Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, April 11, 2009

From Formalism to Effects? – The Commission’s Guidance on Article 82 EC

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege Law (and Howrey) discusses From Formalism to Effects? – The Commission’s Guidance on Article 82 EC in his latest working paper.

ABSTRACT: Recently, the Commission has sought to stray away from the forms-based approach (or per se approach), and endorse the “effects-based approach”, which requires a real “verification of competitive harm”. This paradigmatic shift, which was initiated in three abuse of dominance cases (i.e. the Wanadoo, Microsoft I and Télefonica cases), culminated with the adoption on 3 December 2008 of the Guidance Communication on the Commission’s enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings (the “Commission Guidance” or the “Guidance”). Whilst most observers have welcomed the Commission’s endorsement of the effects-based approach, there has so far been limited, if no, attempts to review the content of the Guidance’s effects-based approach. In turn, no commentators have yet sought to assess whether the Guidance’s effects-based approach effectively enshrined a sound analytical framework for the review of anticompetitive effects, devoid of the forms based approach’s flaws. The primary purpose of the present article is thus to offer preliminary thoughts on this issue, by clarifying the standard of proof which the Commission must discharge under Article 82 EC when it purports to apply the effects-based approach pursuant to the Guidance.8 To this end, the present article is divided into three sections. Section I explains that any finding of unlawful exclusionary abuse under the effects-based approach is contingent upon proof that the dominant firm’s conduct leads to actual or potential “anticompetitive foreclosure”. Section II describes the evidentiary method which the Commission must follow to reach a finding of actual or potential “anticompetitive foreclosure” under the effects-based approach.  Finally, Section III seeks to determine whether the Guidance is likely to modify the future enforcement practice of the Commission or, whether, on the contrary, the Commission will continue to rely on the dissonant, laxer, case-law of the Court of First Instance (the “CFI”) to by-pass a burdensome effects-based analysis.

Download From Formalism to Effects - The Commission's Guidance on Article 82 EC - FINAL-2

April 11, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, April 10, 2009

Competition Authorities' Roundtable: The Reform of Competition Authorities and the 'Modernization' of Antitrust

Posted by D. Daniel Sokol

University College London's (UCL) Centre for Law and Governance in Europe and Centre for Law and Economics (Regulation and Public Policy Section) are pleased to invite you to a

COMPETITION AUTHORITIES’ ROUNDTABLE: THE REFORM OF COMPETITION AUTHORITIES
AND THE “MODERNIZATION” OF ANTITRUST


This roundtable is organized in collaboration with IMEDIPA, Institute for Studies in Competition Law & Policy, Athens (http://www.imedipa.com/ )

Friday, May 29, 2009
16:45 - 19:00 (registration at 16:30)
in Athens, Greece

The roundtable will examine the following topics:

  • Competition authorities with dual roles (competition authority and consumer protection authority): advantages and disadvantages
  • The unification of public competition law enforcement: is one better than two? (the reform of the French competition law system)
  • Integrating economics and economists in competition authorities: the recent reform of the DG Comp with the position of the chief economist, the redesign of the units….
  • Issues of independence, transparency, competition advocacy
  • Relations with sector-specific regulators
  • Political influence: Competition authorities in times of economic crisis


Chair: Frederic Jenny (Judge, Cour de Cassation, France; member of the Board, Office of Fair Trading; President, Competition Committee, OECD; Visiting professor, UCL)

Speaker include:

  • Philip Collins (Chairman, Office of Fair Trading, UK),
  • William Kovacic (Commissioner, Federal Trade Commission, US),
  • Bruno Lasserre (Chairman, Autorité de la concurrence, France),
  • Abel Mateus (Professor, University of Lisbon, former president of the Portuguese competition authority)
  • Carles Esteva Mosso (Director of Policy and Strategy, DG Competition, European Commission)


The roundtable is a separate event taking place in the context of the IMEDIPA annual conference in Athens. For more information on the IMEDIPA's annual conference, see http://www.imedipa.com and/or contact info@imedipa.com

April 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunny Samaritans and Egomaniacs: Price-Fixing in the Gamete Market

Posted by D. Daniel Sokol

Kim Kraweic, UNC - Law discusses Sunny Samaritans and Egomaniacs: Price-Fixing in the Gamete Market in her latest article.

ABSTRACT: This Article considers the market structure of the human egg (or "oocyte") donation business, particularly the presence of anti-competitive behavior by the fertility industry, including horizontal price-fixing of the type long considered per se illegal in other industries. The Article explores why this attempted collusion has failed to generate the same public and regulatory concern prompted by similar behavior in other industries, arguing that the persistent dialogue of gift-giving and altruistic donation obscures both the highly commercial nature of egg "donation" and the benefits to the fertility industry of controlling egg prices - a necessary input into many fertility services. A comparison to the egg market's closest cousin - the sperm market - does not reveal similar collusive attempts to depress the price of sperm. A further analysis of the industry explores potential reasons for this difference.

April 10, 2009 | Permalink | Comments (0) | TrackBack (0)

The Economic Benefits of Credit Card Merchant Restraints: A Response to Adam Levitin

Posted by D. Daniel Sokol

Steven Semeraro, Thomas Jefferson School of Law, offers The Economic Benefits of Credit Card Merchant Restraints: A Response to Adam Levitin.

ABSTRACT: Adam Levitin's article, "Priceless?: The Economic Costs of Credit Card Merchant Restraints," 55 UCLA L. Rev. 1321 (2008), argues that credit card systems violate the U.S. antitrust laws by prohibiting merchants from surcharging credit card transactions and refusing to accept high-priced reward cards. If merchants could engage in these practices, Levitin contends, they would effectively combat credit card system market power and drive down acceptance fees.

In this Essay, Steven Semeraro criticizes Levitin's proposal, arguing that surcharging and selective refusal would be ineffective tools in the fight against anticompetitive credit card acceptance fees, because merchants are unlikely to increase their prices by the amount necessary to counteract anticompetitive overcharges without also stifling efficient card use.

April 10, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 9, 2009

A Survey on the Economics of Behaviour-Based Price Discrimination

Posted by D. Daniel Sokol

Rosa Branca Esteves (University of Minho, Portugal - Economics) provides A Survey on the Economics of Behaviour-Based Price Discrimination.

ABSTRACT: Economists have long been interested in understanding the profit, consumer surplus and welfare effects of an ancient marketing strategy: Price Discrimination. While it is not new that firms try frequently to segment customers in order to price discriminate, what has dramatically changed, with recent advances in information technologies, is the quality of consumer-specific data now available in many markets and how this information has been used by firms for price discrimination purposes. Specifically, thanks to information technology it is nowadays increasingly feasible for sellers to segment customers on the basis of their purchasing histories and to price discriminate accordingly. This form of price discrimination has been named in the literature as Behaviour-Based Price Discrimination (BBPD). For a long time economists have been concerned in understanding the economic effects of price discrimination in monopolistic markets. However, because imperfect competition is undoubtedly the most common economic setting, recent research on the field has been concerned with the following issues. Firstly, how are profit, consumer surplus and welfare affected when firms practice some form of price discrimination in imperfectly competitive markets? Secondly, in which circumstances may competitive firms have an incentive to price discriminate or rather to avoid it? As we will see, conclusions regarding the profit and welfare effects of price discrimination are strongly dependent upon the form of price discrimination, which in turn depends upon the form of consumer heterogeneity and the different instruments available for price discrimination. Basically, the aim of this survey is to clarify the two aforementioned issues in imperfectly competitive markets.

April 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Free the Market

Posted by D. Daniel Sokol

Lawyer Gary Reback has a new book out titled Free the Market.

BOOK ABSTRACT: Antitrust rules affect just about every aspect of modern life, from the price of clothing to the availability of life-saving pharmaceuticals, from the selection of new computer products to the variety of music on the radio. Yet in recent decades, the development of sound antitrust policy has too often been ignored.

Drawing on the most fascinating legal battles of his career – involving top companies like Apple, Microsoft, IBM, Oracle, and AT&T – Reback offers a roadmap for the next decade of antitrust law and calls for a new era of stronger government intervention to foster competition and innovation. Among the questions Reback raises:
• Should the government do more to stop controversial mergers?
• Can a company ever compete too hard for the public good?
• Does it help consumers when a manufacturer sets the prices its retailers charge?
• At what point does intellectual property protection hurt innovation?

April 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Shelanski From Berkeley to Georgetown

Posted by D. Daniel Sokol

Howard Shelanski of Berkeley (Law), who heads the Berkeley Center for Law & Technology, has accepted a lateral offer at Georgetown University.  He joins Bob Pitosfsky and Steve Salop.  This is an important hire for Georgetown as Pitofsky received his BA in 1954 and Salop his BA in 1968.


April 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Sentencing Individuals In Antitrust Cases: The Proper Balance

Posted by D. Daniel Sokol

K450756252 Don Klawiter (Mayer Brown) and Jennifer Driscoll (Mayer Brown) engage in figuring out Sentencing Individuals In Antitrust Cases: The Proper Balance.

ABSTRACT: Enforcement against cartels has been been the great success story of recent antitrust history, both in the United States and around the world. Since the advent of international cartel enforcement in 1995, penalties for such misconduct have increased dramatically and individual accountability has become the centerpiece of U.S. cartel enforcement. Five years ago, the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA) increased the maximum penalty for corporations ten-fold ($10 million to $100 million fines) and penalties for individuals more than threefold (from 3 years to 10 years imprisonment, and from $350,000 to $ 1 million in fines). However, because deterrence is a function of effective detection and prosecution, the harsh penalties represent a hollow threat unless there is also vigorous, timely, and successful enforcement.

In considering the future of antitrust sentencing of individuals under the higher penalties of ACPERA, it is essential to properly balance the impact of higher penalties against the importance of successful prosecution, which is primarily based on timely cooperation from the defendants themselves. These are the two elements of optimal deterrence.The proper balance lies not in the “lock them up and throw away the key” rhetoric of a few in Congress but in pragmatic negotiation by the parties, guided by the statutory mandate of 18 U.S.C. 3553(a), which provides for sentencing that is “sufficient but not greater than necessary,” given, inter alia, the nature and circumstances of the offense and the history and characteristics of the defendant. That pragmatism is responsible for the great success of U.S. cartel enforcement and should continue to guide the enforcers and the courts under ACPERA.

Download Spring09-KlawiterC-1

April 9, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 8, 2009

Happy Passover

Posted by D. Daniel Sokol

Tonight Jews around the world begin the observance of the holiday of Passover, the holiday that celebrates the Exodus from Egypt and the liberation of the Jewish people from slavery. 

Although Adam Sandler has not created a Passover song to match his famous Chanuka song, I did find this great song on Youtube about twenty things to do with leftover Matzah.

There are many great stories about who ends up at your seder.  Among my favorites is one that appeared in today's paper about someone who sat between Bob Dylan and Marlon Brando at a seder twenty years ago.  Wow.

Our Passover seder will be abridged tonight because of the large number of small children at the seder.  The only competition related issue at the seder is what child will find the afikoman.

April 8, 2009 | Permalink | Comments (0) | TrackBack (0)

The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry

Posted by D. Daniel Sokol

Pascal Courty (Economics, European University Institute) and Mario Pagliero (Economics and Finance, University of Turin, and Collegio Carlo Alberto) provide evidence of The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry.

ABSTRACT: Concert tickets can either be sold at a single price or at multiple prices corresponding to different seating categories. We study the relationship between price discrimination and revenue by examining variations in the number of seating categories across concert, tour, artist, location, and time. Offering multiple seating categories leads to revenues that are approximately 5 percent higher than with single price ticketing. The return to price discrimination is higher in markets with more heterogeneous demand, in smaller venues and in more competitive markets. The return of increasing from three to four categories of seating is about half that of increasing from one to two.

April 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Antitrust in the Not‐for‐Profit Sector

Posted by D. Daniel Sokol

Tomas J. Philipson (University of Chicago - Harris School of Public Policy) and Richard A. Posner (University of Chicago - Law) analyze Antitrust in the Not‐for‐Profit Sector.

ABSTRACT: Although the not‐for‐profit sector contributes greatly to aggregate output in many industries, there has been little explicit analysis of the economic consequences of applying antitrust policy in this sector. Despite the differences between for‐profit and nonprofit firms stressed in conventional economic analyses, U.S. antitrust law generally does not distinguish between these two organizational forms. This paper argues that, under plausible assumptions and with possible exceptions, the same incentives to restrain trade exist in the nonprofit sector as in the for‐profit sector. Altruistic firms benefit from exploiting market power, even when they would price below cost in the absence of competition. In fact, the efficiency gains from antitrust policy may often be larger for nonprofit firms. Therefore, a policy of promoting competition has social value even when producers’ motivations are altruistic. The argument for uniform antitrust treatment of the two sectors extends to exemptions from antitrust law as well.

April 8, 2009 | Permalink | Comments (1) | TrackBack (0)

Spatial Asymmetric Duopoly with an Application to Brussels' Airports

Posted by D. Daniel Sokol

Fay Dunkerley (CES – KU Leuven), Andre de Palma (Ecole Normale supérieure de Cachan and Ecole Polytechnique) and Stef Proost (CES – KU Leuven) assess Spatial Asymmetric Duopoly with an Application to Brussels' Airports.

ABSTRACT: In this paper the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylised policies are implemented to address the congestion problem: expansion of transport capacity; congestion pricing; and a direct subsidy to the uncongested facility.

Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.

April 8, 2009 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 7, 2009

Carte Blanche, Quanta, & Competition

Posted by D. Daniel Sokol

Ghosh_-_shubhas_choice_2008 My co-blogger Shubha Ghosh (University of Wisconsin - Law) has just posted Carte Blanche, Quanta, & Competition.

ABSTRACT: This paper, prepared for a symposium by the Journal of Corporation Law at The University of Iowa College of Law, analyzes the Supreme Court's 2008 decision in Quanta v. LG Electronics, which deals with the first sale doctrine and patent exhaustion. The author shows that the Quanta decision follows a line of cases in which the Supreme Court was recognizing norms of competition in interpreting and applying intellectual property doctrine. The paper makes the case for recognizing intellectual property law as a type of competition policy, complementing antitrust law.

April 7, 2009 | Permalink | Comments (0) | TrackBack (0)

Competition Policy, Bailouts and the Economic Crisis

Posted by D. Daniel Sokol

LyonsIn an interesting new paper, Bruce Lyons (School of Economics and the ESRC Centre for Competition Policy, University of East Anglia) discusses Competition Policy, Bailouts and the Economic Crisis.

ABSTRACT: The aims of this paper are twofold. First, I explain the economics of bank bailouts as distinct from bailouts for other sectors of the economy. Why do all the rules of good competition policy appear to fly out of the window when the banks get into trouble? Does this mean that we should abandon the rules equally for car manufacturers and other industries in trouble? I argue that a unique combination of two characteristics make it essential to bailout or nationalise the banks in the current crisis. No other sector of the economy can claim the same justification. Second, I review the threat of a retreat to politically-determined industrial policy and the need for vigilant implementation of economic effects-based competition policy.

April 7, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, April 6, 2009

Can the Commission use Article 82EC to Combat Tacit Collusion?

Posted by D. Daniel Sokol

Felix E. Mezzanotte (University of East Anglia - Centre for Competition Policy) asks Can the Commission use Article 82EC to Combat Tacit Collusion?

ABSTRACT: Recent events suggest that Article 82 may prohibit abusive and tacitly collusive conduct. Yet can the Commission enforce this law? In this article I argue it cannot. I tackle this question of enforcement from the perspective of proof and examine to what extent the Commission can establish the conduct of tacit collusion. I show that proof of tacit collusion requires the Commission to overcome a difficult problem of identification, notably how to distinguish tacit collusion from other very subtle conducts like unconscious parallelism and undetected overt collusion. I argue that the Commission cannot resolve this problem by establishing the typical conditions drawn from case law, such as the lack of effective competition, the Airtours criterion and a focal point, as this proof cannot mitigate error sufficiently. This seeks the Commission to produce greater cogency of evidence, yet only at the expense of rendering enforcement prohibitively onerous. I conclude that owing to a problem of proof (detection) Article 82 is unenforceable and can neither punish nor deter tacit collusion. This makes a policy of using Article 82 to combat tacit collusion ex post misconceived and suggests that tacit collusion admits only an ex ante legal treatment.

April 6, 2009 | Permalink | Comments (0) | TrackBack (0)

Fulbright to Teach Competition Law and Economics

Posted by D. Daniel Sokol

The Fulbright list of countries seeking visiting US academics and practitioners has been posted for the August 2009 deadline.  Though it is possible to undertake antitrust law research or teaching in a number of different countries, Portugal is specifically requesting a specialist to teach antitrust law and economics.

April 6, 2009 | Permalink | Comments (0) | TrackBack (0)

Private Labels, Brands and Competition Policy: The Changing Landscape of Retail Competition

Posted by D. Daniel Sokol

Ariel Ezrachi
of University of Oxford's Faculty of Law is the editor of the Private Labels, Brands and Competition Policy: The Changing Landscape of Retail Competition.

BOOK ABSTRACT: The growing use of private labels in recent years has affected significantly the landscape of retail competition, with major retailers no longer being confined to their traditional role as purchasers and distributors of branded goods. This book provides an in-depth review of the range of competitive and intellectual property issues raised in connection with private brands in Europe and the US. It examines the development of private labels and their impact on retail competition, then moves on to focus on policy and question the adequacy of current economic and legal analysis in light of the characteristics of own-label competition. It contains a collection of essays developed through a series of seminars held in the Oxford Centre for Competition Law and Policy over the last three years. Participants in these seminars have included competition officials, law academics, practitioners and representatives from industry.

PART I: THE NATURE OF RETAIL COMPETITION 1. Private labels - what drives them forward, Richard Herbert 2. The business model for manufacturers' brands, Dick Bell 3. Bargaining between retailers and their suppliers, John Thanassoulis & Howard Smith PART II: MARKET POWER AND THE ABUSE OF DOMINANCE 4. Market power in consumer goods industries, Robert L Steiner 5. Private labels and branded goods: Consumers' "horrors" and "heroes", Paul W Dobson & Ratula Chakraborty 6. Private Labels and Article 82 EC, Andres Font Galarza PART III: VERTICAL RESTRAINTS 7. Private labels, dual distribution and vertical restraints: An analysis of the competitive effects, David Gilo 8. The vertical/horizontal dichotomy in competition law: some reflections with regard to dual distribution and private labels, Ioannis Lianos PART IV: IN-STORE COMPETITION, PRICING, MARKETING AND ADVERTISING 9. Retailer and private labels: asymmetry of information, in-store competition and the control of shelf space, Pieter Kuipers 10. Misleading packaging, copycats and look-alikes: an unfair commercial practice?, Ulf Bernitz 11. Private labels, product variety, and price competition - lessons from the German grocery sector, Rainer Olbrich, Gundula Grewe & Ruth Orenstrat 12. Advertising, promotional campaigns and private labels, Ariel Ezrachi & Jonathan Reynolds PART V: RETAIL CONSOLIDATION AND THE USE OF REMEDIES 13. Retail consolidation: the implications of mergers and buying alliances, John Ratliff 14. Retail competition - the use of ex-ante and ex-post remedies, Alistair Gorrie PART VI: PRIVATE LABALES - THE US EXPERIENCE 15. United States competition law policy - the private label experience, Jeffrey Schmidt & Terry Calvani PART VII: CONSUMER WELFARE AND ENFORCEMENT STANDARD 16. The 'consumer welfare' standard as a form of substantive protection for consumers under European competition law, Philip Marsden & Peter Whelan 17. Welfare objective and enforcement standard in competition law, Renato Nazzini

April 6, 2009 | Permalink | Comments (0) | TrackBack (0)

Upstream Competition and Downstream Buyer Power

Posted by D. Daniel Sokol

Howard Smith (Oxford - Economics) and John Thanassoulis (Oxford - Economics) bring us Upstream Competition and Downstream Buyer Power.

ABSTRACT: It is often claimed that large buyers wield buyer power. Existing theories of this effect generally assume upstream monopoly. Yet the evidence is strongest with upstream competition. We show that upstream competition can yield buyer power for large buyers by generating supplier-level volume uncertainty a feature that emerges from case study evidence of upstream competition so the negotiated price depends on the seller's cost expectation. By analyzing the effect of market structure changes on seller cost expectations the paper gives insights on three key policy-relevant questions around buyer power: (i) who wields it and under what circumstances (ii) does a downstream merger alter the buyer power of other buyers (so-called waterbed effects); and (iii) how are the incentives to invest in upstream technology altered by the creation of large downstream firms?

April 6, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, April 5, 2009

The Gary Dinners and the Meaning of Concerted Action

Posted by D. Daniel Sokol

Page_big My colleague Bill Page has posted an interesting historical work on The Gary Dinners and the Meaning of Concerted Action.

ABSTRACT: Between 1907 and 1911, executives of American steel manufacturers gathered in a series of social events and meetings that became known as the Gary dinners. At the meetings, the participants announced the prices they intended to charge, but made no promises that they would adhere to those prices. The architect of the dinners, Judge Elbert H. Gary, chairman of the board of the United States Steel Corporation, saw them as a lawful way to stabilize steel prices by fostering information-sharing and an ethos of cooperation. The government agreed that the dinners stabilized prices, but took a different view of their legality: it brought suit in 1911, asking the court to dissolve U.S. Steel as an illegal monopoly. In 1915, the trial court held that the dinners amounted to price fixing, but that U.S. Steel's resort to them only proved that the firm could not control steel prices on its own and therefore could not have monopolized the industry. In 1920, the Supreme Court affirmed.

Commentators have long questioned the holding that U.S. Steel lacked monopoly power. In this essay, however, I focus on the intermediate conclusion that the dinners involved concerted action. I describe the legal and historical circumstances in which the dinners occurred and what happened at them. I then examine how the courts analyzed the dinners and extract some lessons that might help modern courts clarify the boundaries of the Sherman Act's agreement requirement.

April 5, 2009 | Permalink | Comments (0) | TrackBack (0)

Unsettling Drug Patent Settlements: A Framework for Presumptive Illegality

Posted by D. Daniel Sokol

Michael Carrier (Rutgers - Camden) describes Unsettling Drug Patent Settlements: A Framework for Presumptive Illegality.

ABSTRACT: A tidal wave of high drug prices has recently crashed across the U.S. economy. One of the primary culprits has been the increase in agreements by which brand-name drug manufacturers and generic firms have settled patent litigation. The framework for such agreements has been the Hatch-Waxman Act, which Congress enacted in 1984. One of the Act's goals was to provide incentives for generics to challenge brand-name patents. But brand firms have recently paid generics millions of dollars to drop their lawsuits and refrain from entering the market.

These reverse payment settlements threaten significant harm. Courts nonetheless have recently blessed them, explaining that the agreements reduce costs, increase innovation, and are reasonable based on the presumption of validity accorded to patents. Although scholars and the Federal Trade Commission have voiced strong arguments against courts' leniency, these have fallen on judicial deaf ears.

In this article, I apply the framework that the Supreme Court articulated in Verizon Communications v. Law Offices of Curtis V. Trinko, which underscored the importance in antitrust analysis of a regulatory regime addressing the challenged activity. In particular, the Hatch-Waxman Act provides Congress's views on innovation and competition in the drug industry, freeing courts from the thorny task of reconciling the patent and antitrust laws. Unfortunately, mechanisms that Congress employed to encourage patent challenges-such as an exclusivity period for the first generic to challenge validity-have been twisted into barriers preventing competition. Antitrust can play a central role in resuscitating the drafters' intentions and promoting competition.

Given the Act's clear purpose to promote patent challenges, as well as the parties' aligned incentives and the severe anticompetitive potential of reverse payments, courts should treat such settlements as presumptively illegal. If the parties can demonstrate that the payments represent a reasonable assessment of litigation success, then they can rebut this presumption. If not, courts should conclude that the agreements violate the antitrust laws.

April 5, 2009 | Permalink | Comments (0) | TrackBack (0)