Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, December 19, 2009

Arbitration and EU Competition Law in a Multi-Jurisdictional Setting

Posted by D. Daniel Sokol

Assimakis Komninos (Hellenic Competition Commission) explains Arbitration and EU Competition Law in a Multi-Jurisdictional Setting.

ABSTRACT: Any discussion of application of EU competition rules by courts cannot ignore arbitration. We examine, first, the historical dimension of the position of arbitration in the context of competition law enforcement, second, the powers of arbitrators to apply EU competition law, third, the private international law questions pertaining to the main theme, fourth, the links between arbitration and competition authorities (notably the European Commission), and finally, the question of the review of arbitral awards on public policy grounds, which remains an appropriate final safeguard and ensures a balanced relationship between arbitration and competition law enforcement.

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

Friday, December 18, 2009

The Stock Market's Valuation of Research and Development and Market Concentration in Horizontal Mergers

Posted by D. Daniel Sokol

Ralph M. Sonenshine (American -Econ) provides some interesting work on the interplay between corporate finance and competition is his paper The Stock Market's Valuation of Research and Development and Market Concentration in Horizontal Mergers.

ABSTRACT: It is well documented that acquirers often pay a very large premium to acquire companies in related industries. There are many explanations as to the source of this premium. This study isolates two variables, R and D-intensity and market concentration, and correlates their value individually and jointly to the value of the acquired company. The results indicate that change in market concentration and Research and Development is positively correlated to the merger deal premium in a horizontal merger. Furthermore, deal premiums tend to follow an inverted U curve pattern relative to market concentration change. The study also shows that cost synergies and macro economic growth impact deal premium values.

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

Testing Theories of Scarcity Pricing in the Airline Industry

Posted by D. Daniel Sokol

Steven L. Puller (Texas A&M University-Econ), Anirban Sengupta (Analysis Group), and Steven N. Wiggins (Texas A&M University-Econ) are Testing Theories of Scarcity Pricing in the Airline Industry.

ABSTRACT: This paper investigates why passengers pay substantially different fares for travel on the same airline between the same two airports. We investigate questions that are fundamentally different from those in the existing literature on airline price dispersion. We use a unique new dataset to test between two broad classes of theories regarding airline pricing. The first group of theories, as advanced by Dana (1999b) and Gale and Holmes (1993), postulates that airlines practice scarcity based pricing and predicts that variation in ticket prices is driven by differences between high demand and low demand periods. The second group of theories is that airlines practice price discrimination by using ticketing restrictions to segment customers by willingness to pay. We use a unique dataset, a census of ticket transactions from one of the major computer reservation systems, to study the relationships between fares, ticket characteristics, and flight load factors. The central advantage of our dataset is that it contains variables not previously available that permit a test of these theories. We find only mixed support for the scarcity pricing theories. Flights during high demand periods have slightly higher fares but exhibit no more fare dispersion than flights where demand is low. Moreover, the fraction of discounted advance purchase seats is only slightly higher on off-peak flights. However, ticket characteristics that are associated with second-degree price discrimination drive much of the variation in ticket pricing.

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

The Reform of EC Competition Law: New Challenges

Posted by D. Daniel Sokol

Ioannis Lianos (UCL Law) and Ioannis Kokkoris (OFT and City University Law) bring us the edited volume The Reform of EC Competition Law: New Challenges.

ABSTRACT:  Responding to external and internal pressure for change the slow reform of EC competition law since the 1989 Merger Regulation can now be seen as a major thread rather than a series of peripheral developments. Now, a body of ‘new’ law may be discerned that encompasses several far-reaching regulations as well as their clarification and extension by official guidelines, discussion papers, ECJ decisions, and legal scholarship.

Twenty-nine prominent competition law authorities – representing all three ‘estates’(practice, administrative regulation, and academe) – bring their deeply informed knowledge and perspectives on this crucially important body of law to the table. The many issues they address include the following:

  • the decentralization of competition law enforcement;
  • the development of private actions for damages;
  • private versus public enforcement;
  • the role of national competition authorities;
  • the role of arbitration;
  • the impact of human rights law;
  • recourse to economic evidence;
  • special cases (e.g., pharmaceuticals, high technology industries);
  • mergers;
  • cartel enforcement; and
  • state aid measures.

This book represents a fresh approach to EC competition law – one that is of singular value in grappling with the huge economic challenges we face today. As a synthesis of the law and options available to European competition authorities and legal practitioners in the field, it stands without peer. It will be greatly welcomed by lawyers, policymakers and other interested professionals in Europe and throughout the world.

Table of Contents

Foreword; V. Korah. Preface; I. Lianos, I. Kokkoris. Part I: Institutional Aspects. Chapter 1: The Design of an Optimal Competition Law Enforcement Regime.1. Welfare-Based Optimal Legal Standards: A Brief Review of Theory and Applications; Y.S. Katsoulacos, D. Ulph. 2. Private Enforcement: Current Situation and Methods of Improvement; D. Waelbroeck. 3. Is There a Need for a Specialist EU Competition Law Tribunal? C. Bellamy. Chapter 2: Concurrent Proceedings in National and EC Competition Law. 4. Case Allocation in Antitrust and Collaboration between the National Competition Authorities and the European Commission; A. Mikroulea. 5. The Role of Arbitration in Competition Disputes; L. Idot. 6. Modernization and the Role of National Courts: Institutional Choices, Power Relations and Substantive Implications; K. Boskovits. Chapter 3: Optimal Sanctions and their Limitations. 7. Optimal Antitrust Enforcement: From Theory to Policy Options; F. Jenny. 8. Tools for an Optimal Enforcement of European Antitrust Law: Examples of Guidelines on the Method of Setting Fines and the Commitment Proceedings: Is the European Commission Right? Some Thoughts concerning Discretion; E. David. 9. Protecting Human Rights in the Context of European Antitrust Criminalization; P. Whelan. Part II : The Challenges of Economic Evidence. 10. Judging Economists: Economic Expertise in Courts; I. Lianos. Part III: Vertical Aspects. Chapter 1: Competition Law Policy in Markets with Non-conventional Price-formation Mechanisms. 11. Antitrust Issues in Dynamic Markets; F. Etro. 12. Antitrust Issues in Network Industries; N. Economides. 13. EC Competition Law and Parallel Trade in Pharmaceutical Products; A. Komninos. Chapter 2: Abuse of a Dominant Position. 14. Exclusionary Abuses and the Justice of ‘Competition on the Merits’; P. Marsden. 15. The Implementation of an Effects-based Approach under Article 82 – Principles and Application; P. Papandropoulos. Chapter 3: Mergers. 16. Critical Analysis of the ECMR Reform; I. Kokkoris, K. Katona. 17. Competition Policy against Non-horizontal Mergers; N. Vettas, F. Kourandi. Chapter 4: Cartels. 18. An Optimal Enforcement System against Cartels; M.L. Tierno Centella. 19. The ECN and the Model Leniency Programme; K. Dekeyser, F. Polverino. Chapter 5: State Action and EC Competition Law. 20. The Community State Aid Action Plan and the Challenge of Developing an Optimal Enforcement System; A. Zemplinerova. 21. EU Competition Policy on State Aid for Rescuing and Restructuring Companies; N.E. Farantouris. 22. State Aid Law Claims in Merger Control; A. Stratakis, L. Crocco. List of Contributors.

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

Thursday, December 17, 2009

Competition, Reputation and Compliance

Posted by D. Daniel Sokol

Paolo Vanin (Department of Economics, Universita di Bologna) has written on Competition, Reputation and Compliance.

ABSTRACT: This paper displays a linear demand oligopoly model, in which firms endogenously decide whether to enter the market and whether to specialize on high or low quality products, and then repeatedly interact to sell experience goods. It shows that the intuition that low and rising prices grant compliance with quality promises extends to this setting, provided that high quality is sufficiently important to buyers.

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

New Blog by the Catholic University of Chile Competition Center

Posted by D. Daniel Sokol

Their new blog will prove to be a useful resource.  I highly recommend it.

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

Anti-Market Antitrust: The Latin American Paradox, Some Comments on an Institutional Assessment of Antitrust Policy, The Latin American Experience

Posted by D. Daniel Sokol

Francisco Marcos (Instituto de Empresa Business School - Law) has some very strong words in his book review Anti-Market Antitrust: The Latin American Paradox, Some Comments on an Institutional Assessment of Antitrust Policy, The Latin American Experience, which reviews Ignacio de Leon's new book.

ABSTRACT: The commented book offers a solid and convincing critique about the origins and evolution of competition policy in Latin America, which probably could be extended elsewhere. Some of the assumptions on which the competition authorities act are unsound and farfetched, this causes notable uncertainty on business firms, undermining the rule of law. However, no matter the antitrust epistemology in Latin America may be based on simplifications and some questionable assumptions, the alternative analysis claimed by the book is both unrealistic and illusory.

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

Call for Papers: International Max Planck Research School for Competition and Innovation and the Professorship for Intellectual Property at ETH Zurich June 2010 Conference

Posted by D. Daniel Sokol

International Max Planck Research School for Competition and Innovation & the Professorship for Intellectual Property, ETH Zurich

CALL FOR PARTICIPATION

From June 20 to June 22, 2010, the International Max Planck Research School for Competition and Innovation and the Professorship for Intellectual Property at ETH Zurich will jointly organize their

2010 WORKSHOP FOR JUNIOR RESEARCHERS ON THE LAW AND ECONOMICS OF INTELLECTUAL PROPERTY AND COMPETITION LAW

The workshop will enable a small number of junior researchers from law and from economics to engage in an intensive, rigorous discussion of their own scholarly work. Several senior professors from law and from economics departments in Europe and the United States will provide feedback on the research projects. The workshop will be held in Wildbad Kreuth, a lovely region one hour south of Munich, Germany, from June 20 to June 22, 2010. The organizers will fund travel and hotel expenses for all invited workshop participants.

Excellent junior researchers (doctoral students, post-docs, research fellows and assistant professors) from law and from economics are invited to submit curriculum vitae, a list of two references as well as an extended abstract of their research project and/or a draft paper by February 15, 2010. Notifications of acceptance will be sent out by March 1, 2010. Papers are due for circulation among workshop participants and commentators on May 15, 2010. Please send your submissions to Prof. Stefan Bechtold, [email protected]. For junior researchers from economics, research projects should relate to industrial organization, competition, innovation and/or intellectual property and may include formal models as well as empirical or experimental approaches. For junior scholars from law, research projects should relate to intellectual property and/or competition law and must use law and economics as a research approach. In order to achieve a good international mix of workshop participants, submissions from researchers from outside Europe are particularly encouraged.

The International Max Planck Research School for Competition and Innovation is a joint initiative by the Max Planck Institute for Intellectual Property, Competition and Tax Law as well as the Department of Economics, the Munich School of Management, and the Faculty of Law of the Ludwig Maximilians University of Munich. Any questions concerning the workshop should be directed to Prof. Stefan Bechtold, [email protected], phone:
+41-44-632-2670.

December 17, 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 has a nice empirical piece on 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.

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

Real Knowledge is to Know the Extent of One's Own Ignorance: On the Consumer Harm Approach in Innovation-Related Competition Cases

Posted by D. Daniel Sokol

Josef Drexl, Max Planck Institute has posted Real Knowledge is to Know the Extent of One's Own Ignorance: On the Consumer Harm Approach in Innovation-Related Competition Cases.

ABSTRACT: Modern economics advocates an assessment of competition law cases in light of the effects of firm conduct on the relevant market. In many instances, law enforcers and also firms that have to assess the legality of their business models in advance will often have to predict the “likely” effects in the future. This obviously creates a problem of uncertainty. This article reviews this problem for the assessment of competition law cases in innovation-related markets. Thereby, three specific sets of cases are discussed: (1.) the GlaxoSmithKline cases in Europe, where the question was whether R&D intensive pharmaceutical companies should be allowed to restrain parallel trade between Member States in order to enhance their ability to invest in innovation, (2.) the European Microsoft case, and (3.) “pay-for-delay” settlements of patent litigation proceedings that involve a so-called “reverse payment” by the patent holder to the generic drugs producer for delaying the market entry of the generic drug. Thereby, the article aims to identify the most appropriate standard of liability against the background of the problem of uncertainty. It rejects the consumer harm standard which is accepted by the courts in the U.S. and traditionally rejected by the EU courts in favor of a concept of protecting the process of dynamic competition which focuses on the elements of rivalry, openness of the market, and consumer choice.

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

Wednesday, December 16, 2009

Competition Law, Innovation And Antitrust: An Analysis of Tying and Technological Integration

Posted by D. Daniel Sokol

Hedvig Schmidt (University of Southampton Law) has a book out on Competition Law, Innovation And Antitrust: An Analysis of Tying and Technological Integration.

BOOK ABSTRACT: Contents: 1. Introduction 2. Tying from an Economic Perspective 3. Tying Arrangements under Article 82 EC 4. Tying Arrangements under US Antitrust Law 5. Intellectual Property Law and Tying – An Alternative Approach 6. Alternative Solutions, the Development of a New Regulatory Model 7. Conclusion Bibliography Index

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

Breaking News II: Intel Sued by FTC

Posted by D. Daniel Sokol

What a big day!  First Microsoft settles in Europe and now the FTC sues Intel.  One thing that I hope that US antitrust enforcers have learned from Microsoft is that you should not bring such a case unless you can have effective remedies. 

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

Breaking News I: The End is Here - EU Settles With Microsoft

Posted by D. Daniel Sokol

The expected Microsoft settlement is now official.  It will take years for academics to figure out the true costs of the Microsoft litigation.  I recommend the many articles and book by my colleague Bill Page on the topic.  For an alternative viewpoint, there is the forthcoming book by Harry First and Andy Gavil.

The Commission's press release is here while the Microsoft one is here.

This should be a quiet Christmas for Microsoft.  Last week the DOJ concluded that Microsoft’s documentation of its protocols was “substantially complete.” 

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

Economics And The Enforcement Of European Competition Law

Posted by D. Daniel Sokol

Christopher Decker, Regulatory Policy Institute and University of Oxford has written on Economics And The Enforcement Of European Competition Law.

BOOK ABSTRACT: Recent years have seen a trend toward an ‘economics-based’ approach to the enforcement of European competition law. But what is meant by ‘economics-based’, and how does this approach sit with legal and enforcement practice? This book explores these issues by examining how economic expertise features in the enforcement activity of the European Commission and Courts in relation to co-ordinated effects. The role of economics is examined in the entire enforcement process, from the decision to initiate an investigation to the assessment of remedies. The conclusions have relevance to all areas of competition law.


Contents: Preface 1. Introduction 2. The Enforcement Context 3. The Law and Economics of Tacit Coordination 4. A Review of Collective Dominance Decisions 5. Economics in the Enforcement Process 6. The Contribution of Economics to Enforcement 7. Towards a More Economic Approach Appendix: The Economics of Tacit Collusion Bibliography Index

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

Fines Against Parent Companies in EU Antitrust Law - Setting Incentives for "Best Practice Compliance"

Posted by D. Daniel Sokol

Karl Hofstetter, University of Zurich - School of Law and Melanie Ludescher, Legal Counsel - Schindler Group focus their research on Fines Against Parent Companies in EU Antitrust Law - Setting Incentives for "Best Practice Compliance".

ABSTRACT: Antitrust fines imposed by the European Commission have reached record levels and have scratched or passed the one billion Euro mark in several cases. This expansion was, inter alia, made possible by the Commission's practice to not only sanction responsible subsidiaries, but their parent companies as well. As a result, the fine cap which Community law sets at 10% of the annual sales of responsible undertakings has been ratcheted up significantly. This article maintains that the current practice of the European Commission, which finds at least partial support in the jurisprudence of the Community courts, ignores the fundamental concept of limited liability for subsidiary corporations. It also lacks a sound basis in EU antitrust law. Perhaps most important, the fining practice of the Commission does not do justice to its pursued goal of effectively preventing antitrust violations by corporate managers and employees. Antitrust fines against corporations, be they subsidiaries or parent companies, should primarily be aimed at deterrence and thereby take into account the principle of fault as embodied in Council Regulation No. 1/2003. Absent any direct involvement in the antitrust violations of the top representatives of a corporation, “fault” on the part of the company should primarily be defined as a deficiency in its compliance organisation. “Best Practice Compliance” should, therefore, take centerstage in an optimally designed antitrust fining policy. As a result, the amount of fines against companies, but also the question of whether a parent company should be coresponsible for antitrust violations by its subsidiaries, should primarily hinge on whether and to what extent “Best Practice Compliance” standards had been implemented.

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

Tuesday, December 15, 2009

Research Topics in Unilateral Effects Analysis

Posted by D. Daniel Sokol

Jonathan B. Baker, American University - Washington College of Law and David Reitman, Charles River Associates, Inc. have drafted a great resource in Research Topics in Unilateral Effects Analysis.

ABSTRACT: This chapter has been prepared for inclusion in the RESEARCH HANDBOOK ON THE ECONOMICS OF ANTITRUST LAW (Einer Elhauge, ed.). It first explains why unilateral effects may result from horizontal mergers, and then describes several key models that have been developed to gauge the likelihood and/or magnitude of unilateral effects, focusing on mergers in differentiated product Bertrand markets. The remaining sections discuss extensions to these models and measurement issues that arise when implementing unilateral effects analysis in practice, highlighting ongoing and potential future topics for research.

December 15, 2009 | Permalink | Comments (1) | TrackBack (0)

9th Global Forum on Competition, 18-19 February 2010, Paris

Posted by D. Daniel Sokol

9th Global Forum on Competition
18-19 February 2010, Paris

The 9th OECD Global Forum on Competition will focus on Competition, State aids and Subsidies, as well as on Collusion and Corruption in Public Procurement. Participants will also discuss a peer review of competition law and policy in Brazil.

Please note that participation to the Forum is by invitation only. It is restricted to government representatives and selected invitees from the business community and civil society. For further information on this aspect and on the Forum in general, please access our Practical information website.

Preliminary Agenda



Opening session

Opening remarks by Mr. Angel GURRIA
OECD Secretary General

Introductory comments by Mr. Frédéric JENNY
Chairman of the Competition Committee

Session I

Roundtable on Competition, State aids and Subsidies

[Call for CountributionsAppel à contributions]

Session II

Peer review of Competition Law and Policy in Brazil

[Open only to country representatives and intergovernmental organisations]

Session III

Breakout sessions on Collusion and Corruption in Public Procurement

  • Value of Certificates of Independent Bid Determination (“CIBD”) and similar tools
  • Discussion on the usefulness of guidelines in Public Procurement
  • Experiences on working with other parts of government to fight bid rigging
Session IV

Fifth anniversary of the OECD-Hungary Regional Centre for Competition

Session V

Roundtable on Collusion and Corruption in Public Procurement

[Call for CountributionsAppel à contributions]


Final session

Evaluation and Future work

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

Static and Dynamic Merger Effects: Evidence from the Divestiture of Texaco's Canadian Assets

Posted by D. Daniel Sokol

Mikko Packalen, University of Waterloo - Department of Economics and Anindya Sen, University of Waterloo - Department of Economics examine Static and Dynamic Merger Effects: Evidence from the Divestiture of Texaco's Canadian Assets.

ABSTRACT: Dynamic merger effects from potential efficiencies created by mergers are a core concept in standard merger theory and merger policy. While these efficiencies will likely arrive mostly in the long run, empirical merger analyses have generally focused on short-run effects. We estimate merger effects from the divestiture of Texaco's Canadian assets. Our main emphasis is on estimating short and long-run merger impacts on market shares. Standard merger theory predicts that merger efficiencies will be reflected in market shares: the presence of merger efficiencies determines whether the merged firm regains market share in the long run. Results from two difference-in-difference specifications show that the short-run merger impact on the merging firms' combined market share was small but in the long run the merged firm experienced a large decline in its market share. These results demonstrate both that dynamic merger effects can be important, and that dynamic merger effects do not necessarily arise from efficiencies created by a merger.

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

Network Effects, Market Structure and Industry Performance

Posted by D. Daniel Sokol

Rabah Amir (Department of Economics, University of Arizona) and Natalia Lazzati (Department of Economics, University of Arizona) have a paper on Network Effects, Market Structure and Industry Performance.

ABSTRACT: This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firm's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market. We also characterize the effects of market structure on industry performance, with an emphasis on departures from standard markets. As per-firm profits need not be monotonic in the number of competitors, we revisit the concept of free entry equilibrium for network industries. The approach relies on lattice-theoretic methods, which a! llow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided.

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

Waiting to imitate: on the dynamic pricing of knowledge

Posted by D. Daniel Sokol

Emeric Henry (Sciences Po - Econ), Carlos Ponce (Universidad Carlos III de Madrid - Econ) explain Waiting to imitate: on the dynamic pricing of knowledge.

ABSTRACT: We study the problem of an inventor who brings to the market an innovation that can be legally copied. Imitators may 'enter' the market by copying the innovation at a cost or by buying from the inventor the knowledge necessary to reproduce and use the invention. The possibility of contracting affects the need for patent protection. Our results reveal that: (i) Imitators wait to enter the market and the inventor becomes a temporary monopolist; (ii) The inventor offers contracts which allow resale of the  knowledge acquired by the imitators; (iii) As the pool of potential imitators grows large, the inventor may become a permanent monopolist.

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