Antitrust & Competition Policy Blog

2009 Antitrust Fall Forum

Posted by D. Daniel Sokol

ABA Antitrust Section
2009 Antitrust Fall Forum
November 12-13, 2009
National Press Club

The ABA Antitrust Section's 2009 Fall Forum will bring together senior government enforcers, experienced practitioners and respected scholars to address some of the most important antitrust issues currently facing businesses and their antitrust counselors. The two-day program will feature presentations by federal and state antitrust enforcers about their enforcement priorities for the coming year. It will also include sessions on many cutting edge antitrust and competition law and policy issues with domestic and international implications. The Fall Forum is a must-attend program for antitrust lawyers seeking to keep abreast of the latest developments and the latest thinking on key issues facing their clients.

The agenda is available here.
Registration is available here.

Bank Competition, Risk and Asset Allocations

Posted by D. Daniel Sokol

John H. Boyd (Minnesota - Carlson School), Gianni De Nicolò (IMF) and Abu M. Jalal (Suffolk - Econ) explain Bank Competition, Risk and Asset Allocations. 

ABSTRACT: We study a banking model in which banks invest in a riskless asset and compete in both deposit and risky loan markets. The model predicts that as competition increases, both loans and assets increase; however, the effect on the loans-to-assets ratio is ambiguous. Similarly, as competition increases, the probability of bank failure can either increase or decrease. We explore these predictions empirically using a cross-sectional sample of 2,500 U.S. banks in 2003, and a panel data set of about 2600 banks in 134 non-industrialized countries for the period 1993-2004. With both samples, we find that banks' probability of failure is negatively and significantly related to measures of competition, and that the loan-to-asset ratio is positively and significantly related to measures of competition. Furthermore, several loan loss measures commonly employed in the literature are negatively and significantly related to measures of b! ank competition. Thus, there is no evidence of a trade-off between bank competition and stability, and bank competition seems to foster banks' willingness to lend. 

Intra-Industry Adjustment to Import Competition: Theory and Application to the German Clothing Industry

Posted by D. Daniel Sokol

Horst Raff (Kiel Institute for the World Economy) and Joachim Wagner (Leuphana University Lüneburg) provide a nice case study of Intra-Industry Adjustment to Import Competition: Theory and Application to the German Clothing Industry.

ABSTRACT: This paper uses an oligopoly model with heterogeneous firms to examine how an industry adjusts to rising import competition. The model predicts that in the short run the least efficient firms in the industry become inactive, surviving firms face a fall in output, mark-ups and profits, and the average productivity of survivors increases. These pro-competitive effects of import penetration on the domestic industry disappear in the long run. The predictions for the short run are confirmed in an empirical study of the German clothing industry.

Estimating the intensity of price and non-price competition in banking

Posted by D. Daniel Sokol

Carbo Valverde (Universidad de Granada), Santiago Fernández de Guevara y Rodoselovics (Instituto Valenciano de Investigaciones Económicas), Juan David Humphrey (Florida State - Finance), and Joaquin Maudos (Universidad de Valencia) work on Estimating the intensity of price and non-price competition in banking.

ABSTRACT: We model bank oligopoly behaviour using price and non-price competition as strategic variables in an expanded conjectural variations framework. Rivals can respond to changes in both loan and deposit market prices as well as (non-price) branch market shares. The model is illustrated using data for Spain which, over 1986-2002, eliminated interest rate and branching restrictions and set off a competitive race to lock-in expanded market shares. Banks use both interest rates and branches as strategic variables and both have changed over time. We illustrate the results using a regional vs. a national specification for the relevant markets.

Thank you readers

Posted by D. Daniel Sokol

We made the list of the most read law prof blogs.  Included on the list are blogs by law profs that are not really about law at all. Ours is.

Do research joint ventures serve a collusive function?

Posted by D. Daniel Sokol

Michelle S. Goeree (University of Zurich and the University of Southern California) and Eric Helland (Claremont McKenna College and RAND) ask Do research joint ventures serve a collusive function?

ABSTRACT: Every year thousands of firms are engaged in research joint ventures (RJV), where all knowledge gained through R&D is shared among members. Most of the empirical literature assumes members are non-cooperative in the product market. But many RJV members are rivals leaving open the possibility that firms may form RJVs to facilitate collusion. We exploit variation in RJV formation generated by a policy change that affects the collusive benefits but not the research synergies associated with an RJV. We estimate an RJV participation equation and find the decision to join is impacted by the policy change. Our results are consistent with research joint ventures serving a collusive function. 

Complementary Patents and Market Structure

Posted by D. Daniel Sokol

Klaus Schmidt (University of Munich) provides his thoughts on Complementary Patents and Market Structure.

ABSTRACT: Many high technology goods are based on standards that require several essential patents owned by different IP holders. This gives rise to a complements and a double mark-up problem. We compare the welfare effects of two different business strategies dealing with these problems. Vertical integration of an IP holder and a downstream producer solves the double mark-up problem between these firms. Nevertheless, it may raise royalty rates and reduce output as compared to non-integration. Horizontal integration of IP holders solves the complements problem but not the double mark-up problem. Vertical integration discourages entry and reduces innovation incentives, while horizontal integration always benefits from entry and innovation.

Wading Into Pandora’s Box: Thoughts On Unanswered Questions Concerning the Scope and Application of Section 2 & Some Further Observations on Section 5

Posted by D. Daniel Sokol

Tom Rosch (FTC) describes Wading Into Pandora’s Box: Thoughts On Unanswered Questions Concerning the Scope and Application of Section 2 & Some Further Observations on Section 5.

Federal Trade Commission Enforcement of the Antitrust Laws

Posted by D. Daniel Sokol

Jon Leibowitz (FTC) gave a speech at the Fordham antitrust conference on Federal Trade Commission Enforcement of the Antitrust Laws.

Striving for the Optimal Balance in Antitrust Enforcement : Single-Firm Conduct, Antitrust Remedies, and Procedural Fairness

Posted by D. Daniel Sokol

Christine Varney recently gave a talk at the Council of Foreign Relations on Striving for the Optimal Balance in Antitrust Enforcement : Single-Firm Conduct, Antitrust Remedies, and Procedural Fairness. 

Product Market Competition and Upstream Innovation: Theory and Evidence from the US Electricity Market Deregulation

Posted by D. Daniel Sokol

Paroma Sanyal, Brandeis University - Department of Economics and Suman Ghosh, Florida Atlantic University - Department of Economics analyze Product Market Competition and Upstream Innovation: Theory and Evidence from the US Electricity Market Deregulation. 

ABSTRACT: This paper studies the innovation response of upstream technology suppliers when their downstream technology buyers transition from regulation to product market competition. First, we develop a theoretical framework that models this particular organizational structure. Second, we use the US electricity deregulation in the 1990's to test the model. Using patents as a metric for innovation, we identify two channels through which the effects of deregulation are transmitted to innovation: (a) the appropriation effect which has decreased innovation by 19.5 percent after deregulation, and (b) the competition effect which has increased innovation by 10.7 percent after deregulation. Other unobserved effects of deregulation have led to a 14.5 percent decline in innovation. In aggregate we find that electric technology innovation by electric equipment manufacturers (who were the upstream innovators) has experienced a 23 percent decline due to deregulation. In addition, upstream innovation quality and generality have both declined after the introduction of downstream competition.

GCR's 2009 Competition Law Review: Recent developments in competition law and policy

Posted by D. Daniel Sokol

2009 Competition Law Review

In-depth analysis and debate on recent developments

in competition law and policy

Monday 16 and Tuesday 17 November 2009, The Conrad Hotel, Brussels

Chairmen: Peter Alexiadis, Partner, Gibson Dunn & Crutcher LLP, Brussels

Lars-Hendrik Röller, President, ESMT, Berlin

DAY ONE

Chairman: Peter Alexiadis

Partner, Gibson Dunn & Crutcher LLP

09.00 Registration and coffee

09.20 Chairman’s opening remarks

09.30 Competition Law Snapshot – A Year in Review

• The legacy of the Kroes era

• Ever larger fines: Intel and Car glass

• New directions for vertical restraints policy

• More consultations and changes to come: Regulation

1/2003, horizontal agreements, ECMR

• The pharmaceutical sector inquiry findings: shocking?

• Merger control in a recession

• Challenges for the new DG Comp regime

Tony Reeves, Partner, Clifford Chance LLP

10.40 Coffee

11.00 Latest Developments in Cartel Enforcement

• Review of recent cases

• Level of fines

• Direct settlements – first assessment on how the process is working

Olivier Guersent, Director, DG Competition, European Commission

Gerwin van Gerven, Partner, Linklaters LLP

Gary R Spratling, Partner, Gibson Dunn & Crutcher LLP

Comment from:

Jürgen Schwarze, Director, Institute of Public Law, Department

of European and Public International Law

Wouter Wils, Legal Service, European Commission and Professor King’s College London

12.30 Lunch

13.45 Information Exchange –

Challenges for Antitrust in a Recession

• Impact on trade associations

• Managing production shutdowns

• Tolling arrangements

• Extra compliance

• The recent T-Mobile case – whether a concerted practice

(exchanging information at a single meeting) has an

anti-competitive object

Robbert Snelders, Partner, Cleary Gottlieb Steen & Hamilton LLP

14.20 Vertical Agreements – The Revised Regulation and Guidelines

• Review of the main changes – resale price maintenance, selective distribution

• Internet selling and distribution options of dominant firms

Luc Peeperkorn, Senior Administrator, DG Competition, European Commission

Panel discussion and comment:

Stephen Kinsella OBE, Partner, Sidley Austin LLP

Nikos Vettas, Professor, Athens University of Economics and Business, CEPR and Economic Advisory Group in Competition Policy

Melanie Thill-Tayara, Partner, Salans

15.30 Tea

15.50 Recent Developments in Merger Control

– Policy Developments and Emerging Trends in an Economic Downturn

Moderator: Philippe Chappatte, Partner, Slaughter and May

• Efficiencies in horizontal and non-horizontal mergers

• What have we learned from the current crisis?

• The failing firm defence – OFT and the Commission

• Remedies

• The Commission’s Review of the Merger Regulation and how it is working

• The ICN Recommended Practice for Mergers

• Recent economic developments in EC merger assessment

• Developments in the US

Guillaume Loriot, Head of Unit, Antitrust and Merger Case Support, DG Competition, European Commission

Simon Priddis, Partner, Freshfields Bruckhaus Deringer LLP

Matthias Pflanz, Vice President, CRA International

James W Lowe, Partner, Wilmer Cutler Pickering Hale and Dorr LLP

18.00 Close of Day One

18.00 Drinks reception

DAY two

Chairman: Lars-Hendrik Röller, President of ESMT

08.30 Coffee

09.00 Chairman’s welcome and opening remarks

09.15 Keynote Address

Reflections on the past seven years – “Competition Policy Challenges in Europe”

Philip Lowe, Director General, DG Competition, European Commission

09.45 Keynote Address

The first months of a new administration – priorities for

enforcement, monopolisation and Article 2

J Thomas Rosch, Commissioner, Federal Trade Commission

10.30 Coffee

10.50 PANE L SESSION – QUESTION TIME

A roundtable discussion with senior competition representatives

Moderator: Lars-Hendrik Röller, President of ESMT

J Thomas Rosch, Commissioner, Federal Trade Commission

Philip Lowe, Director General, DG Competition, European Commission

Bruno Lasserre, President, Autorité de la Concurrence

Christian Ewald, Chief Economist, Bundeskartellamt

Philip Collins, Chairman, Office of Fair Trading

Frédéric Jenny, Director for International Relations ESSEC,

Judge Supreme Court of France

12.45 Lunch

14.00 Article 82 – Competition Issues in the High-Tech Sector

Moderator: Thomas Vinje, Partner, Clifford Chance LLP

• Application of Article 82 in innovative and high-tech markets

• Review recent cases: Intel, Microsoft, Rambus

• The online commerce roundtable

Nick Banasevic, Deputy Head of Unit, DG Competition, European Commission

James S Venit, Partner, Skadden Arps Slate Meagher & Flom LLP

Lars Kjølbye, Partner, Howrey LLP

Jorge Padilla, Managing Director, LECG

Petri Kuoppamäki, Vice President Corporate Legal, Nokia Corporation

15.00 The Pharmaceutical Sector Inquiry

• The Commission’s final report – findings and conclusions

Philipp Gasparon, Deputy Head of Unit, DG Competition, European Commission

Stephen Kon, Partner, SJ Berwin LLP

David H Rosenberg, Industry Affairs, Corporate IP, GlaxoSmithKline tbc

16.00 Tea

16.15 Damages Actions for Breach of the EC Antitrust Rules

• Passing on; opt-in and opt-out; disclosure and costs

• Quantification of damages

Daniele Calisti, Private Enforcement Unit, DG Competition Comment and panel discussion

Robert O’Donoghue, Brick Court Chambers

Gunnar Niels, Director, Oxera

Tim Reher, Partner, CMS Hasche Sigle

17.15 Close of conference

Antitrust Economics and Policy: Some Suggestions for Research Agendas

Posted by D. Daniel Sokol

Michael Baye's (IU-Bloomington) keynote address on Antitrust Economics and Policy, Some Suggestions for Research Agendas delievered at the Searle Center of Northwestern Law School in September is worth watching. You can see the keynote video here.

Resale Price Maintenance

Posted by D. Daniel Sokol

The OECD has published a paper on Resale Price Maintenance.

ABSTRACT: The term "resale price maintenance" refers to a practice in which suppliers and resellers come to an understanding that places restrictions on the prices resellers may charge. There are several types of such agreements, the most common involves a supplier agreeing with retailers not to charge less than a certain price for the supplier's product. RPM may harm consumers by restricting intrabrand price competition, but RPM may benefit consumers by promoting interbrand competition. Despite these mixed effects, most OECD countries treat RPM as a per se violation of their competition laws.

The Concept of critical Loss Analysis for a Group of DIfferentiated Products

Posted by D. Daniel Sokol

Adrien ten Kate and Gunnar Niels (Oxera) describe The Concept of critical Loss Analysis for a Group of DIfferentiated Products.

ABSTRACT: In a recent article, Daljord, Sørgard, and Thomassen criticize Katz and Shapiro for applying the standard formula for critical loss to the case in which the price of only one product of the candidate market is increased. They argue that the standard formula does not hold in that case and suggest another expression. We show that this argument is correct, but that the formula proposed by Daljord, Sørgard, and Thomassen does not capture the essence of what critical loss really is. We propose another formula that does. Daljord, Sørgard, and Thomassen also modify the Katz–Shapiro aggregate diversion ratio rule for deciding whether a candidate market is an antitrust market. We show that their rule happens to be correct for the single-price-increase case and that the Katz–Shapiro rule remains valid for uniform price increases, but that in both cases this is for different reasons than mentioned by the authors. We believe that the confusion is due to the fact that the critical-loss concept, which was originally designed for a single homogeneous product, needs some further explanation before it can be applied in a setting of multiple differentiated products. Such explanation is given in this article.

Assessing the effects of a road surfacing cartel in Switzerland

Posted by D. Daniel Sokol

Kai Hüschelrath (Department for Industrial Economics and International Management, ZEW Centre for European Economic Research; Assistant Professor for Industrial Organization and Competitive Strategy, WHU Otto Beisheim School of Management), Nina Leheyda (Department for Industrial Economics and International Management, ZEW Centre for European Economic Research), and Patrick Beschorner (Department for Industrial Economics and International Management, ZEW Centre for European Economic Research) have a paper on Assessing the effects of a road surfacing cartel in Switzerland. 

ABSTRACT: The paper assesses the impact of the detection of a hard-core cartel in the Swiss market for road surfacing on post-cartel competition. In addition to an investigation of supply-side factors, demand-side factors, and market prices, the paper also derives estimates of the economic effects of the Swiss Competition Commission's decision in the road-surfacing cartel case. The results indicate that the detection of the cartel may have led to short-term price reductions; however, the persistent collusion-friendly industry structure forecloses larger and durable gains for the customers.

Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of These Sectors in India

Posted by D. Daniel Sokol

Russell W. Pittman, DOJ explains Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of These Sectors in India.

ABSTRACT: One important issue facing reformers considering the restructuring of the seaports and freight railways sectors of a developing country is the creation of competition - or, alternatively, avoiding the creation or preservation of monopoly power. In seaports a crucial distinction is often that between intraport and interport competition; in freight railways, between competition among train operating companies over a monopoly track and competition among vertically integrated railways. In both cases it is useful to frame the issue as one of competition at the component level within an open system versus competition between closed systems. In both cases as well, the market definition paradigm suggested by the Horizontal Merger Guidelines of the U.S. competition agencies provides a useful framework for analysis.

Horizontal Mergers Guidelines - Hot Action This Winter

Posted by D. Daniel Sokol

The dates for the different workshops are out.  Once again, I plead with DOJ/FTC people running the workshops that the first question that they ask all panelists is who has/will pay for their comments.  We need more transparency in the decision-making process.

The first workshop will take place on: December 3, 2009 FTC Conference Center 601 New Jersey Avenue, NW Washington, DC 20001 and via webcast.

The second workshop will take place on: December 8, 2009 NYU School of Law Greenberg Lounge 40 Washington Square South New York, NY 10012

The third workshop will take place on: December 10, 2009 Northwestern University School of Law Wieboldt Hall Room #147 340 E. Superior Street Chicago, Il 60611

---

The fourth workshop will take place on: January 14, 2010 Stanford Institute for Economic Policy Research Encina Hall, Bechtel Conference Room 616 Serra Street Stanford University Stanford, CA 94305

The fifth workshop will take place on: January 26, 2010 FTC Conference Center 601 New Jersey Avenue, NW Washington, DC 20001

---

The Department of Justice and the Federal Trade Commission (FTC) solicit public comments and will hold joint public workshops to explore the possibility of updating the Horizontal Merger Guidelines that are used by both agencies to evaluate the potential competitive effects of mergers and acquistions.  The goal of the workshops will be to determine whether the Horizontal Merger Guidelines accurately reflect the current practice of merger review at the Department and the FTC as well as to take into account legal and economic developments that have occurred since the last significant Guidelines revision in 1992. 

Press Release (September 22, 2009) Public Comments Horizontal Merger Guidelines and Related Publications E-mail a Question

Introduction of Philip Lowe and Announcement of Joint FTC/DOJ Project to Modernize the Horizontal Merger Guidelines Remarks of FTC Chairman Jon Leibowitz as prepared for delivery at the Third Annual Georgetown Law Global Antitrust Enforcement Symposium (September 22, 2009) Merger Guidelines Workshops Presented at the Third Annual Georgetown Law Global Antitrust Enforcement Symposium by Assistant Attorney General Christine A. Varney (September 22, 2009)

December 3, 2009 | Washington D.C.

WHEN: December 3, 2009 WHERE: FTC Conference Center 601 New Jersey Avenue, NW Washington, DC 20001 and via webcast.	Agenda (coming soon) Webcast (A live webcast will be available on the day of the event. Bookmark this page and visit it on December 3 to access to the webcast.) File a Comment Request to Participate Disability Accomodations LOCAL INFORMATION: Getting to the Conference Center Nearby Hotels Nearby Restaurants
This workshop will be free and open to the public. Seating will be on a first come, first served basis. Pre-registration is not required to attend. All attendees will be required to display a current driver's license or other valid form of photo identification.

December 8, 2009 | New York, NY

WHEN: December 8, 2009 WHERE: NYU School of Law Greenberg Lounge 40 Washington Square South New York, NY 10012	Agenda (coming soon) File a Comment Request to Participate
This workshop will be free and open to the public. Seating will be on a first come, first served basis. Pre-registration is not required to attend.

December 10, 2009 | Chicago, IL

WHEN: December 10, 2009 WHERE: Northwestern University School of Law Wieboldt Hall Room #147 340 E. Superior Street Chicago, Il 60611	Agenda (coming soon) File a Comment Request to Participate
This workshop will be free and open to the public. Seating will be on a first come, first served basis. Pre-registration is not required to attend.

January 14, 2010 | Stanford, CA

WHEN: January 14, 2010 WHERE: Stanford Institute for Economic Policy Research Encina Hall, Bechtel Conference Room 616 Serra Street Stanford University Stanford, CA 94305	Agenda (coming soon) File a Comment Request to Participate
This workshop will be free and open to the public. Seating will be on a first come, first served basis. Pre-registration is not required to attend.

January 26, 2010 | Washington, DC

WHEN: January 26, 2010 WHERE: FTC Conference Center 601 New Jersey Avenue, NW Washington, DC 20001	Agenda (coming soon) File a Comment Request to Participate
This workshop will be free and open to the public. Seating will be on a first come, first served basis. Pre-registration is not required to attend.

COMMENTS

In connection with the workshops, interested parties are invited to submit written comments or original research. A list of specific questions to inform the first workshop discussions is set forth below;  the agencies may post additional questions relevant to subsequent workshops discussions at a later date. Initial comments should be submitted by November 9, 2009, to ensure ample time for consideration prior to the first workshop. Comments should refer to “HMG Review Project – Comment, Project No. P092900.” To file electronically, follow the instructions and fill out the form at https://public.commentworks.com/ftc/hmgworkshop1. Paper comments should include the above reference both in the text and on the envelope, and should be mailed or delivered to:         Federal Trade Commission         Office of the Secretary, Room H-135 (Annex P)         600 Pennsylvania Avenue NW,         Washington, DC 20580 Comments containing confidential material, however, must be filed in paper form, must be clearly labeled “Confidential,” and must comply with Commission Rule 4.9(c). The FTC requests that any paper comments be sent by courier or overnight service, if possible, because postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Initial Questions for Comment [PDF]

REQUEST TO PARTICIPATE

Individuals and organizations may submit requests to participate as panelists. The requests should be submitted electronically to hmgworkshops@ftc.gov.  Prospective panelists for the first workshop should submit a short statement (100 words) summarizing a proposed presentation no later than November 9, 2009. Deadlines for requesting to participate in the other workshops will be posted at a later date.

Protecting Consumers and Promoting Health Insurance Competition

Posted by D. Daniel Sokol

David Balto (American Center for Progress) provided testimony before the House Judiciary Committee on Protecting Consumers and Promoting Health Insurance Competition.

Administrative Monopoly and the Anti-Monopoly Law: An Examination Of the Debate in China

Posted by D. Daniel Sokol

Gordon Y. M. Chan, Department of Law & Business, Hong Kong Shue Yan University examines Administrative Monopoly and the Anti-Monopoly Law: An Examination Of the Debate in China.

ABSTRACT: After more than a decade of preparation, China finally passed the Anti-Monopoly Law (AML) on August 30, 2007. This paper examines the debate over whether or not administrative monopoly should be included in the ambit of the AML, which took place throughout the drafting process of this new law. Administrative monopoly refers to the abusive use of administrative power by government agencies to engage in monopolistic activities. Owing to the administrative nature of this type of monopoly, the intent to regulate it by an economic law, such as the AML, has stirred up much controversy. Having analyzed the arguments both in support of and in opposition to the inclusion, this paper suggests the need to adopt a more comprehensive scheme in tackling administrative monopoly. Also, the enforcement mechanism of the AML will have to be strengthened in order to prevent this new law from degenerating into ‘a toothless tiger’. Furthermore, the competition law regime of China will benefit from in-depth research in overseas anti-monopoly practices. In particular, the experiences of the former socialist states in Europe should be taken into account, given that they are similarly undergoing the transition from a planned economy to a market economy.