This disagreement is hardly remarkable. The Court frequently reverses its prior precedent.

The twist in Leegin, though, is that Congress expressly endorsed the Dr. Miles rule. In passing the Consumer Goods Pricing Act of 1975, Congress clearly indicated its policy preference that the practice of vertical price-fixing should remain unlawful. It is axiomatic that responsibility for framing economic policy for the nation rests with Congress and the President, not the Supreme Court. Nevertheless, in the field of antitrust, because of the Sherman Act's broad generalities, the Court has always had more leeway to fill in the blanks left open by Congress. But this freedom to fill the void when faced with legislative silence does not give legitimacy to the Court taking the next step, namely substituting its own judgment over a contrary judgment of Congress. And this next step is exactly the path the Court traveled down in Leegin. The Article explains the mistakes made by the Court in embarking on this journey. Moreover, the Article discusses the perils that follow when the Court decides it is accountable to no other branch but itself.
 

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

Tuesday, February 19, 2008

Thomson's/Reuters Gets Antitrust Approval

Posted by D. Daniel Sokol

The Thomson's/Reuters  proposed merger has received antitrust approval (conditioned on some divestitures).  Thompson's is the parent company of our exclusive advertiser so please make sure to click through on their ads located to the right of our blog posts.

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

Non-contractual Liability of the European Community in Competition Matters: The Aftermath of the CFI Judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission

Posted by D. Daniel Sokol

Aitor Montesa Lloreda of the European Court of First Instance writes about Non-contractual Liability of the European Community in Competition Matters: The Aftermath of the CFI Judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission in his latest paper.

ABSTRACT: The recent European Court of First Instance (CFI) judgment of July 11, 2007 in Case T-351/03, Schneider v. Commission, is the first EC judgment to grant a company damages for the losses it had suffered as a result of an illegal Commission decision prohibiting a merger.

The judgment has been drafted as if it were just applying previous jurisprudence in liability matters. However, it is anything but conservative. It indeed represents a major step in European case law. Schneider III has made real a possibility which was only theoretical before: that the Commission can be held responsible for damages caused by its wrongful decisions in competition.

Schneider III will most probably boost many further claims from companies affected by illegal Commission decisions in the antitrust and merger control fields. Schneider III may therefore be perceived by the Commission—wrongly or not—as a heavy burden, particularly in the framework of its merger control activity.

This paper intends to review the conditions that must be met for a Commission decision to engage the Community liability in competition matters. These conditions have been analyzed especially in the two Holcim judgments and, then, in Schneider III.

The paper focuses on the somehow difficult relation among these three cases. The paper will try to examine systematically their commonalities and, as necessary, their contradictions.

Last, the paper will conclude that EC liability can be only engaged in pathological cases. This conclusion should represent an additional incentive for the Commission to embrace self-discipline and high professional and legal standards. However, it does not entail a serious risk to the Commission’s functionality in competition matters, which are indeed some of the Commission’s most fundamental and complex activities.

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

Competition and Regulatory Regimes in Small & Developing Countries

Posted by D. Daniel Sokol

CUTS' CDRF Porject has come out with a policy brief about Competition and Regulatory Regimes in Small & Developing Countries.

ABSTRACT: In small and developing economies, the formulation and implementation of competition policies should take into account the special characteristics associated with small domestic markets. The thrust of this policy brief is that while the main principles of competition law and regulation that have evolved in large economies are also relevant to small economies, the mode and application may have to be different in order to take into account the particular characteristics of small insular markets.

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

Monday, February 18, 2008

Trouble Ahead at the IP/Competition Intersection?

Posted by D. Daniel Sokol

David Hull of Covington asks about Trouble Ahead at the IP/Competition Intersection?  based on the EU investigation of the pharmaceutical sector.

ABSTRACT: Efforts by innovative pharmaceutical companies to protect their markets against generic drugs have generated a wide-ranging debate over how to achieve the proper balance between these companies’ legitimate interests in reaping the full rewards of their research and development efforts and the public’s interest in having access to cheaper drugs. In Europe, this debate has largely centered on issues relating to healthcare policy, national pricing, and reimbursement policies, and the overall pharmaceutical regulatory regime.

To date, competition law has not played a prominent role in this debate. With the notable exception of its decision in AstraZeneca—in which the European Commission found that AstraZeneca had abused its dominant position by pursuing certain strategies aimed at keeping generics off the market—the Commission has not published any decisions dealing with the competition law implications of efforts by pharmaceutical companies to delay the entry of generics. The AstraZeneca decision signaled that such efforts could give rise to competition concerns, but it provides limited guidance because the practices at issue were very specific to the facts of the case.

This situation changed overnight with the Commission’s announcement on January 16, 2008 of a competition investigation into the pharmaceutical sector “relating to the introduction of innovative and generic medicines for human consumption on the market.”

This sector-wide investigation moves competition law to the center of the generics debate. As discussed in this comment, it also raises thorny issues on the relationship between the competition rules and the intellectual property rules.

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

TOP 10 Most Downloaded SSRN New Papers on Antitrust Law & Policy December 19, 2007 to February 17, 2008

Posted by D. Daniel Sokol

1. The Elusive Antitrust Standard on Bundling in Europe and in the United States at the Aftermath of the Microsoft Cases
Nicholas Economides, Ioannis Lianos,
New York University - Stern School of Business, University College London - Faculty of Laws,

2. Evaluating Market Power with Two-Sided Demand and Preemptive Offers to Dissipate Monopoly Rent: Lessons for High-Technology Industries from the Proposed Merger of XM and Sirius Satellite Radio
J. Gregory Sidak, Hal J. Singer,
Criterion Economics, LLC, Criterion Economics, LLC,

3. The Next Frontier for Network Neutrality
Phil Weiser,
University of Colorado Law School,

4. Antitrust (Over-?) Confidence
Thomas A. Lambert, Joshua D. Wright,
University of Missouri School of Law , George Mason University - School of Law,

5. Should Competition Law Promote Efficiency? Some Reflections of an Economist on the Normative Foundations of Competition Law
Wolfgang Kerber,
Philipps University Marburg - Department of Business Administration and Economics,

6. Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance
Marina Lao,
Seton Hall School of Law,

7. Bundles of Joy: The Ubiquity and Efficiency of Bundles in New Technology Markets
Stan J. Liebowitz, Stephen E. Margolis,
University of Texas at Dallas - Department of Finance & Managerial Economics, North Carolina State

8. The Antitrust Assessment of Loyalty Discounts and Rebates
Gianluca Faella,
Cleary Gottlieb Steen & Hamilton,

9. 74 Areeda, Epithets, and Essential Facilities
Spencer Weber Waller,
Loyola University of Chicago - School of Law, and

10. The 'Cut and Paste' of Article 82 of the EC Treaty in Israel: Conditions for a Successful Transplant
Michal S. Gal,
University of Haifa - Faculty of Law

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

Sunday, February 17, 2008

Frictions and Sticking Points: Applying the Textbook Model to the Analysis of Cost Pass-Through in Indirect Purchaser Class Actions

Posted by D. Daniel Sokol

John Johnson and Greg Leonard, Vice Presidents in NERA’s Washington, DC and San Francisco offices, respectively, take a close look at how firms set their prices and find that in the real world, changes in cost do not always lead to changes in price in their article Frictions and Sticking Points: Applying the Textbook Model to the Analysis of Cost Pass-Through in Indirect Purchaser Class Actions. They also explain why the firm and market factors that determine the amount of the cost pass-through, if there is one, is likely to depend on the nature of the product, the variety of end uses of the product, and the distribution channels that make up the supply chain. These observations are worth noting because they have important implications for the analysis that must be conducted in the class certification phase of an indirect purchaser class action. As Johnson and Leonard point out, whether common evidence can be used to demonstrate impact and to calculate damages for a proposed class is ultimately an empirical question, and not one that can be answered by a simple appeal to economic theory.

ABSTRACT: Indirect purchaser class actions are a prevalent avenue for the civil recovery of damages resulting from antitrust violations such as price fixing and monopolization. Although both direct purchaser and indirect purchaser actions are commonplace in antitrust, there are key differences between these types of cases, particularly with respect to the issue of pass-through, which is relevant when determining the appropriateness of class certification in indirect purchaser actions. In this paper, we explain how the generic textbook models that are often used and cited in indirect purchaser class actions to support the claim of pass-through to all or substantially all class members are based on highly restrictive assumptions. We also provide several examples that describe why the simple application of these restrictive models to real world situations can lead to mistaken inferences and conclusions.

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