Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, March 22, 2010

Competition Policy and Financial Distress

Posted by D. Daniel Sokol

Ezra Friedman (Yale University - Department of Economics) and Marco Ottaviani (Northwestern - Kellogg) have an interesting new piece on Competition Policy and Financial Distress.

ABSTRACT: Traditional analyses of competition policy assume that firms operate in perfect credit markets. We argue that imperfections in credit markets should be taken into account, and show one channel by which accounting for financial conditions could alter the welfare effects of a merger. In line with empirical evidence, we posit that the presence of financial distress might diminish price competition by reducing firms' willingness to undertake long-term investments in their customer base. Mergers that reduce the probability of financial distress can induce the merging firms to compete more fiercely for customers, thus partly offsetting the traditional effects of an increase in market power. We use this framework to derive implications for competition policy.

March 22, 2010 | Permalink | Comments (0) | TrackBack (0)

Restoring Accountability and Oversight in the Antitrust Settlement Process

Posted by D. Daniel Sokol

Peter Hettich, University of St. Gallen, University of Basel argues for Restoring Accountability and Oversight in the Antitrust Settlement Process.

ABSTRACT: The enforcement of the antitrust laws is supposed to be a traditional task of the courts in the United States. However, the line between lawful and unlawful restraints of competition is not easily drawn. The courts struggle to assess the competitive effects of restraints, in particular outside the area of per-se unlawful restraints. Still, we are inclined to comfort ourselves by the seemingly acceptable outcomes of enforcement, achieved with the support of expert bodies like the Antitrust Division of the Department of Justice (DOJ) and later the Federal Trade Commission (FTC). Nevertheless, the authorities' resources to litigate cases in full are limited. A full litigation, with extensive discovery, with hearing of witnesses, and possibly with receipt of briefs of amicus curiae, may reveal tons of information, but the necessary knowledge for a sound, lasting decision ("root knowledge") may still not be acquired. Even if it would be theoretically possible to acquire "root knowledge", a rational actor will not try to acquire it if his efforts are subject to information and search costs. Bounded rational agents, i.e. also courts and authorities, generally experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information. Enforcement results, therefore, vary, rendering Type I (false positives) and type II (false negative) errors. Given the circumstances, consent decrees – although probably more vulnerable to errors due to limited analysis – proved helpful to obtain fast relief and reduce the costs of enforcement; amicable settlements enjoy great success in antitrust enforcement. The obvious advantages of the consent decree over traditional antitrust enforcement by litigation come along with serious inherent flaws. Quite often, the settlement process is accused to be vulnerable to undue political influence and possibly corruption. The Tunney Act addressed these concerns by opening up the results of the settlement process to interested third parties and by requiring the government to reveal its justifications for settling the case. However, the Tunney Act fails to guarantee an informed decision of the court on the public interest of the proposed consent decree, and, consequently, fails also to deter participants from drafting inadequate settlements.

This paper is focused on the disregard of public interest by the use of consent decrees by the government. After describing the instrument of consent decree in the United States, the European Community and Switzerland (1.), I want to address inherent flaws of the settlement process (2.) and proposals to mitigate these flaws (3.).

Due to the lack of a conflict of interest, the integrity of settlements in private antitrust cases are hardly compromised, and will not be discussed, except as an instrument mitigating a possible perversion of public interest. Further, I will neglect the enforcement activity of the States' Attorneys General.

March 22, 2010 | Permalink | Comments (0) | TrackBack (0)

Dr. Miles' Orphans: Vertical Conspiracy and Consignment in the Wake of Leegin

Posted by D. Daniel Sokol

My colleague Jeff Harrison has posted a very insightful new article Dr. Miles' Orphans: Vertical Conspiracy and Consignment in the Wake of Leegin.  Download it while it is hot!  I highly recommend it.

ABSTRACT: When the Supreme Court decided Leegin Creative Leather Products, Inc. v. PSKS, Inc. in 2007 not only did it change resale price maintenance from a per se offense to a rule of reason offense, it created one-hundred years of “orphan” cases. These are the cases decided during the period when resale price maintenance was a per se offense that were initially designed to strengthen the per se rule and, more recently, to weaken it. The interpretation of these cases is critical in determining how antitrust law in practice will be reshaped by Leegin. This article reviews the possibilities and examines the post Leegin cases that suggest what may unfold over the next several years. It concludes that the influence of these orphans may actually retard the development of an economically sensible approach to resale price maintenance.

March 22, 2010 | Permalink | Comments (0) | TrackBack (0)

Procedural Convergence in Competition Law: Towards a Spontaneous Ius Commune?

Posted by D. Daniel Sokol

Anna Gerbrandy, University of Utrecht exploresProcedural Convergence in Competition Law: Towards a Spontaneous Ius Commune?

ABSTRACT: In this article I will address the question of whether substantive statutory convergence, by which is meant that national statutory law holds norms that are substantively the same as European law norms, is followed by spontaneous procedural convergence. This question will be addressed in focusing on Dutch competition law, which is substantively the same as EC competition law. This means that at the statutory level there is substantive convergence, but not necessarily statutory procedural convergence. Following a general assumption that procedural law is shaped by substantive law, the expectation may be that the statutory substantive convergence in Dutch competition law will give rise to procedural convergence at the level of the courts. Though this article focuses on the influence of European procedural law on national Dutch court proceedings, its findings have a wider relevance, because of the implications these findings may have on the thesis of a general developing procedural ius commune.

March 22, 2010 | Permalink | Comments (0) | TrackBack (0)