Antitrust & Competition Policy Blog

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

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Saturday, July 11, 2009

East Asian Antitrust

Posted by D. Daniel Sokol

The CPI Learning Center presents: East Asian Antitrust

Session 1: Cartel - Wednesday, June 15, 2009 at 12 pm E.D.T.

Topics include: An historic overview of the development of the Asian legal system; Factors behind the increased role of courts; Examination of the competition laws in various East Asian jurisdictions; EC Treaty in ASEAN; and Cartel regulation.  

Session 2: Abuse of Dominance - Wednesday, June 22, 2009 at 12 pm E.D.T.

Topics include: Regulatory approach to abuse of dominance; Standard approach to abuse of dominance; and the Indomeret Case (Indonesia).

Session 3: Mergers - June, 29, 2009 at 12 pm E.D.T.

Topics include: Prescribed market share vs. case-by-case approach to merger regulation; the Temasek case; and Merger guidelines in East Asian jurisdictions.

About the Instructor:

Professor R. Ian McEwin is Professor of Law at the National University of Singapore and Senior Advisor with Case Associates in London. Formerly, he served as the Principle Economist in the Economics Division of the Ministry of Trade and Industry, Singapore helping to draft Singapore’s competition law.  Subsequently he became the Chief Economist of the Competition Commission of Singapore.   He formerly held visiting appointments at the Centre for Socio-Legal Studies at Oxford, the Law Faculty at George Mason University in Washington, and the Business School at the University of Chicago.

In addition to teaching, Professor McEwin has served as an advisor in competition law, anti-dumping and valuation matters to clients in Australia, Europe and New Zealand.  He has testified as an expert witness in connection with several major competition law lawsuits and has been recognized several times by Global Competition Review in London as a leading competition Economist.

Professor McEwin has a Ph.D. in economics and a L.L.B from the Australian National University and is admitted as a legal practitioner in the Australian Capital Territory.  His articles on the economics of tort law, corporate law, competition law and the regulation of the legal profession have appeared in both economic and law journals worldwide.    

About the CPI Learning Center:

The CPI Learning Center brings together leading global scholars in the fields of competition law and economics with agency officials, practitioners, judges, and corporate counsels. The Learning Center offers a convenient and user-friendly way to acquire the latest thinking on world-wide competition policy and provides access to experts who are at the cutting edge of the field. Lectures are presented by leading professors, scholars, and practitioners of competition policy from around the world, including scholars from Harvard University, University of Chicago, University College London, Singapore University, Hong Kong Polytechnic University and the Chinese Academy of Social Science.

Lectures are presented over CPI’s Global Learning Platform which relies on state-of-the art web technology to deliver lectures globally both in real time as well as on-demand.

To register: Visit  https://www.competitionpolicyinternational.com/course_main.html.

The fee for all three classes, with CLE credit, is $355; without CLE credit the cost is $129. Discounts for multiple users from the same organization and courtesy admissions for competition authorities are available.

This course is approved for CLE in PA, as CPI is an Approved Provider of Distance Learning Courses in PA. Under the approved jurisdiction policy, New York attorneys may apply Pennsylvania CLE credit toward fulfilling their New York CLE requirement. For complete information regarding discounts and the availability of CLE credit in other states, special registration needs, or for any other questions, contact us at LearningCenter@competitionpolicyinternational.com.  

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

Friday, July 10, 2009

Lawyers, Drugs and Money: A Prescription for Antitrust Enforcement in the Pharmaceutical Industry

Posted by D. Daniel Sokol

On Friday, September 25, 2009, at the University of San Francisco School of Law, AAI will co-host a symposium titled "Lawyers, Drugs and Money: A Prescription for Antitrust Enforcement in the Pharmaceutical Industry." Panels.  This symposium will include five panels addressing cutting edge issues relevant to enforcement of antitrust laws in the pharmaceutical industry: 

  • Reverse Payments:  the legality of reverse payments in settling drug patent disputes;
  • Product Hopping:  the legality of brand name drug manufacturers engaging in product hopping to avoid generic competition;
  • Burdens of Proof:  burdens of proof for claims based on allegations of sham patent litigation, Walker Process violations and inequitable conduct before the patent office;
  • Standing and Preemption:  standing for monopolization claims for Walker Process violations and possible preemption by federal patent law; and
  • Class Certification:  the effect of current case law expanding the required showing for class certification in antitrust cases.

Participants.  The keynote speaker will be Prof. C. Scott Hemphill of Columbia Law School.  Panelists will include Meredyth Andrus, Assistant Attorney General, Maryland; Elizabeth Arthur, Assistant Attorney General, Florida;David Balto, Law Offices of David Balto; Lou Bograd, Center for Constitutional Litigation; Prof. Michael Carrier, Rutgers School of Law, Camden; Eric Cramer, Berger & Montague, P.C.; B.D. Daniel, Beck Redden & Secrest; Prof. Joshua Davis, University of San Francisco School of Law; Prof. Robin Feldman, University of California, Hastings; Jay Himes, Labaton Sucharow, LLP; Cheryl Johnson, Deputy Attorney General, California; Prof. Keith Leffler, University of Washington; Linda Nussbaum, Kaplan Fox; Doug Richards, Cohen Milstein; Steven Shadowen, Hangley Aronchick Segal & Pudlin; and David Sorensen, Berger & Montague, P.C.

Sponsors.  Co-Sponsors include USF School of Law, the American Antitrust Institute, the Rutgers Law Journal, Berger & Montague, P.C., Hangley Aronchik Segal & Pudlin, P.C., Kaplan Fox & Kilsheimer LLP, and Lieff, Cabraser Heimann & Bernstein, LLP.

MCLE credit will be provided.  Registration information is forthcoming.  For additional information please email lawfsoevents@usfca.edu.

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

Prices and Network Effects in Two-Sided Markets: The Belgian Newspaper Industry

Posted by D. Daniel Sokol

Patrick J. G. Van Cayseele, Catholic University of Leuven (KUL) - Department of Economics and Stijn Vanormelingen, Hogeschool-Universiteit Brussel (HUBrussel), Catholic University of Leuven (KUL) explain Prices and Network Effects in Two-Sided Markets: The Belgian Newspaper Industry.

ABSTRACT: This paper investigates the two-sided nature of the newspaper industry. We explicitly take into account cross network effects that exist between advertisers and newspaper readers. On one side, advertisers' demand for publicity space depends on the number of newspaper readers and their characteristics. On the other side, readers' demand can be, positively or negatively, influenced by the number of advertisements. In addition, editors may own several newspapers and hence a variety of cross-market effects that result from changes in market prices exist. To estimate demand parameters for both sides of the market, a specific structural model is needed that takes into account those effects. We estimate network effects and price elasticities for Belgian newspaper publishers to assess market power and the degree of competition in the market, which experienced a large consolidation wave over the last decades. This allows us to evaluate a recent merger in the Belgian newspaper industry.

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

Competition Policy after the Credit Crunch: The view from a UK competition authority

Posted by D. Daniel Sokol

Peter Freeman, Chairman—Competition Commission presented an interesting speech at Chatham House last week titled Competition Policy after the Credit Crunch: The view from a UK competition authority.

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

Thursday, July 9, 2009

Monopoly Is What Happens While You’re Busy Making Speeches

Posted by D. Daniel Sokol

Jay L. Himes (Labaton Sucharow) authored an article, Monopoly Is What Happens While You’re Busy Making Speeches, regarding the decision by Christine A. Varney, in her first public speech after being confirmed as Assistant Attorney General for the DOJ's Antitrust Division, to withdraw the Antitrust Division's controversial report discussing conduct by monopolists and dominant firms in the June 12, 2009 issue of BNA's Antitrust & Trade Regulation Report. He examines the background of the DOJ report, and opportunities for the Antitrust Division's new leadership to identify anticompetitive conduct that calls for enforcement action in federal court.

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

Banking Services for Everyone? Barriers to Bank Access and Use around the World

Posted by D. Daniel Sokol

Thorsten Beck, Tilburg University, Economics, Asli Demirguc-Kunt, World Bank - Development Research Group, and Maria Soledad Martinez Peria, World Bank - Development Research Group explain Banking Services for Everyone? Barriers to Bank Access and Use around the World.

ABSTRACT: Information from 209 banks in 62 countries is used to develop new indicators of barriers to banking services around the world, show their correlation with measures of outreach, and explore their association with bank and country characteristics suggested by theory as potential determinants. Barriers such as minimum account and loan balances, account fees, and required documents are associated with lower levels of banking outreach. While country characteristics linked with financial depth, such as the effectiveness of creditor rights, contract enforcement mechanisms, and credit information systems, are weakly correlated with barriers, strong associations are found between barriers and measures of restrictions on bank activities and entry, bank disclosure practices and media freedom, and development of physical infrastructure. In particular, barriers are higher in countries where there are more stringent restrictions on bank activities and entry, less disclosure and media freedom, and poorly developed physical infrastructure. Also, barriers for bank customers are higher where banking systems are predominantly government-owned and are lower where there is more foreign bank participation. Larger banks seem to impose lower barriers on customers, perhaps because they are better positioned to exploit economies of scale and scope.

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

Competition Commission Publishes Annual Report

Posted by D. Daniel Sokol

The Competition Commission (CC) has published its Annual Report and Accounts for 2008/09.  You can download it here.

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

Did the Airline Tariff Publishing Case Reduce Collusion?

Posted by D. Daniel Sokol

Amalia Miller (Virginia - Econ) asks Did the Airline Tariff Publishing Case Reduce Collusion?

ABSTRACT: In December 1992, the US Department of Justice filed suit against eight major domestic airlines and the Airline Tariff Publishing Company in order to reduce opportunities for collusion in the industry. The lawsuit ended with consent decrees limiting the ability of airlines to communicate surreptitiously through the shared fare database. This paper measures the effects of the litigation and its settlement on industry performance, comparing changes in outcomes between market segments that were more and less likely to be affected by the ATP case. Prices fell in response to the investigation, but increased following the settlement, while the number of tickets sold in affected markets declined. The importance of multi-market contact also dropped and then recovered. The ATP case had at best a temporary effect on airline collusion.

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

Successive Monopolies with Endogenous Quality

Posted by D. Daniel Sokol

Hans Zenger (European Commission) analyzes Successive Monopolies with Endogenous Quality.

ABSTRACT: This paper analyzes the impact of vertical integration on product quality. Contrary to previous findings, it is shown that integration decreases quality in many natural situations. In general, the direction of the quality change is governed by three effects that are isolated in the model. This separation allows an analysis of important special cases like the manufacturer/retailer relationship, the intermediate/final good producer relationship, the deregulation of network infrastructure, and the provision of promotional services through independent distributors.

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

Wednesday, July 8, 2009

Asymmetric Price Effects of Competition

Posted by D. Daniel Sokol

Saul Lach (Department of Economics - Hebrew University of Israel) and José-Luis Moraga-González (Department of Economics, University of Groningen) study Asymmetric Price Effects of Competition.

ABSTRACT: This paper examines how the distribution of prices changes with the number of competitors in the market. Using gasoline price data from the Netherlands we find that as competition increases, the distribution of prices spreads out: the low prices go down while the high prices go up, on average. As a result, competition has an asymmetric effect on prices. These findings, which are consistent with a theoretical model where consumers differ in the information they have about prices, imply that consumers' gains from competition depend on their shopping behavior. In our data, all consumers, irrespective of the number of prices they observe, benefit from an increase in the number of gas stations. The magnitude of the welfare gain, however, is greater for those consumers that are aware of more prices. We conclude that an increase in the number of gas stations has a positive but unequal effect on the welfare of consumers in the N! etherlands.

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

European Commission Adopts Final Report Inquiry into the Pharmaceutical Sector

Posted by D. Daniel Sokol

Information is available here.  From the press release:

Main findings and policy conclusions

The inquiry has contributed significantly to the debate on European policy for pharmaceuticals, in particular for generic medicines.

On the basis of a sample of medicines that faced loss of exclusivity in the period 2000 to 2007 in 17 Member States, the inquiry found that citizens waited more than seven months after patent expiry for cheaper generic medicines, costing them 20% in extra spending.

Generic delays matter as generic products are on average 40% cheaper two years after market entry compared to the originator drugs. Competition by generic products thus results in substantially lower prices for consumers. The inquiry showed that originator companies use a variety of instruments to extend the commercial life of their products without generic entry for as long as possible.

The inquiry also confirms a decline of novel medicines reaching the market and points to certain company practices that might contribute to this phenomenon. Further market monitoring is ongoing to identify all the factors that contribute to this decline in innovation.

Reacting to the findings, the Commission will apply increased scrutiny under EC Treaty antitrust law to the sector and bring specific cases where appropriate. The use of specific instruments by originator companies in order to delay generic entry will be subject to competition scrutiny if used in an anti-competitive way, which may constitute an infringement under Article 81 or 82 of the EC Treaty. Defensive patenting strategies that mainly focus on excluding competitors without pursuing innovative efforts will remain under scrutiny. To reduce the risk that settlements between originator and generic companies are concluded at the expense of consumers, the Commission undertakes to carry out further focused monitoring of settlements that limit or delay the market entry of generic drugs. In the case of clear indications that a submission by a stakeholder intervening before a marketing authorisation body was primarily made to delay the market entry of a competitor, injured parties and stakeholders are invited to bring relevant evidence of practices to the attention of the relevant competition authorities.

On regulatory issues the inquiry finds that:

  • There is an urgent need for the establishment of a Community patent and a unified specialised patent litigation system in Europe to reduce administrative burdens and uncertainty for companies. A full 30% of patent court cases are conducted in parallel in several Member States, and in 11% of cases national courts reach conflicting judgements.

  • Recent initiatives of the European Patent Office (EPO) to ensure a high quality standard of patents granted and to accelerate procedures are welcome. This includes measures taken in March 2009 to limit the possibilities and time periods during which voluntary divisional patent applications can be filed (so called "raising the bar exercise")

The Commission is also urging Member States to:

  • ensure that third party submissions do not occur and in any event do not lead to delays for generic approvals

  • significantly accelerate approval procedures for generic medicines - for example, the Commission believes that generic products should automatically/immediately receive pricing and reimbursement status where the originator drug already benefits from such status, which would allow for a faster product launch in certain cases

  • take action if misleading information campaigns questioning the quality of generic medicines are detected in their territory

  • streamline trials that test the added value of novel medicines.



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

Google Plans a PC Operating System

Posted by D. Daniel Sokol

Remember when lots of academics, practitioners and DOJ thought that Microsoft was going to crush everyone in innovative industries?  That seemed to be the dominant position in the academic and legal communities ten, five, three years ago (at least outside of Europe).  Well, today the NY Times reports that Google Plans a PC Operating System.  Google is the search engine of choice today and under DOJ investigation.  Let us also recall that Apple is a serious player in notebooks and Microsoft doesn't have anything that can really touch Apple regarding the IPod and IPhone.  Harry First and Andy Gavil are working on their Microsoft antitrust book this summer and I would be interested to see how they will resolve these technological developments given how they thought that Microsoft got off too easy.  This is yet another example of why we need to be very careful before going after dominant firms in the technology sector.

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

Competition Thinking Still in Silos

Posted by D. Daniel Sokol

Yesterday I presented at the US Chamber of Commerce on the SOE challenge.  One issue that I raised is that there is too much thinking within existing organizational silos among US government agencies (DOJ. FTC, USTR, Commerce, State, and Treasury).  To ameliorate this silo thinking, why not have people from each agency spend 3 to 6 months on secondment to one of the other agencies.  Antitrust enforcers could get a broader understanding of competition policy concerns with time at a trade agency and trade people could learn how markets actually work and competition analysis from the antitrust agencies.  I would suggest a similar secondment in a purely domestic context with FERC, FCC and other agencies spending some time at DOJ and FTC and vice versa.

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

EU Continues with Big Antitrust Fines

Posted by D. Daniel Sokol

The Commission continues to impose large fines.  This time the companies are the European firms E.ON and GDF Suez, thus ending a debate I have with a practitioner friend that only US technology firms would ever received a high fine.  I won the bet and now get a fancy dinner the next time I am in DC.  Are the size of these plus Microsoft and Intel fines excessive?  They may be.  Of course, this is irrelevant since the French political reaction will not be pro-Commission.  I suspect that Kroes' days are now numbered if they were not before.

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

Piercing the Corporate Veil': Imposition of Fines on Associations of Undertakings for Violation of EC Competition Law

Posted by D. Daniel Sokol

Alexandr Svetlicinii, European University Institute - Department of Law describes Piercing the Corporate Veil': Imposition of Fines on Associations of Undertakings for Violation of EC Competition Law.

ABSTRACT: The ECJ's judgment in Coop de France represents an important clarification and affirmation of the basic principles and objectives of the EC fining policy for violations of the competition law. In the present case the Community courts encountered the situation where the appellants were in effect attempting to escape the prosecution for the established violation of competition law by concluding and implementing an anticompetitive agreement for the benefit of its members. The judgment demonstrated that the issue of "objective interests" can make a difference in calculating the fines. Here the Court exemplified the importance of this concept when addressing the principle of non bis in idem and existence of the common members that took part in various associations at the same time. The ruling provided that in situation where the interests of an association are identical to those of its members? the fining based on the latter's turnover is justified. The ECJ's ruling once again indicated the adherence to the main objective of the fining policy articulated in the preceding case law and 2006 fining guidelines: "Fines should have a sufficiently deterrent effect, not only in order to sanction the undertakings concerned (specific deterrence) but also in order to deter other undertakings from engaging in, or continuing, behaviour that is contrary to Articles 81 and 82 of the EC Treaty (general deterrence)". It could be expected that the clarification of the legal standards made by the Community courts will contribute to the prevention of the infringements where associations are used as a convenient legal vehicles for fostering anticompetitive objectives, beneficial to their members.

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

Tuesday, July 7, 2009

Does Competition from Ambulatory Surgical Centers Affect Hospital Surgical Output and Hospital Profit?

Posted by D. Daniel Sokol

Michael Robert Plotzke (ABT Associates) and Charles Courtemanche (UNC - Greensboro, Business and Economics) ask Does Competition from Ambulatory Surgical Centers Affect Hospital Surgical Output and Hospital Profit?

ABSTRACT: Hospital administrators have expressed concern that ambulatory surgical centers (ASCs) lower the profitability of hospitals' outpatient departments by reducing their volume and cherry picking their most profitable patients. This could lead to welfare losses by causing hospitals to reduce their provision of less profitable services such as uncompensated care. This paper estimates the effects of ASC prevalence on hospital surgical volume and profit margins using hospital and year fixed effects models with a variety of robustness checks. We show that ASC entry only appears to influence a hospital's outpatient volume if the facilities are within a few miles of each other. Even then, the average reduction in hospital volume is a modest 2-4%, although the effect is stronger for large ASCs and the first ASCs to enter the market. We find no evidence that entering ASCs reduce a hospital's outpatient profit margins, inpatient surg! ical volume, or inpatient profit margins. In most cases, our results suggest that competition from ASCs does not cause serious financial harm to hospitals.

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

Antitrust and Sports Equipment Standards: Winners and Whiners

Posted by D. Daniel Sokol

John Lopatka (Penn State Law) explains Antitrust and Sports Equipment Standards: Winners and Whiners.

ABSTRACT: Sports governing bodies routinely adopt equipment standards because equipment can have a dramatic impact on performance. Standards and rules set in relation to human capacity define a sport. Because standards by nature are restrictive, equipment producers stand to lose if their products do not conform. Excluded producers sometimes challenge standards on antitrust grounds. This paper explores the economics of sports equipment standard setting and the merits of the antitrust challenge. It concludes that except in the rare case in which the governing body is itself a victim of a boycott, standard setting decisions should be lawful per se.

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

Privatization, Unbundling, and Liberalization of Network Industries: a discussion of the dominant policy paradigm in the EU

Posted by D. Daniel Sokol

Lidia Ceriani, Università Bocconi - Department of Institutional Management, Raffaele Doronzo, Università degli Studi di Milan, Department of Economics, and Massimo Florio, Università degli Studi di Milano, Department of Economics explore Privatization, Unbundling, and Liberalization of Network Industries: a discussion of the dominant policy paradigm in the EU.

ABSTRACT: In this paper we examine the emergence over the last two decades in the EU of a dominant policy paradigm on the reform of network industries. We consider the broad recommendations by the OECD and the European Commission, and the Directives adopted by the European Union on the reform of some public services, such as electricity, gas, and telecom. These recommendations, in their strongest form, advocate the divestiture of public ownership (openly by the OECD, but not by the EC), unbundling (by both organizations, but with differences across sectors), liberalization (again by both organization, but with variations in the role of market regulation). We contrast the predictions and prescriptions of the paradigm, with a theoretical discussion of the welfare impact of the reforms. This discussion, based on a review of some standard microeconomic assumptions on the role of ownership, economies of scale and scope, governance, and market forms, shows that the dominant policy paradigm oversimplifies a very complex story. We suggest that the actual success of the reform is conditional to a large number of economic and institutional factors, and that it is far from obvious that the adoption of the same policy pattern in any and all the EU countries is always welfare improving. Empirical analysis does not support the paradigm.

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

The Evolution of the Chinese Merger Guidelines: A Work in Progress Integrating Global Consensus and Domestic Imperatives

Posted by D. Daniel Sokol

Beth Farmer (Penn State - Law) explains The Evolution of the Chinese Merger Guidelines: A Work in Progress Integrating Global Consensus and Domestic Imperatives.

ABSTRACT:China is among the most recent entrants into global competition enforcement, having adopted the first competition law of general application, the Anti-Monopoly Law (AML) after more than a decade of drafting. The AML and Merger Notification Thresholds, rules issued by decree of the State Council, became effective on August 3, 2008. Both the law and the guidelines were subject to public review and comment, and went through a number of drafts before final adoption.

This article is a comprehensive comparison of merger standards across jurisdictions, with particular focus on the evolution of merger regulation in China. It comprises six parts; after an introduction, part two analyzes the AML with respect to mergers, part three examines predecessor pre-merger notification guidelines for foreign acquisitions and the “legislative history” of the AML pre-merger notification thresholds, which went through successive drafts and significant amendments between March and August, 2008. Part four addresses international benchmarking, raises unanswered questions and issues, and part five concludes.

A variety of international organizations advocate strong national competition policy and use the substance and deployment of national antitrust law to evaluate a jurisdiction’s economic regulation. With the adoption of the AML, China joined a growing number of states that have adopted comprehensive competition laws, but the test of the AML will be in its application. The challenges facing new enforcement agencies are vast: organizational, establishing enforcement procedures that comport with the existing Chinese legal system, allocating appropriate functions to three entities and coordinating process and substance, and, finally, establishing policies and priorities. Given the choice of where to begin enforcement, an agency should weigh the destructiveness of the restraint, importance and ability to enforce, and its own proficiency or readiness to enforce the particular category of violations.

China chose to promulgate its first set of AML Guidelines on the subject of pre-merger notification. In a different system, pre-merger notification and enforcement may not be an obvious first step for a new competition agency implementing a new antitrust law. On the one hand, since the AML itself requires pre-merger notification but does not provide sufficient information to comply, Guidelines are needed. On the other hand, the relevant enforcement agency could have paced its enforcement of mergers. In addition, the enforcement mechanism in China will involve three different government ministries, each responsible for enforcing different segments of the AML. The SAIC, the State Administration of Industry and Commerce, will be responsible for enforcing the provisions against abuse of dominant positions, the NDRC, National Development and Reform Commission, will be entrusted with anti-cartel enforcement, and MOFCOM, the Ministry of Commerce, will have jurisdiction over the merger review provisions of the AML. The organizational structure of three entities with separate responsibilities under the AML may complicate the priority-setting process and set up incentives for maximum activity by each as it competes for position. Additionally, given China’s rapid economic growth and pace of mergers, including foreign investments, there may have been a felt need to assert enforcement power in this arena early.

MOFCOM has already begun to issue additional draft Guidelines and review proposed mergers. Emerging from a lengthy drafting process, the operative agencies appear to be moving with alacrity. Going forward, clarity, transparency and predictability would be recommended in the refinement of the notification procedures and promulgation of substantive merger standards. The AML is indeterminate and judicial interpretation is unavailable, so a clear articulation of the appropriate methodology and controlling legal standard is an unfinished project.

Retrospectively, the experience of the AML and Guideline process has revealed notable receptivity to international commentary on the substance and procedures of merger review. The now-adopted Notification Guidelines went through several public drafts and comments were affirmatively solicited from “all sectors of society” including domestic and foreign scholars and lawyers. Viewing the various official drafts and public comments suggests that some of the recommendations were taken on board. Additionally, the solicitation itself refers to the consensus-based international benchmarks of the ICN and asserts consistency with international standards. The application of the AML, Notification Guidelines and additional Guidelines continues to be a work in progress.

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

Monday, July 6, 2009

More from Professor Christopher Sagers on Judge Sotomayor and American Needle

posted by Shubha Ghosh
[Note: Professor Sagers, a rising star in the field of antitrust and competition policy who teaches at Cleveland-Marshall Law School,posts some additional thoughts on American Needle and Judge Sotomayor's take on the issues raised in the case.  Thank you, Professor Sagers, for your excellent contributions.]

In a post on this blog dated June 30 I speculated that it would be hard to guess how a future Justice Sotomayor might vote in the Court's decision in American Needle v. NFL, cert for which was granted the day before.  MAN did I have it wrong, having overlooked a recent concurrence by that judge that basically is on all fours, and is very encouraging.

Judge Sotomayor's concurrence in Major League Baseball Props., LLC v. Salvino, 542 F.3d 290 (2d Cir. 2008)
http://www.ca2.uscourts.gov/decisions/isysquery/a71a7a75-2cc9-4ec2-a13d-c5ebd55f1704/1/doc/06-1867-cv_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/a71a7a75-2cc9-4ec2-a13d-c5ebd55f1704/1/hilite/),
ought to more or less control her vote in American Needle.  Salvino involved facts nearly on point with American Needle.  Defendant Salvino was a manufacturer of sports memorabilia.  Plaintiff Major League Baseball Properties (MLBP) was an entity substantially identical to central defendant in American Needle, NFL Properties, Inc., in that MLBP was also an entity created and owned by the MLB member teams and had been their exclusive IP licensing agent since the early 1980s.

MLBP brought infringement claims against Salvino for making team-logo-marked novelties, and Salvino counterclaimed in antitrust alleging that the exclusive licensing arrangement was a horizontal restraint in violation of section 1.  The Second Circuit affirmed summary judgment for MLBP on the antitrust counterclaims, finding that there was not even any explicit naked trade restraint at issue, and that under the rule of reason Salvino could not prevail.

Judge Sotomayor concurred, but pointed out that she would have applied the ancillary restraints doctrine.  She began by pointing out her concern over the majority's "flawed view that the Clubs have made no agreement on price," where she considered the creation of an exclusive sales agency to represent horizontal competitors to be a price-fixing conspiracy.  She wrote that "[a]n agreement to eliminate price competition from the market is the essence of price fixing."  542 F.3d at 334-35.  Critically, from the perspective of predicting how she might see American Needle, she added this policy observation:  "Were the majority correct, competing companies could evade the antitrust law simply by creating a 'joint venture' to serve as the exclusive seller of their competing products.  So long as no agreement explicitly listed the prices to be charged, the companies could act as monopolists through the 'joint venture,' setting prices together for their
 competing products . . . ."  Id. at 335.  Also encouraging is her reliance on Timken Roller Bearing Co.
 v. U.S., 341 U.S. 593 (1951), in which Justice Black famously held that as a matter of law the mere labeling of a conspiracy as a "joint venture" is irrelevant to its legality under section 1.  She cited as support for the same proposition the Collaboration Guidelines' observation that "labeling an arrangement a 'joint venture' will not protect what is merely a devise to raise price or restrict output . . . ." 

But the single most important observation in her concurrence seems to me  her citation to page 5 of Dagher, as authority for the view that the court "must decide . . . whether the [MLBP arrangement], which is price fixing in a literal sense, should nevertheless be reviewed under a rule of reason in light of MLBP's other efficiency-enhancing benefits."  Id. at 337.  This seems so important because a major open question under Dagher is just how broadly it should be read, and one plainly permissible reading of that opinion would be that all "internal" decision making that is part of an
 otherwise legal joint venture's "core" conduct should be absolutely immune from section 1, on a single-entity rational.  See, e.g., James A. Keyte, Dagher and “Inside” Joint Venture Restraints, ANTITRUST, Summer 2006, at 44.  Judge Sotomayor's citation to Dagher would seem pretty clearly to reject that reading.

Having reached that point, Judge Sotomayor then analyzed the MLBP's structure and activities through the ancillarity lens and found its price restraint to be reasonably necessary to the entity's procompetitive benefits.

Neither in the majority nor concurring decisions was there any discussion of single entity treatment.  This was presumably because a single-entity finding would be precluded under Second Circuit precedent (N. Am. Soccer League v. NFL, 670 F.2d 1249 (2d Cir. 1982)).

With any luck, at least two of the seemingly likely votes for affirmance (Alito, Kennedy, Scalia, Roberts, and Thomas) can be convinced of the danger and implausibility of the American Needle ruling.  And then with any real luck the then-Justice Sotomayor will write for the resulting majority, and will recap her excellent analysis from Salvino.  And if she does, here's hoping she'll cite to Dagher in exactly the same way.
In a post on this blog dated June 30 I speculated that it would be hard to guess how a future Justice Sotomayor might vote in the Court's decision in American Needle v. NFL, cert for which was granted the day before.  MAN did I have it wrong, having overlooked a recent concurrence by that judge that basically is on all fours, and is very encouraging.

Judge Sotomayor's concurrence in Major League Baseball Props., LLC v. Salvino, 542 F.3d 290 (2d Cir. 2008) http://www.ca2.uscourts.gov/decisions/isysquery/a71a7a75-2cc9-4ec2-a13d-c5ebd55f1704/1/doc/06-1867-cv_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/a71a7a75-2cc9-4ec2-a13d-c5ebd55f1704/1/hilite/), ought to more or less control her vote in American Needle.  Salvino involved facts nearly on point with American Needle.  Defendant Salvino was a manufacturer of sports memorabilia.  Plaintiff Major League Baseball Properties (MLBP) was an entity substantially identical to central defendant in American Needle, NFL Properties, Inc., in that MLBP was also an entity created and owned by the MLB member teams and had been their exclusive IP licensing agent since the early 1980s.

MLBP brought infringement claims against Salvino for making team-logo-marked novelties, and Salvino counterclaimed in antitrust alleging that the exclusive licensing arrangement was a horizontal restraint in violation of section 1.  The Second Circuit affirmed summary judgment for MLBP on the antitrust counterclaims, finding that there was not even any explicit naked trade restraint at issue, and that under the rule of reason Salvino could not prevail.

Judge Sotomayor concurred, but pointed out that she would have applied the ancillary restraints doctrine.  She began by pointing out her concern over the majority's "flawed view that the Clubs have made no agreement on price," where she considered the creation of an exclusive sales agency to represent horizontal competitors to be a price-fixing conspiracy.  She wrote that "[a]n agreement to eliminate price competition from the market is the essence of price fixing."  542 F.3d at 334-35.  Critically, from the perspective of predicting how she might see American Needle, she added this policy observation:  "Were the majority correct, competing companies could evade the antitrust law simply by creating a 'joint venture' to serve as the exclusive seller of their competing products.  So long as no agreement explicitly listed the prices to be charged, the companies could act as monopolists through the 'joint venture,' setting prices together for their
 competing products . . . ."  Id. at 335.  Also encouraging is her reliance on Timken Roller Bearing Co.
 v. U.S., 341 U.S. 593 (1951), in which Justice Black famously held that as a matter of law the mere labeling of a conspiracy as a "joint venture" is irrelevant to its legality under section 1.  She cited as support for the same proposition the Collaboration Guidelines' observation that "labeling an arrangement a 'joint venture' will not protect what is merely a devise to raise price or restrict output . . . ." 

But the single most important observation in her concurrence seems to me  her citation to page 5 of Dagher, as authority for the view that the court "must decide . . . whether the [MLBP arrangement], which is price fixing in a literal sense, should nevertheless be reviewed under a rule of reason in light of MLBP's other efficiency-enhancing benefits."  Id. at 337.  This seems so important because a major open question under Dagher is just how broadly it should be read, and one plainly permissible reading of that opinion would be that all "internal" decision making that is part of an
 otherwise legal joint venture's "core" conduct should be absolutely immune from section 1, on a single-entity rational.  See, e.g., James A. Keyte, Dagher and “Inside” Joint Venture Restraints, ANTITRUST, Summer 2006, at 44.  Judge Sotomayor's citation to Dagher would seem pretty clearly to reject that reading.

Having reached that point, Judge Sotomayor then analyzed the MLBP's structure and activities through the ancillarity lens and found its price restraint to be reasonably necessary to the entity's procompetitive benefits.

Neither in the majority nor concurring decisions was there any discussion of single entity treatment.  This was presumably because a single-entity finding would be precluded under Second Circuit precedent (N. Am. Soccer League v. NFL, 670 F.2d 1249 (2d Cir. 1982)).

With any luck, at least two of the seemingly likely votes for affirmance (Alito, Kennedy, Scalia, Roberts, and Thomas) can be convinced of the danger and implausibility of the American Needle ruling.  And then with any real luck the then-Justice Sotomayor will write for the resulting majority, and will recap her excellent analysis from Salvino.  And if she does, here's hoping she'll cite to Dagher in exactly the same way.

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