Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, August 15, 2009

Professor Ernst-Joachim Mestmäcker receives the Hayek Medal

Posted by D. Daniel Sokol

From the press release:

Prof. Ernst-Joachim Mestmäcker, Emeritus Director at the Max Planck Institute for Comparative and International Private Law, has been awarded the Friedrich August von Hayek Medal of the Hayek-Gesellschaft. Prof. Mestmäcker is being honoured for his work on Ordnungspolitik as well as German and European competition law. By strengthening liberal thought and the political process, his academic efforts have steadfastly contributed to principles underpinning liberty.

In his laudatio at this year’s meeting of the Hayek-Gesellschaft in Jena, Gerhard Schwarz, Business and Economics Editor of the Neuen Züricher Zeitung, praised Prof. Mestmäcker as, above all, a jurist who tackled the topic of competition with unparalleled tenacity, doing so not merely from a perspective of market functionality but rather with an ordoliberal understanding: recognising it as an instrument for checking power. Mestmäcker, per Schwarz, has deliberated upon the boundaries of state, society and private autonomy. In so doing he has shown himself to be equally at home in the field of economics as in the legal sciences. This is reflected, he concluded, in a deeper understanding: whereas the economy and economics are not subordinate to the state or society, the law is, conversely, not subsumed by economics.

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

Coloquio ForoCompetencia

Posted by D. Daniel Sokol

4to. COLOQUIO FOROCOMPETENCIA
Pilar, Buenos Aires - 16 de octubre de 2009

Programa
8:30 - 9:00 - Acreditación y desayuno.
9:00 - 9:10 - Palabras de bienvenida: Miguel del Pino, Miembro del Comité Organizador del 4° Coloquio. 9:10 – 9:30 – Palabras de apertura: Dr. Ricardo Napolitani, Presidente de la CNDC (a confirmar).
9:30 - 11:00 - Panel 1: Defensa de la competencia e intervención del Estado en tiempos de crisis. Panelista: Ignacio de León (Econlex, Venezuela). Comentaristas:Hugo Miguens (ex Secretario de Competencia y Def. del Consumidor, Arg.). José Tavara (Universidad Católica, Perú). Moderador: Julián Peña
11:00 - 11:30 - Café.
11:30 - 13:00 - Panel 2: Medidas preventivas. Panelista: Barbara Rosenberg (Barbosa, Müssnich & Aragão, Brasil). Comentaristas: Alfredo Gusmán (Cámara Apel. Civil y Comercial Federal, Argentina). Ismael Malis (ex Presidente CNDC, Argentina). René Medrado (Pinheiro Neto, Brasil). Moderador: Marcelo D’Amore
13:00 - 14:30 - Almuerzo buffet
14:30 - 16:00 - Panel 3: Acuerdos de clemencia. Integrantes: Mariana Tavares (Secretaria de Derecho Económico, Brasil). Diego Póvolo (vocal de la CNDC, Argentina). Karine Faden (Freshfields, EE.UU.). Moderador: Viviana Guadagni
16:00 - 16:30 - Café.
16:30 - 18:00 - Panel 4: Control de fusiones en la nueva economía: Convergencia e innovación Panelista: Santiago Urbiztondo (FIEL, Argentina). Comentaristas: Antonio Guerra Fernández (Uría & Menéndez, España). Felipe Irarrázabal (Philippi, Yrarrázabal, Pulido & Brunner, Chile). Humberto Guardia Mendonça (Vocal de la CNDC, Argentina). Moderador: Walter Cont
18:00 - Palabras de cierre, Marcelo den Toom, Miembro del Comité Organizador del 4° Coloquio.

Lugar de Realización: Sheraton Pilar Hotel and Convention Center. Pilar, Buenos Aires. Precio de Inscripción: U$S 150 (sector privado) y U$S 75 (sector público). Cupos limitados. Inscripciones: Marina Bidart (marinabidart@yahoo.com.ar), Bernardo Cassagne (bcassagne@ebv.com.ar) o a Viviana Guadagni (vguada@fibertel.com.ar) . En Brasil, enviar pago y formulario a Ricardo Inglez de Souza (rsouza@demarest.com.br). Importante: Se considerará inscripto quien efectivice el correspondiente pago. Comité Organizador: Bernardo Cassagne, Germán Coloma, Walter Cont, Marcelo D´Amore, Viviana Guadagni, Miguel del Pino, Marcelo den Toom, Ricardo Inglez de Souza, Julián Peña y Diego Slucki.

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

Friday, August 14, 2009

August 2009 Issue of Antitrust Source is Out

Posted by D. Daniel Sokol

See here.

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

Quality of Care and Market Failure Defenses in Antitrust Health Care Litigation

Posted by D. Daniel Sokol

Tim Greaney, Saint Louis University School of Law, explores Quality of Care and Market Failure Defenses in Antitrust Health Care Litigation.

ABSTRACT: This article considers quality-based justifications for antitrust challenges to collaboration among health care professionals. It first examines doctrinal developments resisting such justifications and, with a skeptical eye, analyzes attempts to interject quality of care and worthy motive defenses into antitrust appraisals of horizontal restraints of trade. Next the article assesses the economic basis and the risks and benefits of a market failure defense that would allow some quality-enhancing restraints of trade to escape antitrust challenge. Its principle recommendation is that courts recognize a narrow, market failure defense subject to several limiting principles to cabin its reach. The article concludes by applying its suggested approach to the market failure defense in cases involving horizontal conspiracies in which defendants justified certain actions by invoking their salutary effects on quality of care.

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

Linked-In: Antitrust and the Virtues of a Virtual Network

Posted by D. Daniel Sokol

Fox Eleanor Fox (NYU Law) describes Linked-In: Antitrust and the Virtues of a Virtual Network.

ABSTRACT: The International Competition Network is one of the several new transnational networks of specialized government officials. Unlike some others, this network is not intended to be a new form of governance. It has no secretariat, no land address, and notionally no power. It is intended to bring together antitrust authorities of the world to share ideas and knowhow, cross-fertilize, give support especially to younger agencies in developing countries, and work towards better, common antitrust process and principles. This article describes the creation and evolution of the International Competition Network. It describes its work and work product. It then assesses its effectiveness, legitimacy and sufficiency. It asks how the ICN can be effective if it has no power. Then it asks whether, in spite of its charter principle, the ICN has power or influence, and, to the extent it does, what are the implications for inclusiveness, transparency and governance within the ICN?


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

Antitrust Practitioner Survey

Posted by D. Daniel Sokol

Last summer I created an online antitrust practitioner survey to gauge the current state of antitrust in a number of different substantive areas.  The results that came back with 234 responses were interesting.  Now that I have received Institutional Review Board permission (University rules) for additional testing on "human research subjects", I am in the process of interviewing elite antitrust practitioners, as measured by Chambers ranked lawyers in the US.  The goal is to see if elite practitioners have a different sense of the state of antitrust.  So far I have come away very impressed with the depth and sophistication of nearly all of the interviewees.  What is perhaps more interesting is that I have talked with some of the most interesting, charming, and cerebral people I have ever met.  I still have  another 80 or so interviews to do.  Hopefully I will have a write up of my results by January. 

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

Thursday, August 13, 2009

Strategic Vertical Pricing in the U.S. Butter Market

Posted by D. Daniel Sokol

Kyle Stiegert (Wisconsin - Applied Economics) and Ying Du (Wisconsin - Applied Economics) examine Strategic Vertical Pricing in the U.S. Butter Market.

ABSTRACT: This article develops a methodology for empirically analyzing vertically strategic interactions in a multi-level supply channel. The model is used to analyze the vertical channel for U.S. butter manufacturing and retailing. Aggregating products to the firm level and using a nonlinear AIDS demand system under alternative strategic pricing assumptions is estimated using full information maximum likelihood (FIML) for seven geographic markets from 1998-2002. The market demand for butter was found to very price elastic. Furthermore, cross price elasticities between private labels and the two large national brands were also very elastic. The selected market structure was one indicating category profit maximization of national brands (separate from private label) at the retail level, Vertical Nash competition in the vertical channel, and Bretrand competition at the manufacturing level. Our results strongly suggest that the reta! il market for food products is impacted by the underlying vertical structure. The study provides useful measures of imperfect competition in the retail manufacturing sector.

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

Banking Deregulations, Financing Constraints and Firm Entry Size

Posted by D. Daniel Sokol

William R. Kerr (Harvard Business School, Entrepreneurial Management Unit) and Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit) examine Banking Deregulations, Financing Constraints and Firm Entry Size.

ABSTRACT: We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, this result masks the differences in entry size among startups that failed within three years of entry and those that survived for four years or more. Long-term entrants started at a 2% larger size relative to their size in their fourth year, while churning entrants were no larger. Our results suggest that the banking deregulations had two distinct effects on the product market. On the one hand, they allowed entrants to compete more effectively against incumbents by reducing financing constraints and facilitating their entry at larger firm sizes. On the other hand, the process of lowering financing constraints democratized entry and created a lot more churning among entrants, particularly at! the low end of the size distribution. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.

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

Make vs Buy in a Monopoly with Demand or Cost Uncertainty

Posted by D. Daniel Sokol

Luca Lambertini (Department of Economics, University of Bologna) decides between Make vs Buy in a Monopoly with Demand or Cost Uncertainty.

ABSTRACT: The issue of technical progress under uncertainty is nested into the debate on vertical integration vs outsourcing, to show that, in general, the former is preferable to the latter in terms of both expected profits and technological efficiency. It is then shown that there exist (i) an optimal two part tariff where the unit price set by the upstream firm is conditional upon its R&D effort, and (ii) an optimal contract specifying the input price in terms of the initial capabilities of the sub-contractor, whereby the industry replicates the same performance as the vertically integrated firm as for both profits and R&D efforts.

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

Collusion in markets with imperfect price information on both sides

Posted by D. Daniel Sokol

Christian Schultz (Department of Economics, University of Copenhagen) analyzes Collusion in markets with imperfect price information on both sides.

ABSTRACT: The paper considers tacit collusion in markets which are not fully transparent on both sides. Consumers only detect prices with some probability before deciding which fi?rm to purchase from, and each fi?rm only detects the other fi?rm's price with some probability. Increasing transparency on the producer side facilitates collusion, while increasing transparency on the consumer side makes collusion more difficult. Conditions are given under which increases in a common factor, affecting transparency positively on both sides, are pro-competitive. With two standard information technologies, this is so, when fi?rms are easier to inform than consumers.

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

Wednesday, August 12, 2009

An Analysis of Pricing in the U.S. Cotton Seed Market

Posted by D. Daniel Sokol

Guanming Shi, Kyle Stiegert, and Jean Paul Chavas (all Wisconsin Applied Economics) provide An Analysis of Pricing in the U.S. Cotton Seed Market.

ABSTRACT: The purpose of the research in this paper is to investigate the impact of differentiated vertical strategies by agricultural biotechnology firms in the U.S. cottonseed market. The model advances the measurement of industry concentration to consider substitution/complementarity relationships among differentiated products delivered under different vertical structures. We find evidence of sub-additive pricing in the stacking of bundled biotech traits. Prices paid by farmers for cottonseed sold under vertical integration are found to be higher than under licensing. The model is flexible and allows for evaluation of the effects of changing market structures. The parameters on traditional measures of concentration indicate that higher concentration leads to higher prices. The effects of cross-market concentrations stress the need to conduct the analysis in a multi-market context.

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

Toward A Competition Policy Agenda for Agriculture Markets

Posted by D. Daniel Sokol

Phil Weiser (DOJ) provides thoughts Toward A Competition Policy Agenda for Agriculture Markets in his latest speech.


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

When Should States Challenge Mergers: A Proposed Federal/State Balance

Posted by D. Daniel Sokol

Bob Lande (Baltimore Law) analyzes When Should States Challenge Mergers: A Proposed Federal/State Balance.

ABSTRACT: This article critically analyzes the current system of United States merger enforcement, under which both federal and State antitrust enforcers scrutinizes and potentially can challenge any merger that affects interstate commerce. This article develops and proposes an alternative, a voluntary division of responsibility patterned after the European Union's approach. Under this alternative federal enforcers normally would defer to State enforcers for certain specified mergers, and State enforcers normally would defer to federal enforcers for other specified mergers.

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

Patent Disclosure and R&D Competition in Pharmaceuticals

Posted by D. Daniel Sokol

Laura Magazzini (Department of Economics, University of Verona), Fabio Pammolli (University of Florence and IMT, Lucca), Massimo Riccaboni (DISA, University of Trento) and Maria Alessandra Rossi (CLEIS, University of Siena) explain Patent Disclosure and R&D Competition in Pharmaceuticals.

ABSTRACT: The prominent role played by patents within the pharmaceutical domain is unquestionable. In this paper we take an unusual perspective and focus on a relatively neglected implication of patents: the effect of patent-induced information disclosure (of both successes and failures) on the dynamics of R&D and market competition. The study builds upon the combination of two large datasets, linking the information about patents to firm level data on R&D projects and their outcome. Two case studies in the fields of anti-inflammatory compounds and cancer research complement our analysis. We show the important role played by patent disclosure in shaping firms technological trajectories through the possibility of reciprocal monitoring in a context of parallel research efforts, and suggest the importance of enhancing the diffusion of information concerning failures, not only to avoid wasteful duplication of innovative effort! s, but also as a tool for the identification of promising research trajectories. This paper is the result of the "R&D competition" research project carried out jointly with Adrian Towse and Martina Garau of the Office of Health Economics, London, UK. A preliminary draft of the paper has been presented to the DRUID Summer Conference 2006 (Copenhagen), and to the 11th ISS Conference (Sophia-Antipolis).

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

Tuesday, August 11, 2009

On Public Inefficiencies in a Mixed Duopoly

Posted by D. Daniel Sokol

Giuseppe De Feo (Department of Economics, University of Strathclyde) and Carlo Capuano (Department of Economics, University of Naples Federico II, Complesso Universitario di Monte S.Angelo) provide thoughts On Public Inefficiencies in a Mixed Duopoly.

ABSTRACT: The aim of this paper is to investigate the welfare effect of a change in the public firms objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare- to profit-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by Hamilton and Slutsky (1990). Differently from previous work that assumed the timing of competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large efficiency gains result from the shift in public firm's objective, an inefficient public rm that maximizes welfare may be preferred.

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

Suing the Suits – Derivative Shareholder Actions to Bring Home the Message of Antitrust

Posted by D. Daniel Sokol

Florian Wagner-von Papp (UCL Law) and Arad Reisberg (UCL Law) have an interesting new paper on Suing the Suits – Derivative Shareholder Actions to Bring Home the Message of Antitrust.

ABSTRACT: This article starts by analysing the potential benefits of derivative actions brought by shareholders against the management of firms which have infringed the antitrust laws (derivative shareholder suits). It goes on to discuss the limitations of these actions as they are currently implemented in selected jurisdictions, such as Delaware, the United Kingdom and Germany. The

article then addresses possibilities for reforming the instrument of derivative actions to overcome these limitations. It concludes that – with the necessary adaptations – these actions could make a valuable contribution to the fight against antitrust law violations, inter alia, by providing incentives to install effective antitrust compliance schemes.

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

Financial Regulation and the Current Crisis: A Guide for the Antitrust Community

Posted by D. Daniel Sokol

Larry White of NYU's Department of Economics explains Financial Regulation and the Current Crisis: A Guide for the Antitrust Community.

ABSTRACT: The U.S. financial crisis of 2007-2008 has been a searing experience. The popping of a housing bubble exposed the subprime lending debacle, which in turn created a wider financial crisis. In its response to this crisis, the federal government has provided financial assistance to a number of financial institutions that are often described as 'too big to fail' (TBTF) – which, to those who associate antitrust with size, seems to bring antitrust potentially into the picture. This paper will offer a guide to the antitrust community that will cover the U.S. financial sector, financial regulation, and the debacle and subsequent financial crisis. The tensions that can arise between financial regulation and antitrust will be highlighted. TBTF is not one of them, however, because TBTF is about size and interconnectedness, but not about competition and market power. Although much progress has been made in removing anticompetitive elements from financial regulation over the past three to four decades, there are still important advances that can be made. The paper concludes by offering a set of policy recommendations for the removal of some of the important remaining elements of financial regulation that impede competition.

August 11, 2009 | Permalink | Comments (1) | TrackBack (0)

On Regulation and Competition: Pros and Cons of a Diversified Monopolist

Posted by D. Daniel Sokol

Carlo Scarpa (University of Brescia - Econ) and Giacomo Calzolari (University of Bologna - Econ) think about On Regulation and Competition: Pros and Cons of a Diversified Monopolist.

ABSTRACT: We study the regulation of a firm which supplies a regulated service while also operating in a competitive, unregulated sector. If the firm conducts its activities in the two markets jointly, it enjoys economies of scope whose size is the firm’s private information, unknown either to the regulator or to the rival firms. We characterize the unregulated market outcome (with price and quantity competition) and optimal regulation that involves an informational externality to the competitors. Although joint conduct of the activities generates scope economies, it also entails private information, so that regulation is less efficient and the unregulated market too may be adversely affected. Nevertheless, we show that allowing the firm to integrate productions is (socially) desirable, unless joint production is characterized by dis-economies of scope.

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

Monday, August 10, 2009

The ACCC Merger Guidelines: A Review

Posted by D. Daniel Sokol

Henry Ergas, Concept Economics, Eric Kodjo Ralph, EKonomics LLC, and Alex Robson, Concept Economics explain The ACCC Merger Guidelines: A Review.

ABSTRACT:  The Merger Guidelines released in March 2008 by the Australian Competition and Consumer Commission (ACCC) provide a guide to the analytical approach the ACCC intends to adopt to assessing mergers for the purposes of s.50 of the Trade Practices Act. The new Guidelines do a relatively good job in listing the factors that the contemporary economic literature identifies as potentially characterising mergers that reduce competition and harm consumer welfare. However, unlike the earlier Guidelines, they rarely explain the mechanism connecting the factors to the harm, and the conditions that need to be met for that harm to occur.


This paper provides a “user’s guide” to the Guidelines that explains the reasoning that underpins the Guidelines’ assertions, and draws attention to the assumptions on which those assertions rest. We also provide an economic assessment of the Guidelines and recommend a simpler criterion by which the ACCC should judge mergers.

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

Organization, Control and the Single Entity Defense in Antitrust

Posted by D. Daniel Sokol

Dean Williamson (DOJ) analyzes Organization, Control and the Single Entity Defense in Antitrust.

ABSTRACT: Since at least the 1930's economists have puzzled over how to delineate the boundaries of the firm. With the advent of antitrust legislation in 1890, courts have been pressed to consider what constitute conspiracies between corporate entities to restrain commerce. By the 1940's, courts started to characterize conspiracies by sorting out what they are not — specifically, by extending the status of "single entity" to certain types of business arrangements. Both efforts in economics and in the law to sort out what constitutes a "firm" or "single entity" have focused on "control." A difficulty is that neither the law nor economics offer an operationally significant concept of control. Even so, both law and economics contribute concepts other than control that provide a way of understanding economic organization. These concepts — control rights, adaptation, delegation, and renegotiation — suggests how one can subsume the sometimes confusing array of single entity tests proposed in the case law within a two-stage sequence of tests.

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