Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, January 17, 2009

Financial Strength as a Relevant Criterion in EC Merger Analysis: A Search for Meaning

Posted by D. Daniel Sokol

Christopher Bright (Shearman & Sterling) and John Schmidt (Shepherd and Wedderburn) discuss Financial Strength as a Relevant Criterion in EC Merger Analysis: A Search for Meaning in a new article.

ABSTRACT: The concept that a firm's economic or financial strength may confer or enhance market power found its way into European merger control largely as a result of the German influence in formulating the original dominance test. In the past, Commission has used financial strength only tentatively, as a plus factor in problematic cases, but without robustly defining either the concept or the situations in which it gives rise to competitive harm. Financial strength seems nevertheless to have withstood the Commission's maelstrom of reforms. Whether this happened by design or accident is unclear. In examining past Commission practice, we seek to identify common strands and meaning in the Commission's approach, before concluding that the concept remains as a vague remnant of the ECMR's ordoliberal origins and should have no place in the world of modern merger analysis.

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

Friday, January 16, 2009

Product Bundling: The Implications of the Recent Australian Full Federal Court Decision in ACCC v. Baxter Healthcare

Posted by D. Daniel Sokol

Richard Owens, DLA Phillips Fox discusses Product Bundling: The Implications of the Recent Australian Full Federal Court Decision in ACCC v. Baxter Healthcare.

ABSTRACT: The Australian Full Federal Court has recently issued its decision in ACCC v. Baxter Healthcare. This decision is the first time that bundling has been found to be a misuse of market power under section 46 of the Trade Practices Act 1974 (Cth). The decision therefore has significant implications for any firms that are considering bundling products. The judgments of the Federal Court and Full Federal Court also show the reluctance of Australian judges to apply detailed economic tests to assess bundling, but they indicate that Australian judges instead tend to apply informal tests that have a similar effect.

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

Prominence and Consumer Search: The Case With Multiple Prominent Firms

Posted by D. Daniel Sokol

Jidong Zhou (Department of Economics, University College London) discusses Prominence and Consumer Search: The Case With Multiple Prominent Firms.

ABSTRACT: This paper extends Armstrong, Vickers, and Zhou (2007) to the case with multiple prominent firms. All consumers first search among prominent firms, and if their products are not satisfactory, they continue to search among non-prominent ones. Prominent firms will charge a lower price than their non-prominent rivals as in the case with a single prominent firm, but relative to the situation without any prominent firm, the presence of more than one prominent firm can induce all firms to raise their prices. We also characterize how market prices and welfare vary with the number of prominent firms.

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

Bush, Clinton, Bush: Twenty Years of Merger Enforcement at the Federal Trade Commission

Posted by D. Daniel Sokol

Malcolm B. Coate of the FTC's Bureau of Economics offers a retrospective on Bush, Clinton, Bush: Twenty Years of Merger Enforcement at the Federal Trade Commission.

ABSTRACT: The Hart Scott Rodino program, coupled with the modern Merger Guidelines, has structured merger enforcement for the last twenty years. This paper tabulates and evaluates information from Federal Trade Commission merger reviews. While horizontal mergers predominate, vertical, potential competition and monopsony cases are represented in the sample. Over the years, the Commission has studied mergers in a broad range of industries, including branded consumer products, chemicals, hospitals, drugs, oil, and retailing. Some evolution in the theories of concern actually used is observed, along with changes in the efficiency reviews. A statistical model identifies limited evidence to suggest that enforcement standards change with the political control of the Federal Trade Commission.

January 16, 2009 | Permalink | Comments (1) | TrackBack (0)

Thursday, January 15, 2009

Reuters Picks Elhauge and Leibowitz as Likely DOJ/FTC Heads

Posted by D. Daniel Sokol

See the story here.

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

Reflections on the Antitrust Modernization Commission's Report and Recommendations Relating to the Antitrust/IP Interface

Posted by D. Daniel Sokol

Tom Cotter of the University of Minnesota Law School provides some Reflections on the Antitrust Modernization Commission's Report and Recommendations Relating to the Antitrust/IP Interface.

ABSTRACT: The Antitrust Modernization Commission's (AMC's) recommendations relating to the IP/antitrust interface reflect what has become the consensus view among mainstream commentators that IP and antitrust are, for the most part, complementary rather than antagonistic bodies of law. In this article, I argue that this consensus view is largely correct, and that the AMC's consensus-based recommendations are both commendable and persuasive. In addition, however, I argue that the consensus view nevertheless fails to capture some remaining tensions that could become acute in certain ongoing disputes lying along the antitrust/IP interface. These areas of potential conflict can be grouped into three broad categories. "Category 1" comprises cases in which IP law does not provide what some market participants believe to be an adequate solution to a free-riding problem that in theory could undermine the participants' incentive to invest in innovation. When such cases arise, courts may have to determine whether self-help efforts on the part of such participants to inhabit IP's "negative space" violate IP or antitrust norms, and if so whether the two sets of norms themselves conflict. Second, and of greater significance to antitrust policy at present, joint efforts on the part of potential IP users to facilitate the adoption and use of a particular technology may give rise to antitrust problems. The report briefly discusses one recurring situation falling within this latter category ("category 2"), relating to SSOs. Third, antitrust enforcers from time to time may perceive IP law as falling far short of attaining the optimal incentives/access tradeoff. In this third category of cases ("category 3"), questions may then arise whether antitrust should come to the rescue by constraining the exercise of unduly broad IPRs. In all three categories of cases, the risk will be present that antitrust intervention may overshoot its mark, thus undermining both the incentive structures embedded within the IP laws and efforts to reform those IP laws, when necessary, from within. Problematically, it remains unclear how antitrust enforcers can weigh the procompetitive benefits of challenged conduct that substitutes for IPRs (in category 1), restricts the exercise of IPRs (category 2), or exploits those IPRs to the maximum degree (category 3), against the potential corresponding harms to the integrity of the IP incentive scheme or to social welfare generally; and yet to describe the costs and benefits as in some sense incommensurable does not make the problem go away.

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

The Perils of Antitrust Proliferation - The Process of 'Decentralized Globalization' and the Risks of Over-Regulation of Competitive Behaviour

Posted by D. Daniel Sokol

Geradind_1 Damien Geradin, Tilburg University - Tilburg Law and Economics Center (TILEC) and College of Europe has an interested new paper on The Perils of Antitrust Proliferation - The Process of 'Decentralized Globalization' and the Risks of Over-Regulation of Competitive Behaviour.

ABSTRACT: As Einer Elhauge and I noted in the preface to our recently published casebook, modern antitrust law is global antitrust law. This is not so much the case because large corporations are subject to global antitrust rules, but because their behavior is being reviewed under the antitrust rules of an ever growing number of jurisdictions. While the last six decades have seen repeated unsuccessful attempts to develop global antitrust rules, the 1980s and 1990s have witnessed significant growth in the number of countries adopting antitrust law statutes and setting up specialized antitrust agencies and/or courts. Thus, some 100 countries currently have antitrust rules in place, and the process has not ended yet. On August 1, 2008, China's Anti-Monopoly Law (hereafter, the "AML") entered into force and various factors indicate that China will become a significant actor on the global antitrust scene.

As a result, a typical merger between large U.S. corporations now ordinarily requires approval not just in the United States ("U.S."), but also in the European Union ("EU"), Canada, Brazil, South Africa, Russia, Korea, and the numerous other jurisdictions which have merger control rules and in which the activities of such corporations may produce market effects. Similarly, international cartels may trigger administrative, civil or even criminal investigations not only in the United States, but also in a range of other jurisdictions. The Microsoft case also bears testimony to the fact that firms engaging in certain practices, such as refusal to license or tying, may end up being condemned for abuse of dominance under the antitrust laws of different nations and, as a result, face a variety of remedies that are not necessarily consistent. Thus, businessmen, lawyers and policy-makers can no longer content themselves with understanding only the antitrust law of their nation. They must also be conversant with the other regimes that form part of the overall legal framework that regulates competitive behavior.

While I, like many other scholars, have supported and even to some extent contributed to the development and adoption of antitrust law regimes in a growing number of jurisdictions, my increased level of involvement in recent years in cases dealing with the application of antitrust laws and the participation of authorities of several jurisdictions has permitted me to gain first hand experience of some of the pitfalls of the process of "decentralized globalization" of antitrust, which has taken place in the last few decades as a result of the concomitant failure of nations or international organizations to develop a global antitrust law regime and the decision of many nations to adopt their own antitrust laws. While the notion of "decentralized globalization" may sound like an oxymoron, it represents an attempt to describe the fact that antitrust is today a global phenomenon, not through the adoption of supranational rules such as in areas pertaining to environmental protection, labor rights, or human rights, but through the adoption of national rules often varying in scope, objectives, methods, and the manner in which they are enforced.

There is no doubt that the adoption of antitrust rules in a larger number of nations generates benefits as it allows, for instance, these nations to protect their citizens against international cartels or excessive market concentration This process has, however, also given rise to challenges for global corporations, some of which are well known. The "decentralized globalization" of antitrust increases: (i) the cost of doing business and the complexity of large-scale antitrust investigations, which now often have a multi-jurisdictional component; (ii) the risk of contradictory decisions where a firm's behavior is reviewed by different antitrust authorities under different sets of rules; and (iii) the likelihood that some decisions be guided by protectionist motives.

The objective of this paper is to raise awareness of a particular problem, which relates to the fact that in a world where a conduct of a given is subject to different antitrust regimes, the most restrictive antitrust regime always wins, i.e. the firm in question will be required to ensure that its conduct conforms to whichever regime is most restrictive, hence leading to global antitrust over-enforcement. As will be seen, this issue, which I referred to as the "Strictest Regime Wins" problem, may lead to situations where the decision of an antitrust authority in one jurisdiction (for instance, taking a negative decision on a conduct that is otherwise considered to be pro-competitive) may deprive consumers in other jurisdictions of various efficiencies that are well-recognized by their own antitrust authorities. This paper also draws attention to a number of procedural issues, which may negatively impact the ability of corporations investigated in foreign jurisdictions to defend their case.

Against this background, this paper is divided into five parts. Part II describes the process of "decentralized globalization" alluded to above. Part III discusses the various benefits brought about by the adoption of antitrust regimes in an increasingly large number of nations, but also the challenges that this has created for multinational corporations. Part IV focuses on the problem of global antitrust over-enforcement described above. Finally, Part V provides for a short conclusion.

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

Comments on New DOJ Guidelines for its Leniency Program

Posted by D. Daniel Sokol

Tiffany M. Joslyn, Research Counsel, White Collar Crime Project of the National Association of Criminal Defense Lawyers (NACDL) offers a very brief piece on the recent changes to the DOJ Antitrust Division Leniency Program guidelines.

Download nacdl_update_1.7.09 - DOJ Antitrust Division Releases New Guidelines for its Leniency Program.pdf

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

Draft Commission Guidelines on the Assessment of Non-Horizontal Mergers: Do They 'Defend' the Efficiency Defence?

Posted by D. Daniel Sokol

Alexandr Svetlicinii, European University Institute - Department of Law asks, Draft Commission Guidelines on the Assessment of Non-Horizontal Mergers: Do They 'Defend' the Efficiency Defence?

ABSTRACT: The Draft Guidelines on the assessment of non-horizontal mergers released by the Commission in February 2007 provides academia, industry and the larger public with an opportunity to comment on the treatment of non-horizontal concentrations under the new substantive test of the 2004 EC Merger Regulation. The Draft Guidelines is one of the continuous steps towards clarification of both substantive and procedural aspects of the reformed EC merger control. One of the issues that was expected to be clarified in the future Non-Horizontal Guidelines is the treatment of the efficiencies and incorporation of the efficiency defence in merger assessment process. As economic theory demonstrates, vertical and conglomerate concentrations are more likely to generate efficiencies that reduce costs and improve production or distribution processes and quality of the products thus ultimately benefiting the final consumer. As the efficiency defence was recognized in principle, but not yet applied by the Commission or Community courts, the future Non-Horizontal Guidelines have special importance in clarifying this legal concept and its practical application. Present work analyses the Draft Guidelines in the light of the preceding administrative guidelines issued by the Commission and recent case law developments in the area of EC merger control. The author submits that the Draft Guidelines fall short of improving the chances of the efficiency defence being effectively applied by the merging parties in view of the increasing standard of proof and judicial review. The article advocates the elaboration of more detailed and specific rules concerning the efficiency defence that would provide the parties with a functioning procedural mechanism giving a chance for efficiency claims to be considered against the alleged competitive harm.

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

Wednesday, January 14, 2009

Antitrust Systems: Searching Similarities between East Asia and Chile

Posted by D. Daniel Sokol

Crispulo Marmolejo, Universidad Santo Tomas - Chile, Law discusses Antitrust Systems: Searching Similarities between East Asia and Chile.

ABSTRACT: This paper analyzes the main characteristics of the Antitrust Laws applied to the experiences of three countries in East Asia (China, Korea and Japan) and exploring some similarities with the antitrust system of Chile, a South American country. The text establishes that the four countries lived in authoritarian regimes that implemented free market economies, and as a consequence of this, a collection of legal rules on Monopolies and Protection of the Free Competition. Also, all the cases studied are experiencing the phenomena of corporate concentration, which has encouraged to its regulatory agencies to design administrative rules called "Merger Guidelines".

January 14, 2009 | Permalink | Comments (0) | TrackBack (0)

An Introduction to Statistics in Antitrust Litigation

Posted by D. Daniel Sokol

Now on offer is what looks to be an amazingly useful class on An Introduction to Statistics in Antitrust Litigation by Professor Michael Salinger.

This course provides an introduction to the use of expert statistical presentation in antitrust litigation. It will focus on how to use statistical analysis in litigation to organize data and ultimately establish a fact or set of facts. Professor Salinger will demystify esoteric statistical concepts that are crucial to understanding statistical evidence. Professor Salinger also will address how to prepare and present expert statistical testimony more effectively in court.

In this course, you’ll learn:

    * What can (and cannot) be learned from data analysis
    * How to work with mathematical models
    * Techniques for organizing data: distribution and densities

Professor Salinger’s course has significant professional and practical content for attorneys practicing in the antitrust and competition policy arenas, both domestically and abroad. While the principles covered will be general, the course will be organized around two examples from antitrust: market definition and the effect of a conspiracy.

The course will be presented in four sessions, beginning on Wednesday, January 21, 2009 at 12 pm E.S.T. 
 
Course Schedule: 
 
Session 1: The Objective of Statistics – Wednesday, January 21, 2009 at 12 pm E.S.T.
Topics: What can (and cannot) be learned from data analysis, Nature of mathematical modeling, Organizing data:  Distributions and Densities
Session 2: Statistics of One Variable – Wednesday, January 28, 2009 at 12 pm E.S.T.
Topics: Measures of central tendency, Measures of dispersion, Precision of estimates, Hypothesis tests and statistical significance
Session 3: Statistical Relationship between Two Variables – Wednesday, February 4, 2009 at 12 pm E.S.T.
Topics: Scatter plots, Simple regression, Correlation
Session 4: Statistical Relationships among More Than Two Variables – Wednesday, February 11, 2009 at 12 pm E.S.T.
Topics: Multiple regression, Meaning of / Controlling for another variable

Each session will feature a dedicated Q&A period at the end of the lecture.

This series will be presented over CPI’s Global Learning Platform which delivers lectures globally in real time.

Registration:
To register, please go to our Learning Center Website at https://www.competitionpolicyinternational.com/cpi-learning.html, and click on the "Explore Courses" link.

Pricing:
The base price for the course is $129 for all four classes or $49 for each individual class. If you are requesting CLE credit, the price for the course is $429, or $124 for each class.

We will provide 20% discounts for five or more members of the same institution who register. We are also offering free access to members of competition authorities. To register under these circumstances, please contact us directly at LearningCenter@competitionpolicyinternational.com.

Technology:
We are using an Adobe learning platform. The only technology you will need for access is an Adobe Flash player (which most computers already have downloaded; if not the player is accessible, free, at http://get.adobe.com/flashplayer/).

In order to ensure comprehensive global audio access, we have chosen Global Connect, which uses a phone line. Once you log on to the Adobe platform, you will be prompted in a pop up window to enter your phone number. The bridge will then call you - once you answer you'll be joined to the bridge. We do have a back up process which will allow you to dial in directly from your phone using a toll-free number.

Expertise Level:
This is a basic class that doesn't require any substantive knowledge of statistics or economics.

Duration:
Each Class will have a 5 minute introduction, a 45-50 minute lecture period and 10 to 15 minute Question and Answer session.

Subsequent availability:
We will be posting this class on our website after presentation. Access will be provided at no cost for a limited period to those who attended the class. For those who cannot attend the live course, access will be provided for the same price as the live course. Purchase information will be available after the end of the course.

CLE Credit:
Applications for CLE credit for the real time course are in process for several states, including New York, California, Texas, Illinois, and Virginia. The seminar has been designed for one hour of CLE credit/class (four hours of credit for the entire course). CLE requirements are different for classes that are not viewed in real time and may not be available in your state. For further information or for additional questions regarding earning CLE credit, please contact our Director of CLE at Learning Center@competitionpolicyinternational.com.

January 14, 2009 | Permalink | Comments (0) | TrackBack (0)

Why the Filed Rate Doctrine Should Not Imply Blanket Judicial Deference to Regulatory Agencies

Posted by D. Daniel Sokol

Jim Rossi, Florida State University College of Law argues Why the Filed Rate Doctrine Should Not Imply Blanket Judicial Deference to Regulatory Agencies.

ABSTRACT: The filed rate doctrine is a venerable doctrine of public utility regulation. Federal courts applying the doctrine frequently defer to the regulatory agency and refuse to consider the merits of alleged violations of antitrust, tort or contract claims where resolution would require a departure from a filed rate. For over a century, the filed rate doctrine has served many important purposes. However, with increased attention to market-based approaches to electric power, natural gas and telecommunications regulation, there is reason to question both the doctrine's continued applicability and usefulness. This short essay argues that, as regulators implement competitive markets in utility industries, at a minimum the traditional principles of deference which courts applied in this context need to be reassessed.

January 14, 2009 | Permalink | Comments (0) | TrackBack (0)

Two Forms of Modernization in European Competition Law

Posted by D. Daniel Sokol

Dgerber_web David Gerber of Chicago Kent Law discusses Two Forms of Modernization in European Competition Law.

ABSTRACT: In European competition law, the term "modernization" has been a catchword and focus of attention since the late 1990s. Usually, the reference is to "procedural" or "institutional" modernization. The European Commission used the term "modernization" in referring to the important set of changes in the institutional structure and procedures of competition law that it introduced in 2004, and it has fundamentally changed important procedures for developing and applying competition law in Europe. During the same period in which this form of modernization was proceeding, another form of "modernization" was also taking shape that represents a fundamental reorientation of much of the substantive law thinking in European competition law

Curiously, little attention has been paid to the relationship between these two processes. Yet they have taken place over roughly the same period; many of the same people have been involved in instigating the changes; and they have been driven by many of the same forces and pressures. Understanding the relationship between these two processes promises not only to provide a better understanding of each, but also important insights into the current roles of competition law in the further integration of Europe. Even more broadly, it helps to reveal the forces at work in this critical period of European legal and political development.

The Article makes two central claims. One is that the two processes are related in important ways and that neither can be fully understood without understanding the other. The other is that the relationships between the two reveal changes in the dynamics of European competition law that have so far been little noticed.

January 14, 2009 | Permalink | Comments (1) | TrackBack (0)

Tuesday, January 13, 2009

Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition

Posted by D. Daniel Sokol

Joseph Farrell, University of California, Berkeley - Department of Economics, and Carl Shapiro, University of California, Berkeley - Haas School of Business argue for Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition.

ABSTRACT: We propose a simple, new test for making an initial determination of whether a proposed merger between rivals is likely to reduce competition and thus lead to higher prices. Under current antitrust policy, the government can establish a presumption that a proposed horizontal merger will harm competition by defining the relevant market and showing that the merger will lead to a substantial increase in concentration in that market. However, this approach can perform poorly in markets for differentiated products, where market boundaries are unclear and the proximity of the products sold by the merging firms is a key determinant of the merger's effect on competition. Our test looks for upward pricing pressure (UPP) resulting from the merger. We develop a simple diagnostic for UPP based on the price/cost margins of the products sold by the merging firms and the magnitude of direct substitution between the two firm's products. We argue that our approach is well grounded in economics, workable in practice, and superior to existing methods in a substantial class of mergers.

January 13, 2009 | Permalink | Comments (0) | TrackBack (0)

Maximal Cartel Pricing and Leniency Programs

Posted by D. Daniel Sokol

Harold Houba, VU University Amsterdam - Department of Economics, Evguenia Motchenkova, VU University Amsterdam, and Quan Wen, Vanderbilt University - Department of Economics discuss Maximal Cartel Pricing and Leniency Programs.

ABSTRACT: For a general class of oligopoly models with price competition, we analyze the impact of ex-ante leniency programs in antitrust regulation on the endogenous maximal-sustainable cartel price. This impact depends upon industry characteristics including its cartel culture. Our analysis disentangles the effects of traditional antitrust regulation and the leniency program. Ex-ante leniency programs are effective if and only if these offer substantial rewards to the self-reporting firm. This is in contrast to currently employed programs that are therefore ineffective.

January 13, 2009 | Permalink | Comments (0) | TrackBack (0)

New Antitrust Realism

Posted by D. Daniel Sokol

Stuckemaurice

Maurice Stucke of the University of Tennessee Law School argues for New Antitrust Realism in a forthcoming piece.

ABSTRACT: In the midst of a failing economy, the incoming Obama administration will not likely adopt its predecessor's antitrust policies. So if change is afoot, what form should change take? This essay outlines the needed transformative change in today's competition policy. The essay proposes more empirical analysis by the U.S. competition authorities, outlines how behavioral economics can assist in this new antitrust realism, and concludes in explaining why such antitrust realism is needed.

January 13, 2009 | Permalink | Comments (0) | TrackBack (0)

Ex Post Regulation Facilitates Collusion

Posted by D. Daniel Sokol

Patrick Beschorner, Centre for European Economic Research, argues that Ex Post Regulation Facilitates Collusion.

ABSTRACT: Under ex ante access regulation entrants often claim that access fees are excessive. I show that this is only the case if further entry is admitted. If the entrant is protected from further entry it would agree with the incumbent upon a strictly positive access fee which may exceed the efficient level. Ex post regulation facilitates this type of collusion and should be abandoned.

January 13, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2009

Competition Policy in Times of Global Crisis

Posted by D. Daniel Sokol

Juan Antonio Riviere of the European Commission has written on Competition Policy in Times of Global Crisis. 

Download blc24_en_competition_policy_in_times_of_global_crisis.pdf

January 12, 2009 | Permalink | Comments (0) | TrackBack (0)

Why Two US Antitrust Agencies?

Posted by D. Daniel Sokol

With an increasing push by the FTC to create a different merger review standard and with conduct cases brought under the FTC Act strategically over the use of the Sherman Act, and with a change in administration, maybe we should rethink the institutional structure of US antitrust.  Do we really need two agencies? There are a number of different possibilities that this could take:

1. move all but the criminal DOJ work to the FTC (empirical work from the past 15 years suggests that independent agencies lead to better outcomes than executive agencies within the world of complex regulation)
2. move all of the competition work from the FTC to DOJ and make the FTC a consumer protection agency
3. create some very specific slice and dice similar to FERC and the Department of Energy
4. Make formal some of the informal turf allocations between the agencies on mergers

Do readers have any thoughts?

January 12, 2009 | Permalink | Comments (2) | TrackBack (0)

COMESA Launches Fair Competition Commission

Posted by D. Daniel Sokol

Eastern and Southern Africa now has antitrust coverage as COMESA Launches Fair Competition Commission.

January 12, 2009 | Permalink | Comments (0) | TrackBack (0)