Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, November 28, 2009

Barroso proposes Joaquín Almunia to head Europe's antitrust efforts

Posted by D. Daniel Sokol

The story is here in the Wall Street Journal.

November 28, 2009 | Permalink | Comments (0) | TrackBack (0)

Review of An Institutional Assessment of Antitrust Policy The Latin American Experience

Posted by D. Daniel Sokol

Armando Rodriguez (U. New Haven - Econ) and to my knowledge the only other Panamanian antitrust professor teaching in the US other than me* has a book review of Review of Ignacio De Leon: An Institutional Assessment of Antitrust Policy The Latin American Experience.  Querido Armando, where is the love (ie, where is my review)?  Along with Eleanor Fox, I did just publish Latin American Competition Law and Policy.  You can download the table of contents here.  In all seriousness, Armando has done a very good review and I encourage you to read it.  

* As of 1994 I am also a US citizen, the first in my family.  This means that when I married Hannah it was for love and not the green card.  I think I am in the minority but I belive that most national anthems need a modern reimagining.  One fantasy I have had is to get the government in Panama to change the Panamanian national anthem to Panama by Van Halen. 

Update: The link seems to be broken.  Below is a pdf version.Download WP0903[1]

November 28, 2009 | Permalink | Comments (1) | TrackBack (0)

Friday, November 27, 2009

The Changing Antitrust/Regulation Interface in the US: Railways and Beyond

Posted by D. Daniel Sokol

Tim Brenan (U Maryland - Baltimore, Econ) explains The Changing Antitrust/Regulation Interface in the US: Railways and Beyond.

ABSTRACT: The transition from regulation to competition creates both structural and governance issues in rail, as it has in telecommunications and electricity. The latter two sectors provide both models for handling structural issues through either strict separation or fostering competition among vertically integrated firms and lessons regarding when separation may be problematic regarding operations and investment. We then turn to the antitrust/regulation interface, describing present rail immunities and using proposed legislation to identify competitive problems involving bottleneck control and conditions on sales of routes to short lines. Even if immunity were lifted, antitrust may (and perhaps should) be unable to address alleged problems. Addressing substantive harms may also be precluded by a recent radical shift in US law, making antitrust defer to regulatory authority. Recent political changes may herald a reversal, with consequences going far beyond rail.

November 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Antitrust Doctrine, Competition Policy, and International Dialogue

Posted by D. Daniel Sokol

Phil Weiser (DOJ) explains Antitrust Doctrine, Competition Policy, and International Dialogue in a recent speech.

November 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Thursday, November 26, 2009

An Introduction to Network Industries

Posted by D. Daniel Sokol

An Introduction to Network Industries

This three session course, to be offered on December 2, 9, and 16 will discuss Network Industries:

Networks have frequently been at the heart of the great regulated industries of the day. This was true of railroads and telegraphs and is just as true of today’s natural gas industry, the electricity industry and telecommunications. The modern treatment of network industries focuses on approaches to regulating natural monopolies. Many of these industries are organized around physical networks, while others turn on platform competition and virtual networks.

This course will serve as an introduction to the law and economics of these industries. It will be based on the full-quarter course that Prof. Picker teaches at the University of Chicago Law School

Each class will be approximately one hour with time available for questions and answers.Each class will begin at 12:00 PM U.S. Eastern Standard Time. The only technology required for attending is a computer with internet access and a phone.

Recommendations for reading material for this class will be forthcoming.

Lecturer:
Dr. Randal Picker, Leffman Professor of Commercial Law, University of Chicago Law School

November 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Overcoming Foreseeable Challenges in Implementing the Competition Act

Posted by D. Daniel Sokol

Bill Blumenthal (Clifford Chance) has a great new speech that he just delivered in India on Overcoming Foreseeable Challenges in Implementing the Competition Act at the International Academy of Law conference in India.

Download 20091106_ICCL_Delhi_Paper[1]

November 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Updating the Merger Guidelines: Issues for the Upcoming Workshops

Posted by D. Daniel Sokol

Carl Shapiro (DOJ) provides some thoughts on Updating the Merger Guidelines: Issues for the Upcoming Workshops, which he presented at the ABA Fall Forum.

November 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Are all mergers equally delay-averse? An empirical analysis of procedural delay in European Commission merger cases (1999-2008)

Posted by D. Daniel Sokol

Peter L. Ormosi, ESRC Centre for Competition Policy, University of East Anglia has a paper that I think is worth a read titled Are all mergers equally delay-averse? An empirical analysis of procedural delay in European Commission merger cases (1999-2008).

ABSTRACT:  This article looks at the distribution of two EC merger procedural events and examines the effect of the indefinite-length suspension of merger investigations. Although the ECMR refers to the suspension of investigations as an exceptional instrument, it is used in a high proportion of cases. As the ECMR does not set a time limit for suspension, it can lead to significant delay in the assessment of mergers. To understand the causes of delay, this article relies on the fact that the suspension of the investigation is a consequence of merging parties’ failure to provide the necessary information to the Commission. Two main causes of this behaviour are identified. Firstly, merging parties may decide to intentionally withhold information in order to cause the suspension of the investigation, which allows them more time to do whatever is necessary to avoid a lengthy second phase investigation. Secondly, failure to provide the required information to the Commission may be a result of merging parties’ negligence towards the regulatory assessment of their merger. Whereas the first case may be socially beneficial, identifying the second type of behaviour may help in filtering out inefficient mergers.

November 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 25, 2009

Buyer Power in Health Plan Mergers

Posted by D. Daniel Sokol

Cory S. Capps (Bates White) writes on Buyer Power in Health Plan Mergers.

ABSTRACT: In light of recent increased policy attention directed toward health insurance, the next significant health plan merger is almost certain to receive close scrutiny from many quarters, including representatives of providers, such as the American Medical Association and the American Hospital Association, and the U.S. Department of Justice. In this paper, I review the key buy-side economic questions and analytic frameworks that are likely to be at the forefront in future investigations of health plan mergers. In particular, I explain how industry structure implies that shares of purchases from individual providers as well as area-wide shares of purchases are likely to inform antitrust analysis of potential monopsony harm in health plan mergers. I also discuss the appropriate treatment of government payers in calculating and assessing buy-side market shares. I conclude with a discussion of how competition and market power in downstream markets for the sale of commercial insurance interact with the potential exercise of monopsony power in upstream markets for the purchase of provider services.

November 25, 2009 | Permalink | Comments (2) | TrackBack (0)

Type 1 Error and Uncertainty: Holding the Antitrust Enforcement Pendulum Steady

Posted by D. Daniel Sokol

Jim Rill (Howrey) & Thomas Dillickrath (Howrey) explain Type 1 Error and Uncertainty: Holding the Antitrust Enforcement Pendulum Steady.

ABSTRACT: Recent pronouncements by the leaders of the federal antitrust agencies have brought into sharper focus the debate over how best to balance the risks of Type 1 error (or over-enforcement error) against the risks of Type 2 error (or under-enforcement error) in antitrust enforcement. In this paper, we examine the literature surrounding the debate and suggest that the harm resulting from Type 1 error more likely and more often exceeds that stemming from Type 2 error. Indeed, the Supreme Court has recognized this imbalance in its antitrust jurisprudence, repeatedly insisting on rules that give more weight to avoiding over-deterrence of procompetitive conduct.

Especially in the area of single-firm conduct analyzed under Section 2 of the Sherman Act or Section 5 of the FTC Act, the dangers of overly interventionist antitrust rules are not limited to actual government enforcement and private actions that lead to punishing and enjoining procompetitive conduct. Such rules create uncertainty and fear resulting in constructive Type 1 error; that is, businesses forego aggressive competition that benefits consumers for fear of becoming embroiled in government or private enforcement actions. These threats to consumer welfare are compounded by amorphous antitrust rules that make it impossible for businesses to know ex ante whether their conduct will be deemed violative of the antitrust laws. Such legal ambiguity can deter businesses from engaging in efficient, procompetitive conduct; even conduct that would ultimately be found to be legal.

November 25, 2009 | Permalink | Comments (1) | TrackBack (0)

Another term for Neelie Kroes? It may happen

Posted by D. Daniel Sokol

The Dutch government has nominated her for a second term.

November 25, 2009 | Permalink | Comments (0) | TrackBack (0)

Ensuring a More Level Playing Field in Competition Enforcement throughout the European Union

Posted by D. Daniel Sokol

Abel Mateus (UCL) offers thoughts on Ensuring a More Level Playing Field in Competition Enforcement throughout the European Union.

ABSTRACT: The European Competition Network was launched in May 2004 in order to ensure a more coherent and effective network of competition authorities to enforce the Treaty and to ensure a more level playing field to enterprises operating throughout the Single Market. After five years of enforcement the network proved to be an important instrument for exchange of information among national competition authorities in the EU and the Commission and ensured a certain level of coherence in the competition decisions. However, omissions and weak enforcement at national level have not been addressed, the integration of the courts in the network has proven quite difficult and large differences in the level of enforcement across countries are far from ensuring an acceptable level playing field. Outside of Regulation 1/2003, problems also remain, e.g., in the harmonization of merger control and in private enforcement. Some proposals for incremental reforms and strengthening the network are made.

November 25, 2009 | Permalink | Comments (0) | TrackBack (0)

Canadian Competition Authority's Reach for Foreign Affiliates in its Cartel Investigations

Posted by D. Daniel Sokol

John Clifford (McMillan) & Hayane Dahmen (McMillan) describe the Canadian Competition Authority's Reach for Foreign Affiliates in its Cartel Investigations.

ABSTRACT: The Competition Act (“the Act”) governs all aspects of competition law in Canada. Section 45 forms the core of Canadian cartel law, and once recent amendments to that section come into force in March 2010, section 45 will make it a per se offense for a person to conspire, agree, or arrange with a competitor to enter into certain types of agreements with respect to a “product.” Generally, agreements to fix prices, allocate markets or customers, or restrict the supply of a product are caught under this section. Investigations and prosecutions (and guilty pleas) under section 45 in respect of international cartels have occurred often, including several in which some of the co-conspirators were never present in Canada. In most cases, however, there was specific evidence that the parties had targeted Canadian customers and markets as part of their cartel.

In general, Canadian courts and the Competition Bureau will not pierce the corporate veil to impose liability or find guilty foreign parents for the anticompetitive practices of their Canadian affiliates in the absence of evidence that the parent was also a cartel participant. However, the Act contains two sections that permit the Commissioner of Competition (the “Commissioner”) to use Canadian companies to reach international cartels. Specifically, subsection 11(2) requires Canadian targets of an order for production of records to produce evidence in the hands of foreign affiliates and section 46 creates an offense for a Canadian corporation to implement a foreign-directed conspiracy.

November 25, 2009 | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 24, 2009

The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy

Posted by D. Daniel Sokol

Juan S. Lleras (DOJ) and Nathan H. Miller (DOJ) provide analysis on The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy.

ABSTRACT: We model competition between two firms in a vertical upstream-downstream relationship. Each firm can pay a sunk cost to enter the other’s market. For equilibria in which both firms enter, the downstream price can be lower than the joint profit maximizing level, and coordination (e.g., through merger) is anticompetitive.

November 24, 2009 | Permalink | Comments (0) | TrackBack (0)

Tacit Collusion with Price-Matching Punishments

Posted by D. Daniel Sokol

Yuanzhu Lu, China Economics and Management Academy, Central University of Finance and Economics and Julian Wright, National University of Singapore (NUS) - Department of Economics analyze Tacit Collusion with Price-Matching Punishments.

ABSTRACT: Tacit collusion is explored under a strategy in which, loosely speaking, firms match the lowest price set by any firm in the previous period. Conditions are provided under which this strategy supports collusive outcomes in a subgame perfect equilibrium. In contrast to traditional results, the highest collusive price is always lower than the monopoly price. It corresponds to the unique Nash equilibrium price when upward and downward price deviations are matched. Our paper provides a game theoretic interpretation of the old kinked demand curve theory which unlike earlier attempts does not depart from standard timing assumptions to do so.

November 24, 2009 | Permalink | Comments (1) | TrackBack (0)

Why Shareholders Should Not Share the Blame in the EU

Posted by D. Daniel Sokol

Stephen Kinsella (Sidley Austin) & Anouck Meier (Sidley Austin) argue Why Shareholders Should Not Share the Blame in the EU.

ABSTRACT: Should an independent shareholder which is not itself a party to an antitrust infringement be held liable for the misconduct of a company it jointly owns?

The question might raise eyebrows of practitioners in other jurisdictions, such as the United States, where corporate separateness prevails as a general rule and the proverbial corporate veil can be pierced only as an “extreme remedy.” For European counsel and their clients, however, the question has become highly relevant and any nervousness on their part seems justified. The European Commission (“Commission”) seems to have adopted an ever-expanding theory of “liability by association.” In addition to parents of wholly-owned subsidiaries and partners in general partnerships, shareholders in jointly-owned companies increasingly find themselves in the line of fire.

November 24, 2009 | Permalink | Comments (0) | TrackBack (0)

Liability of a Parent for the Antitrust Violations of a Subsidiary Under Asian Antitrust Law

Posted by D. Daniel Sokol

David Eggert (Handong International Law School) & Jingbo Hou (Handong International Law School) explain Liability of a Parent for the Antitrust Violations of a Subsidiary Under Asian Antitrust Law.

ABSTRACT: On September 10, 2009, the European Court of Justice (the highest court in the European Union) issued its much-anticipated decision in Akzo Nobel. N.V., and held that a parent company’s 100 percent ownership of a subsidiary automatically creates a presumption that the parent company controlled the actions of the subsidiary and is therefore liable for the antitrust violations of the subsidiary. Although this presumption of control is rebuttable, the court held that it had not been rebutted in the Akzo case. The issue was of special relevance in Akzo because the European Commission had imposed a fine upon Akzo (which had not been shown to have directly participated in a price-fixing conspiracy) and certain subsidiaries (which had been shown to have directly participated). Under European law, the maximum fine is bounded by 10 percent of the “turnover” (revenues) of the offending undertaking in the immediately preceding year. Since the turnover of Akzo Nobel was significantly larger than the turnover of the particular subsidiaries involved, this resulted in a much larger fine than otherwise could have been imposed. In reaching its conclusion, the Court relied heavily upon the concept of “undertaking” as developed in the law interpreting Sections 81 and 82 of the Treaty of Rome.

TheAkzo decision establishes a clear distinction between United States and European law on the issue of parental liability for the antitrust actions of a subsidiary. As a general rule, mere 100 percent ownership of a subsidiary will not be sufficient to impute liability upon a parent for the actions of a subsidiary; nor does it create a presumption that the parent exercises the degree of control over the subsidiary necessary to impose liability upon the parent for the subsidiary’s actions.

Given this conflict between EC and U.S. law, this article summarizes the applicable law on the issue of parental liability for the competition law violations of subsidiaries in three Asian countries—China, Korea, and Japan—and tries to anticipate whether the Akzo decision is likely to have a significant impact upon the development of the law in those jurisdictions.

November 24, 2009 | Permalink | Comments (1) | TrackBack (0)

Monday, November 23, 2009

Parental Liability for A Subsidiary's Antitrust Violations Under U.S. Law

Posted by D. Daniel Sokol

Samuel Miller (Sidley Austin) & Ryan Sandrock (Sidley Austin) provide their thoughts on Parental Liability for A Subsidiary's Antitrust Violations Under U.S. Law.

ABSTRACT: A frequently-arising issue in both civil and criminal antitrust cases in the United States is whether a parent company can be held liable for the antitrust violations of a subsidiary or other related company. The applicable U.S. law on this issue is remarkably clear: corporate separateness and formalities must be respected. Simply because Company A has an ownership interest, even a 100 percent ownership interest, in Company B does not mean that Company A can be held criminally or civilly liable for Company B’s conduct. Neither government enforcers nor civil plaintiffs should be able to maintain an action against a company simply because it owns an interest in another company whose conduct is in question or simply because there is some other factor—common parent, overlapping directors, exercise of general supervisory power—suggesting a relationship between the entities.

November 23, 2009 | Permalink | Comments (0) | TrackBack (0)

How Far Does Economic Theory Explain Competitive Nonlinear Pricing in Practice?

Posted by D. Daniel Sokol

Stephen Davies (University of East Anglia - ESRC Centre for Competition Policy), Catherine Waddams Price (University of East Anglia - ESRC Centre for Competition Policy) and Chris M. Wilson (Economics - Loughborough University) ask How Far Does Economic Theory Explain Competitive Nonlinear Pricing in Practice?

ABSTRACT: Liberalisation of the British electricity market, in which previously monopolised regional markets were exposed to large-scale entry, is used to test the propositions of several recent theoretical papers on oligopolistic nonlinear pricing. Consistent with those theories, each oligopolist offered a single two-part electricity tariff, and a lump sum discount to consumers who purchased both electricity and gas. However, inconsistent with those theories, firms’ two-part tariffs are heterogeneous in ways that cannot be attributed to cost. We establish a series of stylised facts about the nature of these asymmetries between firms and use them to confront established theory.

November 23, 2009 | Permalink | Comments (0) | TrackBack (0)

Sanctioning Cartel Activity: Let the Punishment Fit the Crime

Posted by D. Daniel Sokol

Greg Werden (DOJ) suggests Sanctioning Cartel Activity: Let the Punishment Fit the Crime.

ABSTRACT: This essay explains how economic analysis and enforcement experience support the conclusion that cartel activity should be viewed as a serious crime and punished with serious sanctions on both business enterprises and individuals. My subtitle provides part of the argument: "Let the punishment fit the crime." As many before me, I borrow William Schwenck Gilbert's memorable line from The Mikado, a contemporary of the earliest criminal statutes relating to cartel activity. For historic background and current context, I initially review the evolution of sanctions for cartel activity in the United States.

November 23, 2009 | Permalink | Comments (0) | TrackBack (0)