Antitrust & Competition Policy Blog

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

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Tuesday, May 19, 2009

Margins of Appreciation: Changing Contours in Community and Domestic Case Law

Posted by D. Daniel Sokol

Vivien Rose (U.K. Competition Appeal Tribunal) addresses Margins of Appreciation: Changing Contours in Community and Domestic Case Law.

ABSTRACT: This article considers the circumstances in which a court, faced with a challenge to a decision taken by a primary decision-maker, accords a “margin of appreciation” to that decision-maker by limiting the intensity of its review. It compares the concept of the margin of appreciation as applied by the Community Courts in the application of Article 81 with that of the domestic courts in the United Kingdom when they are dealing with challenges based on directly effective Community rights or alleged breaches of the European Convention on Human Rights.

The article examines how discussion of the existence and scope of the margin is influenced by the reviewing court’s perception of its role in administrative challenges more generally and whether the position of a specialist tribunal established to hear a particular kind of case is different from the position of a generalist court.

May 19, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, May 18, 2009

Dissecting Regional Integration in Financial Services from the Competition Policy and Trade Policy Perspectives

Posted by D. Daniel Sokol

Mamiko Yokoi-Arai (OECD) and Masamichi Kono (Financial Services Agency Japan) address Dissecting Regional Integration in Financial Services from the Competition Policy and Trade Policy Perspectives.

ABSTRACT: The dynamism of regional integration is not globally uniform, and is strongly dependent on common philosophies being developed and various infrastructures being established within the region. The worldwide proliferation of customs unions, free trade areas, and eventually, common markets, indicates that regional integration efforts are being pursued widely to boost the economic capacity of the market, and gain competitive advantage through close economic alliances.

For any of these efforts to bear fruit, however, there needs to be a presumption, on behalf of the participating states, that competition policy will be actively applied and the market is being used to determine the distribution of resources. The enlargement of the market is one of the major benefits of regional integration, enabling the region to capitalise on economies of scale and of scope. Regional financial integration assumes that participating states will allow market forces to align demand for and supply of financial services in the region, providing a larger market that selects services and distributes capital according to efficiency and cost. In general, an integrated regional financial market should be better able to provide the necessary financial services and capital to those sectors and entities in need within the region, as compared to a smaller local market with a limited number of players, less investment opportunities, and a meagre savings pool.

Thus, a precondition for regional integration in financial services is that financial markets are being gradually but steadily liberalised, both de jure and de facto, vis-a-vis other economies in the region. While the importance of economies being actively engaged in financial services trade is an essential factor for meaningful integration, it is probably equally important to have economies liberalised within each jurisdiction, so as to maintain a competitive and innovative environment for financial services providers. The level of liberalisation in the financial sector will have a direct impact on the level of financial integration that can take place.

With this in mind, the paper analyses three dimensions of financial liberalisation. At the foundation is the competition law environment. The competition regime demonstrates the country's overall commitment to a liberalised and market-oriented economic structure within the jurisdiction. The second is the country's external commitment to liberalisation of financial services trade, which includes the country's schedule of commitments under the General Agreement on Trade in Services (GATS), and the commitments made in the framework of bilateral and regional free trade agreements, or economic partnership agreements (FTAs or EPAs). While there are certain exceptions, the commitments made under such trade agreements represent a minimum level of liberalisation that a country is willing to make towards a foreign counterparty. The third dimension is the actual entry requirements imposed on foreign counterparties, including procedural and enforcement mechanisms. It is likely that there will be a positive or negative deviation from competition law, or from commitments to trade agreements.

May 18, 2009 | Permalink | Comments (0) | TrackBack (0)

Bundling and Economies of Scope

Posted by D. Daniel Sokol

Antonin Arlandis, France Telecom R&D explains Bundling and Economies of Scope.

ABSTRACT: This paper examines how bundling and economies of scope impact competition. We model a duopoly where two firms, produce the two components of a system. We show that firms always have a unilateral incentive to target a discount to consumers who buy the two goods close to the same firm. In our model, the Nash equilibrium is one of mixed bundling. The economies of scope (created by bundling) act to reduce (increase) firms' profits when the market is completely (partially) covered. Moreover, economies of scope act to increase consumer surplus.

May 18, 2009 | Permalink | Comments (0) | TrackBack (0)

Why We Need to Measure the Effect of Merger Policy and How to Do It

Posted by D. Daniel Sokol

Carlton Dennis Carlton of the University of Chicago Booth Graduate School of Business explains Why We Need to Measure the Effect of Merger Policy and How to Do It.

ABSTRACT: In this article, I explain the inadequacy of our current state of knowledge regarding the effectiveness of antitrust policy towards mergers. I then discuss the types of data that one must collect in order to be able to perform an analysis of the effectiveness of antitrust policy. There are two types of data one requires in order to perform such an analysis. One is data on the relevant market pre- and post-merger. The second is data on the specific predictions of the government agencies about the market post-merger.

A key point of this article is to stress how weak an analysis of only the first type of data is. The frequent call for retrospective studies typically envisions relying on just this type of data, but the limitations of the analysis are not well-understood. As I explain below, retrospective studies that ask whether prices went up post-merger are surprisingly poor guides for analyzing merger policy. It is only when the second type of data is combined with the first type that a reliable analysis of antitrust policy can be carried out. There is a need both to collect the necessary data and to analyze it correctly.

May 18, 2009 | Permalink | Comments (0) | TrackBack (0)

Google an Antitrust Target?

Posted by D. Daniel Sokol

Today's NY Times has a story on potential antitrust problems that Google faces.  The article discusses antitrust issues in the United States. As events of the last few weeks remind us, even with ramped up antitrust enforcement in the United States under an Obama administration, I am rather surprised that the article is silent about the potential for antitrust liability of Google in the EU.  After all, that is where we have seen far more aggressive antitrust enforcement against dominant technology firms - just ask Intel and Microsoft.  Certainly, corporate America is acutely aware of what enforcement looks like in the EU and has been for quite some time.  Between the two major antitrust powers (Europe and the US), global compliance is shaped by the more aggressive of the two.  On international antitrust and the search for convergence, see my article here.

7:15am update - Today's Wall Street Journal has run an article on high tech firms and antitrust and does make sure to cover both US and EU angles.

Both of these articles ultimately lead us to ponder what the new US administration really thinks about antitrust and innovation.  In my mind, this is the hardest issue confronting antitrust today.  To a certain extent, we rely too much on theories and prior beliefs.  There is not yet enough of an empirical record to guide us in how to treat innovation and competition issues.  We are not yet clear on how static effects translate into dynamic effects.  This is an area in which enforcers across both sides of the Atlantic should tread cautiously since there is much damage that they can do to innovation and to one of the key drivers of economic growth in the past two decades.  An additional point for enforcers to consider is the question of remedies in this area (and thank you Kathy Fenton and the ABA Antitrust Section for the wonderful Dominant Firms Remedies Conference last summer at UVA to get us thinking about this issue.  What I said then at the conference in my comments was "Unless you have a workable remedy, do not bring a case.")  This is one of the key lessons of the Microsoft litigation.  My colleague Bill Page has provided some excellent scholarship on the shortcomings of Microsoft remedies in both the US and EU.  

May 18, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, May 17, 2009

IP and Antitrust: Errands into the Wilderness

Posted by D. Daniel Sokol

Christina Bohannan, University of Iowa - College of Law and Herb Hovenkamp, University of Iowa - College of Law have an interesting new working paper IP and Antitrust: Errands into the Wilderness.

ABSTRACT: Antitrust and intellectual property law are both concerned with improving economic welfare by facilitating competition and investment in innovation. At various times both antitrust and IP law have wandered off this course and have become more driven by special interests. Today, antitrust and IP are on very different roads to reform. Antitrust began its Errand into the Wilderness in the late 1970s with a series of Supreme Court decisions that linked the plaintiff’s right to recover damages or obtain an injunction to the competition-furthering goals of antitrust policy. In the process antitrust moved from a regime in which harm was more or less presumed to one that requires strict proof. Today, patent law has begun its own reform journey, but it is in a much earlier stage. The outlook for copyright law is much bleaker.

The main component in these reform journeys has been the development of a concept of harm that is related to the underlying goal of legal policy. In its 1977 Brunswick decision the Supreme Court largely ignored the language of an expansive antitrust damages provision that gives private plaintiffs treble damages for every injury caused by an antitrust violation. Rather, the Court said, the type of harm must be sufficiently related to the underlying goals of the antitrust laws, which is to make markets more competitive. We propose a concept of “IP injury” that does something similar by limiting IP remedies to situations in which the IP holder has suffered actual harm that is sufficiently linked to the underlying purpose of the IP laws, which is to incentivize innovation. After all, an infringement that benefits the infringer and does no cognizable harm to the IP right holder or anyone else is a pure Pareto improvement – something that can be said of very few involuntary transactions. The trick for legal policy is to determine when the IP holder has not suffered any cognizable harm. This analysis requires a re-examination of IP externalities, or spillovers, where IP should follow the antitrust lead in permitting the market to correct for them, intervening only where it can be shown that the inability to recover for an external benefit has a material impact on ex ante incentives to innovate. As in the case of antitrust, reformation of IP’s theory of harm will very likely have to come from the judiciary and not from Congress.

May 17, 2009 | Permalink | Comments (0) | TrackBack (0)

UCL / IMEDIPA Santorini Competition Policy Workshop

Posted by D. Daniel Sokol

If anyone were to receive an Olympic gold medal for conference organization, it would go to Ioannis Lianos of University College London - Law for organizing a spectacular conference of antitrust experts from four continents to present papers at a conference on the beautiful island of Santorini, Greece.

PROGRAMME

Conference organiser: Dr. Ioannis Lianos, UCL


TUESDAY 26h May 2009
Arrival at the hotel. Check in is possible after 2 pm. Free day to visit the volcano, or Oia and watch the amazing sunset from the hill of the caldera.
DAY ONE: 27th May 2009
09:00 Introduction of all participants
 
09:15

SESSION I:
Integrating public policy concerns in competition law analysis: limit or a necessary extension?

Chair: Valentine Korah

  • Ioannis Kokkoris & Rodrigo Olivares Caminal:
    Competition law in the wake of financial crises (20 min)
  • Maurice Stucke:
    Concentrated Media Is Something We Can't Ignore: The Challenge of Developing Antitrust Policies that Support the Media Sector's Unique Role in Our Democracy (15 min)
  • Assimakis Komninos:
    Integration of non competition concerns within Article 81 EC (15 min)

Commentator: Laurence Idot (15 min)

Discussion: 40 min
Some questions for discussion

  • Should we oppose “non-competition” and competition concerns?
  • Should competition law be perceived as public policy or should we perceive public policy as a separate category than competition law?
  • Are the methods of public policy analysis different from those of competition law? Should they be?
  • How does the debate over competition and public policy connect/relate with that on the objectives of competition law?
11:00 Coffee Break
11:15

SESSION II:
Are the limits of economic analysis and/or methodology the real limits of competition law?

Chair: Wolfgang Kerber

  • Anne-Lise Sibony:
    Limits imported from economics (15 min)
  • Pinar Akman:
    ‘Consumer’ versus ‘Customer’: the Devil is in the Detail (15 min)
  • Ioannis Lianos:
    Translation wars: on economic experts, lawyers and other sources of wisdom for competition law (15 min)

Commentator: Andrew Gavil (20 min)

Discussion: 40 min
Some questions for discussion

  • Has the recourse to economics as the primary source of wisdom for competition law affected the scope of competition law, as this is usually perceived by competition law and economics scholars?
  • Is the scope of the “antitrust enterprise” related to the scope and limits of economics as a discipline?
  • Are there any limits to the introduction of economic analysis in competition law?  Is or should competition law become a branch of economics?
  • How does the evolution of economic methodology affect the evolution of competition law doctrine?
  • Is there a time lag between the evolution of economics and the evolution of competition law? Why? Should we overcome it? What is the way to do so?
13:00 Lunch and free time
15:00

SESSION III:
The internationalization of the competition law idea and the limits imposed by specific market circumstances and social norms

Chair: William Kovacic

  • Abel Mateus:
    Competition and Development: Towards an Institutional Foundation for Competition Enforcement (15 min)

  • Thomas Cheng:
    The limitations of convergence of competition law (15 min)

  • Julian Pena:
    The limits to competition law in Latin America (15 min)

  • Andreas Stephan:
    Beyond the Cartel Law Handbook: How Corruption, Social Norms and Collectivist Business Cultures can Undermine Conventional Enforcement Tools (15 min)

Commentator: William Kovacic (10 min), Daniel Sokol (10 min)

Discussion: 40 min
Some questions for discussion

  • How much does the degree of development affect the expansion and integration of competition law in different jurisdictions?
  • Is market size important? Small market economies and competition law
  • Should market characteristics affect the design of competition law enforcement? For example one could advance the point that closed economies (with former state monopolies) should perceive false negatives as more costly than false positives. Open economies may perceive the social cost of errors differently.
  • The inherent risk of the discretion of competition authorities for corruption.
17:00 Coffee Break
17:15

SESSION IV:
Fundamental rights and the rule of law stricto sensu as a limit to competition law (Roundtable discussion)

Chair: Wouter Wils

  • Arianna Andreangeli:
    Competition law and human rights: striking a balance between business freedom and regulatory intervention (15 min)

Commentators: Wouter Wils (10 min), Maurice Stucke (10 min)

Discussion: 40 min
Some questions for discussion

  • Reflect on the content of the rule of law as a starting point of the discussion (Ioannis will circulate a paper by NYU Emile Noel fellow Laurent Pech which could serve as the basis for the discussion of this principle in the European context). Could the claims for better administrability and predictability of competition law be considered as a rule of law issue?
  • What is the impact of the rule of law and fundamental rights in delimiting the scope of the antitrust intervention (property rights, Ip as a property right, freedom to contract, freedom of competition?)
  • What is the impact of the rule of law in designing antitrust rules: rule of reason versus per se (I guess Maurice would like to introduce this aspect)
  • What is the impact of the rule of law and fundamental rights in designing procedural rules for antitrust enforcement (rights of defense, impartiality): specific implications for the institutional architecture of the system of European enforcement: breaking up the DG Comp (investigation, prosecution), creation of an independent cartel office, establishing a specialized tribunal, the role of court-appointed experts/assessors and the case law of the European Court of Human rights, the design of merger enforcement in Europe and in the US)
20:30 Dinner at the taverna
 
DAY TWO: 28th May 2009
09:00

SESSION V:
The reform of Article 82 as a case study of the limits of competition law

Chair: Nick Economides

  • Lisa Lovdahl Gormsen:
    The legitimacy of consumer welfare in Article 82 (15 min)
  • Ekaterina Rousseva:
    Objective justifications in Article 82 (15 min)
  • Ariel Ezrachi:
    Can they fix it? Maybe they can –The way in which institutional limitations affect the reform of Article 82 EC (15 min)

Commentators: Jorge Padilla (10 min), John Kallaugher (10 min)

Discussion: 45 min
Some Questions for discussion:

  • An assessment of the recent Commission’s Guidance on Article 82 and issues of transatlantic divergence
  • Is the concept of ‘consumer welfare’ clear and uncontroversial enough to serve as a canon for the competition law enforcement in the context of Article 82 EC?
  • What is the part of institutional factors rather than prior beliefs on markets and competition law intervention that explain differences between jurisdictions?
  • Would different dominant economic paradigms explain the differences? What would be the limits of competition law intervention under an ordo-liberal, Austrian, Chicago, post-Chicago, behavioral law and economics paradigm…?
11:00 Coffee Break
11:15

SESSION VI
The limits of the administrative and/or judicial process (institutional limitations, administrability, decision theory)

Chair: John Kallaugher

  • Yannis Katsoulacos:
    Legal uncertainty: A red herring? (15 min)
  • Jorge Padilla:
    Error Costs as a limit to competition law enforcement (15 min)
  • Yannis Stamoulis:
    EU administrative law: a limit to a full-scale judicial review of Commission’s decisions  (15 min)

Commentators: Eric Barbier de la Serre (10 min), Wolfgang Kerber (10 min)

Discussion:  40 min
Some questions for discussion

  1. Does the decision theoretic approach provide a useful framework for designing rules of substantive competition law and/or competition law enforcement?
  2. How does the nature and specific characteristics of the judicial review affect competition law assessment and consequently the content of substantive competition rules?
  3. Can we establish a link between the greater recourse to economic analysis in competition law and the development of distrust to the judicial process to handle issues of antitrust? It is frequently advanced that courts should not behave as regulators: is this an issue of expertise only? Or, is it something different? (regulation versus antitrust)? Would these arguments work in Europe where public enforcement (through the Commission and national competition authorities) is the most important part of competition law enforcement? Are regulators better suited than courts to deal with competition law? Would things change if we move towards specialized tribunals in competition law?
13:00 Lunch and free time
15:30

SESSION VII:
The interaction of competition law with other areas of law: limits and extensions

Chair: Laurence Idot

  • Francesco Salerno:
    Competition law or regulation? An institutional perspective on a false dichotomy (15 min)
  • Daniel Sokol:
    Competition Policy and Corporate Governance of State Owned Enterprises (15 min)
  • Paolisa Nebbia:
    Crossing parallels: competition law and unfair commercial practices (15 min)
  • Florian Wagner von Papp:
    Suing the suits –Derivative Shareholder Actions To Bring Home the Message of Antitrust (15 min)

Commentators: Abel Mateus (10 min), William Kovacic (10 min)

Discussion : 40 min

  • The topics presented in this session are touching different areas. I would suggest to structure the discussion as following:
    • The first paper raises the issue of the characterization of competition law as a separate area than regulation. Indeed, this is something that we will also touch in the session on the limits of the administrative and judicial process. In Europe, sector-specific regulation is often perceived as a way to introduce competition in a market. In the US, there may be a different perception of what are the objectives of sector-specific regulation. Another issue is the difference that exists between Europe and the US in dealing with the interaction between competition law and regulation, which I suggest to discuss briefly
    • The second paper provides an example of understanding competition law in the context of other areas of law and perceives competition law as an alternative tool to achieve specific objectives. The area of corporate governance constitutes an excellent example, which in my knowledge has never been examined in depth before.
    • The third paper raises the issue of remedies. A number of competition authorities deal with both issues of consumer protection and competition law. Would this co-habitation lead to the emergence of innovative remedies? One could also extend the discussion to the broader issue of remedies and how other areas of law may be used in order to increase the effectiveness of antitrust law enforcement. For example, some have suggested to distinguish between the liability and the remedy phase in antitrust enforcement and delegate the authority of designing or enforcing remedies to regulatory authorities (The AT&T and the Otter Tail precedents in the US could provide useful examples).
    • One could also envision tools of corporate governance as effective means of antitrust enforcement: for example, the use of derivative actions from shareholders as an additional tool to deter antitrust law violations from the company’s management, which is the topic of the fourth paper.
    • A possibility to raise final points and questions on issues that have not been dealt during the last two days.
18:00 End of Workshop

May 17, 2009 | Permalink | Comments (0) | TrackBack (0)