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 22, 2009

Fingleton named "Business big shot of the week" by the Times

Posted by D. Daniel Sokol

OFT head John Fingleton is the new Business big shot of the week.  Well done.

August 22, 2009 | Permalink | Comments (0) | TrackBack (0)

AAI Third Annual Invitational Symposium on the Future of Private Antitrust Enforcement

Posted by D. Daniel Sokol


On December 8, 2009 the American Antitrust Institute will host its third annual Invitational Symposium on the Future of Private Antitrust Enforcement at the National Press Club in Washington D.C.

This year, our program will cover some of the most current and relevant issues in antitrust, including the Empagran opinion, reverse payments in the pharmaceutical industry, Congress’s action on ACPERA, Iqbal’s expansion of Twombly’s reach, and the ongoing challenges to class certification.

Location: National Press Club, Holeman Lounge 529 14th St. NW, 13th Floor Washington, DC 20045 There is no cost for the program, but it is an invitational event. Invitations and complete agenda to come. If you would like to request an invitation, please email aai@antitrustinstitute.org.

August 22, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, August 21, 2009

Searching for the Long-Lost Soul of Article 82EC

Posted by D. Daniel Sokol

Pinar_akman3 Pinar Akman (Centre for Competition Policy, University of East Anglia) is Searching for the Long-Lost Soul of Article 82EC.

ABSTRACT:This article has two interrelated purposes, one of historical and one of contemporary significance. It first seeks to challenge the common view in the literature that Article 82EC is a product of ordoliberalism. This is done by directly examining the travaux préparatoires of the competition rules of the EC Treaty to discover the intent of the drafters of Article 82EC. This inquiry is important for a modernized approach to Article 82EC since it must be determined whether Article 82EC can be applied with a ‘consumer welfare’ standard without a Treaty amendment. This is because, if the provision is ‘ordoliberal’, its objective cannot be the enhancement of ‘consumer welfare’. As its second and policy-driven purpose, this article suggests that the intent of the drafters of Article 82EC provides the EC Commission and the courts with the means to apply Article 82EC in a modernized manner with a ‘more economic approach’. The article shows that the drafters of Article 82EC were mainly concerned with increasing ‘efficiency’. Hence, adopting a welfarist objective would not imply a fundamental change in the goals of Article 82EC. On the contrary, including efficiencies in the assessment would be a late but welcome recognition since efficiency is already imbedded in the provision.

August 21, 2009 | Permalink | Comments (0) | TrackBack (0)

Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits

Posted by D. Daniel Sokol

Oliver Budzinski (Environmental and Business Economics - University of Southern Denmark) explores Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits.

ABSTRACT: Naturally, competition policy is based on competition economics made applicable in terms of law and its enforcement. Within the different branches of competition economics, modern industrial economics, or more precisely game-theoretic oligopoly theory, has become the dominating paradigm both in the U.S. (since the 1990s Post-Chicago movement) and in the EU (so-called more economic approach in the 2000s). This contribution reviews the state of the art in antitrust-oriented modern industrial economics and, in particular, critically discusses open questions and possible limits of basing antitrust on modern industrial economics. In doing so, it provides some hints how to escape current enforcement problems in industrial economics-based competition policy on both sides of the Atlantic. In particular, the paper advocates a change of the way modern industrial economics is used in competition policy: instead of more and more case-by-cases analyses, the insights from modern industrial economics should be used to design better competition rules.

August 21, 2009 | Permalink | Comments (0) | TrackBack (0)

Ultrabroadband Competition in Two-Sided Markets

Posted by D. Daniel Sokol

Armando Calabrese, University of Rome I, Massimo Gastaldi, University of L'Aquila, Irene Iacovelli, University of Rome II, and Nathan Levialdi Ghiron, University of Rome II discuss Ultrabroadband Competition in Two-Sided Markets.

ABSTRACT: Network neutrality refers to a policy principle regarding access for online content and service providers to broadband infrastructures. It implies a general and ex ante obligation of non-discrimination for network operators when granting access to providers of online services, with the aim of excluding practices such as blocking access to non-affiliated content, degrading the quality of transmission, imposing unreasonable restrictions or prioritising affiliated content. Whether such obligation should be "cast in the Stone Tables" of the law was first fiercely debated in the United States, and the issue is now gaining increased attention in other parts of the world, including the European Union, where the regulatory framework for electronic communications is currently under review. This article examines whether existing rules already provide the relevant authorities with the necessary tools to take action against broadband providers illegitimately discriminating or blocking content of those who are not prepared to pay a "toll" for the use of higher speed networks or better quality services. It focuses in particular on the EU regulatory framework for electronic communications networks and services, including the reform proposals published by the European Commission on November 13th (type should be like 24th below) 2007 and the resolution adopted by the European Parliament on 24th September 2008.

August 21, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 20, 2009

Selective Distribution and Luxury Goods: The Challenge of the Internet?

Posted by D. Daniel Sokol

Emily Clark, Mat Hughes, & Denis Waelbroeck (all Ashurst) address Selective Distribution and Luxury Goods: The Challenge of the Internet?

ABSTRACT: On July 28, 2009 the European Commission published for consultation its proposals for a revised vertical agreements block exemption regulation ("the Block Exemption") to replace the current Block Exemption due to expire in May 2010; as well as revised draft Guidelines on Vertical Restraints ("the Guidelines"). The Commission's accompanying press release states that "the Commission considers that the rules are working well overall and should not be fundamentally modified."

One range of restrictions covered by the scope of the existing and draft Block Exemption relates to selective distribution which permits manufacturers to supply only authorized retailers who meet certain criteria. A key issue is the use of selective distribution by luxury goods producers and, in particular, whether the rationales which have traditionally been used to justify such arrangements can be applied to restrictions placed on a newer distribution channel, namely internet retailing.

Diametrically opposing views have been expressed on this subject.

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

Hear No Evil, See No Evil: Why Antitrust Compliance Programmes May Be Ineffective at Preventing Cartels

Posted by D. Daniel Sokol

Andreas Stephan of the University of East Anglia Centre for Competition Policy has an interesting paper on Hear No Evil, See No Evil: Why Antitrust Compliance Programmes May Be Ineffective at Preventing Cartels.

ABSTRACT: Cartel practices attract enormous corporate fines, even where they only involve a handful of employees. Internal compliance programmes are thought to protect firms by training employees and auditing their activities. However, this paper argues that such programmes are ineffective because cartelists typically know what they are doing is illegal, go to great lengths to avoid detection and are usually senior managers. Moreover, compliance programmes do not mitigate cartel fines, despite their being imposed on the whole corporation years after an infringement has occurred. It is argued that the threat of criminal sanctions against individuals is essential to effective internal compliance.

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

An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration

Posted by D. Daniel Sokol

Tim Kochanski (Systems Science Program – Department of Economics Portland State University) undertakes work in An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration.

ABSTRACT: In this paper, I develop a hybrid model that contains elements of both agent based simulations (ABS) as well as analytic Cournot models, to study the effects of firm characteristics, market characteristics, and innovation on market concentration, as measured by a Herfindahl-Hirschman Index (HHI). The model accommodates the following components: multiple firms with heterogeneous marginal costs, market entry and exit, barriers to entry, low or high cost industries, changing demand, varying levels of marginal cost reducing returns-to-innovation, varying costs associated with innovation, increased returns to innovation from past experience innovating, and varying propensities to innovate within the market. The components mentioned above are commonly cited as determinants of market concentration. A sensitivity analysis which is robust to high degrees of model complexity demonstrates that the model provides results that are co! nsistent with economic theories of markets.

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

Fines Against Hard Core Cartels in Europe: The Myth of Over Enforcement

Posted by D. Daniel Sokol

Emmanuel Combe, Université Panthéon-Sorbonne (Paris 1) and Constance Monnier, Université Panthéon-Sorbonne (Paris 1) discuss Fines Against Hard Core Cartels in Europe: The Myth of Over Enforcement.

ABSTRACT: Based on a sample of 64 cartels convicted by the European Commission from 1975 to 2009 and a methodology allowing to estimate restitution and dissuasive fines to be imposed on cartels from microeconomic variables on a case by case basis, this paper compares the level of fines actually inflicted to cartels participants to the illicit gain captured by the firms and estimates a range of restitution and dissuasive fines in each case. Our results show that fines imposed against cartels by the European Commission are overall sub optimal, whatever the level of the probability of detection.

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

Wednesday, August 19, 2009

Cartel Facilitators Beware—AC Treuhand Spurs Competition Authorities into Action

Posted by D. Daniel Sokol

Wilko van Weert (SJ Berwin) & Gordon Christian (SJ Berwin) write on Cartel Facilitators Beware—AC Treuhand Spurs Competition Authorities into Action.

ABSTRACT: It is uncontroversial that undertakings that are active in a particular industry (e.g. by manufacturing a product or providing a service) and who engage in anti-competitive behavior are guilty of illegal conduct. For example, price-fixing, market sharing, customer allocation, or bid rigging can all lead to large fines, possible criminal or civil penalties (depending on the jurisdiction) for directors or managers, and possibly significant liabilities arising from private enforcement damages actions.

However, until recently the position has been somewhat less clear in relation to cartel facilitators. Although such cartel facilitators, which are usually either consultancies or trade associations, have featured in cartels going back to the 1970’s, the enforcement focus of competition authorities in Europe has traditionally been on the undertakings that are active in the cartelized industry.

After the European Court of First Instance’s (“CFI”) judgment in the AC Treuhand case, however, cartel facilitators have found themselves under increased pressure from regulators. Whereas this article focuses on the approach taken on this issue by the Nederlandse Mededingingsautoriteit (“NMa”), the Dutch Competition Authority, it also charts the history of cartel facilitator jurisprudence at EC level and refers to a number of other cartel facilitator cases at national level.

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

Antitrust Conference in Honor of Joseph Brodley

Posted by D. Daniel Sokol


Antitrust Conference in Honor of Joseph Brodley
Boston University
September 18, 2009 (Friday)

Professor Joe Brodley, after a long and distinguished career as an antitrust scholar, retired at the end of the Spring 2009 semester. Boston University Law School will host a symposium honoring Joe’s contributions to Antitrust on September 18, 2009 (Friday). The Boston University Law Review will publish the contributions. The symposium will consist of three panels. The first will focus on Joe's contributions. Panelists will reflect on Joe’s work, on their own work with Joe, on his contributions to the field, or on how his papers may have influenced their work. The second panel, a transition between between the first and third, will address topics that Joe wrote about: predatory pricing, joint ventures, mergers, antitrust standing, oligopoly, patent settlement, and the goals of antitrust law. The third panel will focus on the future, specifically what direction antitrust should take in the new administration. The conference schedule is as follows:

First Panel: 9:30 to 10:45
Eleanor Fox
Richard Brunnell
Hillary Greene

Second Panel: 11:00 to 12:15
Dennis Yao
Richard Dagan
Michael Salinger
Patrick Bolton (paper only)

Lunch: 12:30 to 2:00

Last Panel: 2:00 - 3:15
Einer Elhauge
William Kovacic
Herbert Hovenkamp (paper only)
Response from Joe Brodley

For more information, please contact Professor Keith Hylton (knhylton@bu.edu). If you plan to attend, please contact Mary Gallagher (marykg@bu.edu).

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

The Core of Antitrust and the Slow Death of Dr. Miles

Posted by D. Daniel Sokol

Thomas C. Arthur, Emory University School of Law explains The Core of Antitrust and the Slow Death of Dr. Miles.

ABSTRACT: In 1911 the Supreme Court held in Dr. Miles that all forms of resale price maintenance (RPM), whether connected to a cartel or not, violated section 1 of the Sherman Act. In 2007, the Court overruled Dr. Miles in Leegin. This decision has sharply criticized both as a departure from basic antitrust principles and for overruling a precedent that has been widely relied upon for nearly a century. These criticisms are misplaced. The Dr. Miles per se rule was not based on core antitrust principles, and the Court has permitted it to be evaded over most of its history.

In the last generation, the Supreme Court has been returning antitrust law to its statutory core: the problem of monopoly artificially created by cartels, large mergers and predation. In the process, it has produced a body of doctrine that is far more internally coherent and faithful to the original antitrust statues. Unless used to facilitate a cartel, RPM and other forms of intrabrand distributional restraints are not part of the core of antitrust. By the time of Leegin, Dr. Miles' per se rule was so inconsistent with the rest of section 1 doctrine and so eroded in its scope that, far from being an example of unprincipled judicial activism, the Court's decision was a textbook example of the law working itself clear.

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

It Ain’t Funny How Time Slips Away: Amnesty Recipient Cooperation in Civil Antitrust Litigation

Posted by D. Daniel Sokol

Jay L. Himes (Labaton Sucharow) describes It Ain’t Funny How Time Slips Away: Amnesty Recipient Cooperation in Civil Antitrust Litigation.

ABSTRACT: Five years ago, Congress enacted the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (“ACPERA”), part of which offers reduced civil damage exposure to a cartel participant who receives amnesty under the Department of Justice Antitrust Division’s (“DOJ”) Corporate Leniency Program. Under § 213(a) of ACPERA, the amnesty recipient can limit its civil liability to “the actual damages” sustained by civil plaintiffs which are “attributable to the [the amnesty recipient’s] commerce . . . in the goods or services affected by the violation.” Thus, this admitted cartel participant avoids not only criminal responsibility, but also both treble damages and joint and several liability in civil litigation.

ACPERA’s benefits do not flow simply from the DOJ’s amnesty grant. The amnesty recipient must earn them by cooperating with the civil plaintiffs, thus helping develop the damages case against the other cartel members more efficiently. In effect, the statute offers a statutorily-created “first-in discount,” available only to the amnesty recipient, not unlike that which plaintiffs’ counsel often offer a defendant voluntarily in order to reach an early settlement that includes cooperation against non-settlers.

Congress authorized this reduction in damage exposure in response to the Antitrust Division’s concern that treble damages can deter cartel participants from ratting out their co-conspirators, thereby rendering the DOJ’s leniency program less effective than it otherwise might be. Although empirical data supporting this assertion was non-existent, DOJ’s position could not be dismissed as fanciful either. Reducing the amnesty recipient’s civil damage exposure was, therefore, a means both to promote the DOJ’s leniency program and to increase compensation to cartel victims through cooperation that would assist in proving the civil case, as well as in reducing costs in the civil litigation.

As enacted in 2004, ACPERA had a five-year sunset provision, with June 22, 2009 as the end date. Although some have questioned the impact of ACPERA’s civil damage relief provision, the DOJ and Congress are of the view that the law “bolstered” the leniency program. Congress therefore recently extended the law, albeit only for one year, in order to buy time to “consider potential changes to make it more effective.” Accordingly, this is an opportune point to review the law, with particular attention to the timing of the cooperation required to trigger the statute’s civil damage relief.

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

An Antitrust Assessment of the Google Book Search Settlement

Posted by D. Daniel Sokol

Mark A. Lemley, Stanford Law School provides An Antitrust Assessment of the Google Book Search Settlement.

The Google Book Search settlement has prompted a flurry of attention from commentators, including a number of respected scholars who have worried that the settlement makes Google an 'orphan works monopoly.' In this paper I evaluate these claims and find them generally unpersuasive. The Google Book Search settlement expands, rather than diminishes, access to books of all sorts, and that is particularly true of orphan works.

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

Tuesday, August 18, 2009

Pharmaceutical Patent Settlements—A Presumption in Reverse

Posted by D. Daniel Sokol

Kristina Nordlander (Sidley Austin) & Patrick Harrison (Sidley Austin) explain Pharmaceutical Patent Settlements—A Presumption in Reverse.

ABSTRACT: On July 8, 2009, the European Commission’s Directorate General for Competition (“DG Comp”) issued the much-anticipated Final Report (consisting of a Commission Communication and Staff Working Document) of its sector inquiry into competition in pharmaceuticals (“Sector Inquiry”). One of the areas examined in detail during the course of the Sector Inquiry was the conclusion among originator and generic manufacturers of settlement agreements relating to patent litigation.

This paper argues that the final report’s apparent suspicion of patent settlement agreements that involve a “reverse” value transfer (i.e. from the originator to the generic)—and the presumption that they are anticompetitive—may be misplaced, and indeed moving EU competition law “in reverse” in the sense that it goes back to an outdated position in the U.S. courts which has now been abandoned.

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

Pricing Practice in the Postal Industry: Current Approaches and Challenges Under Liberalization

Posted by D. Daniel Sokol

Paul R. Kleindorfer, Wharton School, Paul Dubrule Professor of Sustainable Development & Distinguished Research Professor at INSEAD and Zoltan Szirmay, Roland Berger Strategy Consultants provide thoughts on Pricing Practice in the Postal Industry: Current Approaches and Challenges Under Liberalization.

ABSTRACT: Challenges facing the European postal industry are greater then ever before. The approaching full market opening in 2011 and 2013 will be the central factor driving commercial developments, where new market entrants - without the burden of the universal service obligation and additional social responsibilities as one of the largest employers in their domestic markets - will have the possibility to attract large volume B2B/B2C mailers away from incumbent national postal operators, and especially on the high-margin, high-density urban areas.


Traditional bulk mailers such as financial service providers, telecom companies and utility service providers, which are themselves under pressure to maintain there revenue streams and/or decrease operational costs, will search for cost efficient mailing alternatives and thereby foster postal competition. Substitution through electronic/hybrid communication is also a continuing major force cutting into transactional mail volumes.

Understanding customer demand and the development of customer oriented solutions will become central issues for postal operators. Part of this customer orientation will be a shift in pricing policies, which today are often considered as purely a regulatory determined component in the revenue equation, with the primary focus of commercial activity being on volume development rather than on innovative pricing and billing practices.

As postal operators are dominant market players in domestic mail markets, full market opening will not mean the absence of regulation. To the contrary, strong supervision will limit their margins in price definition for universal service products, which have complex interactions with bulk mail products. Thus, a major challenge facing European postal operators besides competition is how to retain market share and price level simultaneously.

Price will be an important influencing factor for customers when new entrants with similar service levels appear. Therefore in this study we undertake to analyze current practices of postal operators and, together with the study participants, formulate key lessons on what should be part of preparation for full market opening in terms of market-oriented pricing.

The study was realized in three stages. We first overviewed major trends on the European postal market with an eye on the role of pricing in a liberalized environment. As a second step, through structured interviews with selected operators on current and planned pricing practices, we attempted to understand current approaches to pricing strategies. Finally, by a comparison of results on a regional level, we formulated key lessons learned. Marketing, strategy and pricing experts of incumbent postal operators were visited personally or interviewed by phone. In all cases we applied the same interview structure, which was focused on the underlying pricing framework and on pricing processes.

Under “pricing framework” we evaluated the pricing strategy, the organizational structure in place for dealing with pricing issues, the methods facilitating pricing decisions and the supporting technology. “Pricing processes” summarized the practices on pricing activities, including market analysis, pricing structures, implementation and monitoring of pricing outcomes.

The research scope included European postal operators facing various stages of market opening. Altogether we interviewed 17 incumbents; for confidentiality reasons the study results were synthesized into Eastern and Western European practices in order to disguise the individual responses.

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

Rules Versus Standards and the Antitrust Jurisprudence of Justice Breyer

Posted by D. Daniel Sokol

Lee Greenfield (Wilmer) and Daniel Matheson (Wilmer) have a good short article on Rules Versus Standards and the Antitrust Jurisprudence of Justice Breyer.

ABSTRACT: Stephen Breyer’s antitrust opinions have consistently focused on searching for the right balance between clear, predictable predictable rules and detailed, fact-specific analysis under more open-ended standards. Indeed, of all Justice Breyer’s contributions to the development of modern antitrust law, both during his tenure on the First Circuit and on the Supreme Court, perhaps none has been more valuable. Breyer has emphasized that antitrust is a system of laws that must be administered by fallible judges and juries and followed by businesses in real time. He has favored bright-line rules and safe harbors when, in his view, the benefits of exhaustive analysis using all of the economic and other tools available in modern antitrust cases do not justify the costs. This focus has sometimes led to prodefendant opinions shielding conduct from intensive antitrust inquiry; but, in other cases, to obtain the benefits of predictable rules, Breyer has been willing quickly to condemn conduct that could conceivably be procompetitive. The principles Justice Breyer has articulated have served as a conceptual blueprint for several landmark Supreme Court antitrust decisions. And, as the sharp debate over the Department of Justice’s now-withdrawn Section 2 Report well illustrates, these principles promise to remain central to the debate as the courts and agencies deal with some of the most controversial antitrust issues of our times.

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

The Rule of Reason under Article 82 EC after Sot Lelos Kai Sia

Posted by D. Daniel Sokol

Tu T. Nguyen, Faculty of Law, Lund University, Timo Minssen, and Xavier Groussot, explain The Rule of Reason under Article 82 EC after Sot Lelos Kai Sia.

ABSTRACT: Using Sot. Lelos kai Sia as a starting point, the main purpose of this paper is to investigate the trend of application of the rule of reason under Article 82 EC with respect to a refusal to supply in the European Union (EU) pharmaceutical market. In addition, some procedural issues deriving from this case and Syfait shall be analyzed in the beginning. In the light of that purpose, section 2 of this paper considers procedural concerns raised by those two cases with regard to the functioning of Regulation 1/2003. Section 3 then examines the application of the rule of reason under Article 82 EC to refusal to supply both before and in Sot. Lelos kai Sia. Moreover, section 4 identifies the issues which are still left open by this case. Next, section 5 considers potential developments towards a full fledged rule of reason under Article 82. Finally, section 6 draws implications for the pharmaceutical industry.

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

Monday, August 17, 2009

Exclusive Dealing, Market Shares and the Safe Harbour of Regulation 2790/1999 - Time for a Rethink?

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege Law and Marc Abenhaim ask Exclusive Dealing, Market Shares and the Safe Harbour of Regulation 2790/1999 - Time for a Rethink?

ABSTRACT: The present paper discusses whether the market share threshold enshrined in Regulation 2790/1999 allows to draw correct inferences on the foreclosure risks arising from single branding and exclusive purchasing obligations in the context of vertical relationships. As far as the customer foreclosure risks arising from single branding are concerned, it comes to the conclusion that Regulation 2790/1999 wrongly focuses on the market share of the seller and should concentrate on the market share of the acquirer. Symetrically, in so far as the input foreclosure risks arising from exclusive purchasing are concerned, Regulation 2790/1999 should focus on the market share of the seller. In the context of the upcoming review of the rules applicable to vertical agreements, the European Commission should seek to address this problem.

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

The Australian Criminal Cartel Regime: A Model for New Zealand

Posted by D. Daniel Sokol

Caron Beaton-Wells and Brent Fisse (both University of Melbourne Law School) have posted The Australian Criminal Cartel Regime: A Model for New Zealand.

ABSTRACT: In January 2008 the Australia government released exposure draft materials relating to the criminalisation of cartel conduct for public comment. This paper reviews the Exposure Draft Materials in relation to the definition of cartel offences and the formulation of enforcement policy, including immunity/leniency and cooperation policies; highlights preferable possible approaches and the lessons that emerge from other overseas models; and canvasses what appear to be the main possible implications for a criminal cartel regime in New Zealand if New Zealand decides to develop such a regime.

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