Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, June 20, 2009

Low Cost Solutions to Health Care Through Generic Competition

Posted by D. Daniel Sokol

June 23, 2009, 9:30am to 11:00am

Admission is free.

RSVP to attend this event

Keynote speaker:
Jon Leibowitz, Chairman, Federal Trade Commission

Featured Panelists:
Seth Bloom, General Counsel, Senate Antitrust Subcommittee
Heather Bresch, Chief Operating Officer, Mylan Labratories, Inc.
Michael Carrier, Professor, Rutgers University
Gerald Masoudi, Partner, Covington & Burling
Bernard Sherman, Chief Executive Officer, Apotex Inc.

Moderated by:
David Balto, Senior Fellow, Center for American Progress

Twenty-five years ago Congress established a regulatory regime to facilitate generic drug creation, and the availability of these drugs has resulted in substantial consumer savings. With Congress addressing the health care issue this summer, it is important that we now consider the potential public savings made possible from ensuring access to affordable medicine through increased generic competition.

Many are also concerned that patent settlements involving innovator and generic firms are delaying new generic drugs from entering the market. These settlements significantly increase health care costs, and some commentators estimate that they cost consumers over $12 billion annually in higher drug prices. Congress and antitrust enforcers are taking steps to address this problem.

Please join the Center for American Progress as Federal Trade Commission Chairman Jon Leibowitz discusses recent developments on the issue. A panel of distinguished experts will also talk about generic drug competition and a report issued by CAP on competition in the pharmaceutical markets.

June 23, 2009, 9:30am – 11:00am

Space is extremely limited. RSVP required.
Seating is on a first-come, first-served basis.

Coffee will be served at 9:00 a.m.

Center for American Progress
1333 H St. NW, 10th Floor
Washington, DC 20005
Map & Directions

Nearest Metro: Blue/Orange Line to McPherson Square or Red Line to Metro Center

RSVP to attend this event

For more information, call 202-682-1611.

June 20, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, June 19, 2009

Competition Policy and Organizational Fragmentation in Health Care

Posted by D. Daniel Sokol

Tim Greaney (St. Louis Law) describes Competition Policy and Organizational Fragmentation in Health Care.

ABSTRACT: A central challenge for all health care reform proposals currently being discussed is finding the means to effectively channel market forces given many deeply embedded features of our system and the peculiar economics of health care delivery and financing. This essay traces the path of competition law in health care and explains its chicken-and-egg relationship with provider organizational arrangements. It explores a central puzzle for future health care policy: why have market forces failed to counteract organizational fragmentation? Answering this question requires an understanding of why competition policy is inexorably linked to the organizational structures of health care providers and payers and how that the fragmentation that bedevils those arrangements has undermined its success. The article concludes with a negative assessment of recent ?consumer directed? approaches, finding them likely to increase fragmentation and incapable of delivering the benefits of competition.

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

Is Collective Administration of Copyrights Justified by the Economic Literature?

Posted by D. Daniel Sokol

Ariel Katz (Toronto - Law) asks Is Collective Administration of Copyrights Justified by the Economic Literature?

ABSTRACT: On March 2007 Canada's Competition Bureau hosted a symposium on the interface between competition and intellectual property. This short comment responds to a paper presented by Professor Jacques Robert in which he argued that the economic literature on bundling of information goods provides a novel justification for the collective administration of copyrights and made a few other recommendations relating to collective administration of copyright. This comment critically examines this bundling argument as well as other recommendations made by Robert.

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

The Politics of Cartel Criminalisation: A Pessimistic View from Australia

Posted by D. Daniel Sokol

Caron Beaton-Wells (University of Melbourne Law School) has posted The Politics of Cartel Criminalisation: A Pessimistic View from Australia.

ABSTRACT: A global movement towards a tougher stance against serious cartel conduct has seen several countries examine whether or not to criminalise this type of behaviour in recent years. This article argues that in both making the decision to criminalise and in implementing and enforcing a criminal cartel regime political support is essential. The article uses the Australian experience to make this point. It highlights delay, obfuscation and incoherence in the approach taken between 2003 and 2008 by the conservative Australian government to in deciding whether or not to criminalise serious cartel conduct to illustrate the consequences of weakness or ambivalence in political attitudes towards criminalisation.

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

Thursday, June 18, 2009

Eleanor Fox - Scholar, Advocate, Humanist, Female Traiblazer

Posted by D. Daniel Sokol

Today the American Antitrust Institute honored my friend, mentor and co-author Eleanor Fox.  A number of people gave speeches - Christine Varney (DOJ), John Fingleton (OFT) and Ilene Gotts (Wachtell).  Eleanor followed.  All the speeches were very personal.  Ilene's speech brought tears to someone sitting at my table and I am told that people at other tables got choked up during Ilene's speech.  There is not much more that I could add to the speeches other than to say that Eleanor continues to amaze and challenge me with her interersting ideas.  

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

Judgment-Sharing Agreements

Posted by D. Daniel Sokol

Christopher Leslie (UC Irvine Law) explains Judgment-Sharing Agreements.

ABSTRACT: Antitrust law condemns price-fixing cartels and seeks to encourage private suits against the conspirators by automatically trebling antitrust damages and by providing for joint and several liability. Because the Supreme Court has held that there is no right to contribution among antitrust violators, this creates the risk of a single defendant being saddled with damages significantly greater than three times the amount of the harm associated with that firm's own market share. Firms engaged in -- or accused of -- price fixing often try to ameliorate this risk by entering into judgment-sharing agreements, which essentially create a right to contribution through contract.

This Article shows how judgment-sharing agreements can undermine antitrust deterrence and stabilize price-fixing cartels. Using both economic theory and empirical evidence, the Article explains how judgment-sharing agreements may reduce settlement values, lead to the suppression of incriminating evidence, reduce the likelihood of success of meritorious price-fixing suits, and make price fixing cost-beneficial. The Article then argues that fairness arguments in favor of judgment-sharing agreements (and contribution more generally) are misguided and easily disproved, and in any event outweighed by the potential anticompetitive effects of such agreements. Finally, the Article advocates a more informed antitrust treatment of judgment-sharing agreements that takes into account their potential use for anticompetitive purposes.

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

Market Share Exclusion

Posted by D. Daniel Sokol

Mikko Packalen, University of Waterloo - Department of Economics examines Market Share Exclusion.

ABSTRACT: A market share exclusion contract between a seller and a buyer prevents rival sellers from competing for a share of the buyer's purchases. We examine both non-discriminatory and discriminatory market share exclusion contracts, and compare them with exclusive dealing contracts. For non-discriminatory contracting we show that, unlike exclusion through exclusive dealing, market share exclusion can be profitable. The condition for the profitability of market share exclusion is characterized in terms of straightforward economic concepts. For discriminatory contracting we show that the ability to offer market share exclusion contracts does not provide an advantage over the ability to offer only exclusive dealing contracts. We also show that market share exclusion always decreases both buyer surplus and total surplus. Hence, competition authorities should not view exclusion through exclusive dealing as a pre-requisite for the possibility of anti-competitive effect from exclusionary contracting.

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

Wednesday, June 17, 2009

Are There Any Chicago School European Competition Law or Econ Professors?

Posted by D. Daniel Sokol

After two conferences in the last three weeks of primarily European professors in both law and economics, I have noticed nobody from Europe who shows a proclivity to Chicago School antitrust analysis.  Because of the blog, I read lots of abstracts and skim through many papers.  Perhaps I am missing someone but is there anybody who is a full time European professor (the practitioner lecturers/professors may be beholden to their client's beliefs in their writings so I will only count full time academics) who uses the Chicago School (or Chicago/Harvard double helix) as the baseline for their analysis or is everyone either post-Chicago or just non-Chicago (the latter a category I just made up of people who use a framework divorced from price theory)?

June 17, 2009 | Permalink | Comments (3) | TrackBack (0)

Merger Analysis and the Importance of Looking Beyond the Level of Pre-Transaction Competition Between the Merging Parties

Posted by D. Daniel Sokol

Timothy Daniel (NERA) has written on Merger Analysis and the Importance of Looking Beyond the Level of Pre-Transaction Competition Between the Merging Parties.

ABSTRACT: Timothy Daniel discusses four proposed mergers that were challenged by the Federal Trade Commission in 2007 and 2008. Although all four case studies highlight the importance of analyzing data on the degree to which the merging parties have been competitors, they also show that such evidence is not sufficient to assess the state of competition that would result with and without the transaction.  As Tim describes below, information on the merging parties’ future competitive plans, the potential for the transaction to generate efficiencies, the competitive responses of rivals, and the future competitive viability of the firm being acquired are important considerations that cannot be ignored.

Download AT_Insights_Spring 2009

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

Complements and Potential Competition

Posted by D. Daniel Sokol

Mikko Packalen, University of Waterloo - Department of Economics has a paper that address Complements and Potential Competition.

ABSTRACT: In this paper we examine the effect of cooperation between complementary incumbent monopolists on consumer welfare. While divided technical leadership makes it difficult for firms to integrate into complementary markets, firms induce entry in complementary markets by reducing the cost of entry in those markets. This is accomplished through, for example, the development and dissemination of royalty-free intellectual property. We present and analyze a model in which incumbents can influence the ease of entry in complementary markets. Cooperation between complementary monopolists decreases consumer welfare by reducing or even eliminating the entry inducement incentive but increases consumer welfare by eliminating double marginalization. We show that cooperation may decrease consumer welfare, contrary to Cournot's celebrated double-monopoly result, and that the welfare comparison can be determined in terms of straightforward economic concepts. We also present and analyze a model in which each incumbent can induce entry in the complementary market through long-term price commitments which are common in patent licensing.

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

Tuesday, June 16, 2009

What Could Anti-Trust in the OECD Mean for Development?

Posted by D. Daniel Sokol

Peter A.G. van Bergeijk, Institute of Social Studies asks What Could Anti-Trust in the OECD Mean for Development?

ABSTRACT: The extra-territorial effects of cartels, mergers and other non-competitive activities require consideration especially if they harm consumers and firms in developing countries. This chapter provides an overview of the available empirical literature regarding the impact of cartels, mergers and abuses of dominance and that are rooted in the OECD. Typically the available evidence is not yet sufficiently comprehensive to allow robust conclusions, but (with no claim on accuracy), it seems reasonable that the direct impact on developing countries is very substantial and in welfare terms may exceed the contribution by Official Development Aid. OECD countries could contribute to development through the activities of their competition authorities and appropriate changes in legislation.

June 16, 2009 | Permalink | Comments (0) | TrackBack (0)

Antitrust Law Developments, Sixth Edition

Posted by D. Daniel Sokol

The ABA Antitrust Section has put out Antitrust Law Developments (Sixth).

Antitrust Law Developments (Sixth) is the seminal comprehensive review of federal antitrust law, with reports on current case law and administrative and legislative developments current through 2006. The Sixth edition replaces the Fifth edition and the annual paperbound supplements.

This 2-volume set updates you on key decisions in the courts and at the enforcement agencies, keeping you current in every area of antitrust practice. Each edition of Antitrust Law Developments is designed to improve upon, as well as update, prior editions, and to ensure consistency with ever-changing developments in this dynamic area of law.

June 16, 2009 | Permalink | Comments (0) | TrackBack (0)

Hospital Competition and Quality with Regulated Prices

Posted by D. Daniel Sokol

Kurt Richard Brekke, Norwegian School of Economics and Business Administration - Department of Economics Luigi Siciliani, University of York - Department of Economics, and Odd Rune Straume, University of Minho - Economic Policies Research Unit explain Hospital Competition and Quality with Regulated Prices.

ABSTRACT: We analyse the effect of competition on quality in hospital markets with regulated prices, considering both the effect of (i) introducing competition (monopoly versus competition) and (ii) increasing competition through lower transportation costs (increased substitutability) or a higher number of hospitals. With semi-altruistic providers and a fairly general cost structure, we show that the relationship between competition and quality is generally ambiguous. In contrast to the received theoretical literature, this is consistent with, and potentially explains, the mixed empirical evidence.

June 16, 2009 | Permalink | Comments (0) | TrackBack (0)

Fight Against Cartels in Croatia: More than a Decade of Enforcement Practice

Posted by D. Daniel Sokol

Jasminka Pecotic Kaufman (University of Zagreb) discusses the Fight Against Cartels in Croatia: More than a Decade of Enforcement Practice.

ABSTRACT: The Croatian Competition Act 2003 prohibits cartel agreements and considers them to be null and void: “agreements between undertakings..., explicit or tacit agreements, coordinated practice... which have as their object or effect distortion of competition are prohibited, in particular those by which undertakings determine directly or indirectly purchase or sale prices, or other commercial terms.” Although this provision is modeled on Article 81 EC, there is a significant departure from the Community acquis in part of the provision which mentions “tacit agreements.” It is a widely accepted view that tacit collusion should not be prohibited unless the behavior at stake cannot be explained in any other way. This view is strongly promoted by antitrust economists and was also accepted by the European Court of Justice.

Although the first Croatian Competition Act (1995) was already drafted under the influence of EC competition law, it was the Stabilisation and Association Agreement (“SAA”) signed between Croatia and EU in 2001 that introduced an obligation for Croatia to harmonize its domestic legislation with the acquis (Art 69 SAA), which resulted in adoption of the new, more thoroughly harmonized Competition Act in 2003. Pursuant to the SAA (Art 70) Croatian authorities must apply, to restrictive agreements and abuse of dominant position (and state aid), criteria arising from the application of Community competition rules provided there is an effect on trade between Croatia and Community. Unlike Europe Agreements, which also contained a similar provision, no implementing rules must be adopted to this effect.

Under the current Croatian competition regime there is no leniency program. However, the possibility of a more lenient treatment of undertakings is extensively used by the Croatian misdemeanor courts when deciding on a fine on the basis of the Competition Agency infringement decision (under the current legislation the Agency has no competence to pronounce fines). Misdemeanor courts are for this purpose applying the general rule of criminal law on immunity from fines and reduction of fines, and thereby perversely distorting the efficient prosecution of undertakings that breach competition rules. Evidently, this is no alternative to having a U.S. or EU-style leniency program.

June 16, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, June 15, 2009

Latin American Competition Law and Policy

Posted by D. Daniel Sokol

In what is the most important book on the topic to date, Eleanor Fox (NYU - Law) and Daniel Sokol (University of Florida - Law) have edited the forthcoming Latin American Competition Law and Policy.  The book is an excellent collection of work from top academics and practitioners and covers many critical issues in the region.  You can download the table of contents here.

BOOK ABSTRACT: This book offers an unparalleled analysis of the emerging law and economics of competition policy in Latin America. Nearly all Latin American countries now have competition laws and agencies to enforce them. Yet these laws and agencies are relatively young. The relative youth of Latin American competition agencies and the institutional and political environment in which they operate limit the ability of agencies to address anti-competitive conduct effectively. Competition policy is a tool to overcome anti-market traditions in Latin America. Effective competition policy is critical to assisting in the growth of Latin American economies and their global competitiveness, and to improving the welfare of domestic consumers. This book provides new region-specific insights into how better to achieve these aims.  

June 15, 2009 | Permalink | Comments (0) | TrackBack (0)

Mergers with Bundling in Complementary Markets

Posted by D. Daniel Sokol

Jay Pil Choi (MSU - Economics) has a new paper on Mergers with Bundling in Complementary Markets.

ABSTRACT: This paper develops a simple model to analyze the effects of mergers in complementary system markets when the merged firm is able to engage in bundling. In particular, I analyze the impact of (mixed) bundling on pricing decisions for existing generations of products and derive welfare implications of mergers. The basic model is then extended to analyze industry dynamics where the implications of mergers for innovation incentives and technical tying/compatibility decisions are explored. I also consider the possibility of counter-merger and derive implications of the policy prescription that prohibits bundling as a condition for merger.

June 15, 2009 | Permalink | Comments (0) | TrackBack (0)

Patent Settlements as a Barrier to Entry

Posted by D. Daniel Sokol

Anne Duchene, Drexel University - Department of Economics & International Business and Konstantinos Serfes, Drexel University - Department of Economics & International Business examine Patent Settlements as a Barrier to Entry.

ABSTRACT: Empirical studies have found that most patent litigations are resolved through settlements rather than trials.Moreover, license fees negotiated in settlement agreements have become very large. We formulate a model of sequential entry with an incumbent patent holder, multiple potential entrants and asymmetric information about the validity of the contested patent (patent strength) between firms that are already in the market and future potential entrants. Within this framework we show that patent settlements between the incumbent and the first entrant can be mutually beneficial even when the cost of trial is zero and the settlement agreement takes the form of a simple fixed license fee. For intermediate patent strengths, settlements are a tool for further entry deterrence. The two parties agree on a high settlement amount which sends a credible signal to "outsiders" that the incumbent's patent is not weak and therefore further entry will not be profitable. This provides a novel explanation for the role of settlements and to the recent observation of high license fees negotiated in settlement agreements. Our analysis demonstrates than even non-reverse settlements that entail only a fixed fee can be anticompetitive because they are used to block further entry.

June 15, 2009 | Permalink | Comments (0) | TrackBack (0)

Judicial Review in Hungarian Competition Law -Tetra Laval Á La Hongroise

Posted by D. Daniel Sokol

Kati Cseres, University of Amsterdam - Amsterdam Center for Law & Economics and Jurian Langer, University of Amsterdam address Judicial Review in Hungarian Competition Law -Tetra Laval Á La Hongroise.

ABSTRACT: This paper assesses the degree of judicial scrutiny performed by administrative courts in Hungary when reviewing decisions by the Hungarian Competition Authority (Gazdasági Versenyhivatal, ?GVH?) in the light of the landmark ruling handed down by the European Court of Justice in Commission vs. Tetra Laval. The paper is divided into four parts. The first part provides an outline of the Hungarian Competition Act. The second part offers a brief overview of the general principles of judicial review of the Hungarian administrative authorities? decisions. The third part examines whether the Tetra Laval ruling has influenced the judicial scrutiny applied by Hungarian courts. The fourth part concludes that although at first sight the Hungarian courts seem to draw little or no inspiration at all from the Community Courts? case-law, a deeper analysis suggests that - irrespective of the developments in European jurisprudence - the Hungarian courts have in essence developed a finely tuned and restrained judicial review of the GVH decisions.The conclusions of this analysis point further than the Hungarian case and provides thoughts for the general discussion on the standard of judicial review of administrative authorities? decisions.

June 15, 2009 | Permalink | Comments (0) | TrackBack (0)