Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, April 24, 2010

Costs, demand, and producer price changes

Posted by D. Daniel Sokol

Claire Loupias (Banque de France) and Patrick Sevestre (Paris School of Economics, Université de Paris I - Panthéon Sorbonne) examine Costs, demand, and producer price changes.

ABSTRACT: We estimate an ordered probit model in order to explain the occurrence and magnitude of producer price changes in the French manufacturing sector. We use data consisting essentially of the Banque de France monthly business surveys, pooled over the years 1998-2005. Our results show that changes in the price of intermediate inputs are the main driver of producer price changes. Firms also appear to react significantly to changes in the producer price index of their industry. Variations in labor costs as well as in the production level also appear to increase the likelihood of a price change but their influence seems to be of a lesser importance. We also show that estimating an unconstrained dynamic model allows improving the estimation results as compared to those associated with a standard state-dependent model. Finally, our results point to an asymmetry in price adjustments. When they face a change in their costs, firms a! djust their prices upward more often and more rapidly than they do it downward.

April 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, April 23, 2010

When are Excessive Prices Unfair?

Posted by D. Daniel Sokol

Pinar Akman, University of East Anglia - Centre for Competition Policy, University of East Anglia - Norwich Law School and Luke Garrod, University of East Anglia - ESRC Centre for Competition Policy and School of Economics ask When are Excessive Prices Unfair?

ABSTRACT: EU competition law prohibits the abuse of a dominant position. An example of abuse is the charging of unfair prices. This prohibition in Article 102TFEU has been used to sanction excessive prices that are ‘too high’. According to the ECJ in United Brands, a price is abusive if (i) the price-cost margin is excessive and (ii) the price is unfair compared to other prices. However, there is little guidance to determine whether a price is excessive and/or unfair. We consider whether the principle of dual entitlement, which is consistent with most people’s perceptions of when prices are unfair relative to others, can be used to define explicitly what constitutes an unfair price in terms of the second stage of the United Brands test. We show that in general this principle is in line with the goals of an effective prohibition of excessive pricing and develop a procedure that defines a price as unfair in terms of this principle. We also show that European competition law enforcers in their attempts to define prices as unfair relative to others have followed similar arguments as the procedure developed here. Therefore, this procedure could go some way to resolve one of a number of problems regarding the prohibition of excessive prices.

April 23, 2010 | Permalink | Comments (0) | TrackBack (0)

The Impact of Behavioral Economics on Consumer and Competition Policies

Posted by D. Daniel Sokol

Eliana Garcés (European Commission) analyzes The Impact of Behavioral Economics on Consumer and Competition Policies.

ABSTRACT: Interesting questions are being asked about the policy implications of relaxing commonly held assumptions about how people make decisions. If consumers are not always rationally maximizing some kind of utility function, can we still claim that their decisions are always in their own best interest? And should this be a policy concern at all? We commonly rely on the competitive process to produce the market outcomes that are the most favorable to consumers. In a model of rational behavior, firms in a competitive environment compete mostly on the merits and the market outcome is efficient and welfare-maximizing. Does this result continue to hold when the rationality assumption about consumer behavior is relaxed?

April 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 22, 2010

Competition and productivity: a review of evidence

Posted by D. Daniel Sokol

Thomas J. Holmes and James A. Schmitz, Jr. summarize Competition and productivity: a review of evidence.

ABSTRACT: Does competition spur productivity? And if so, how does it do so? These have long been regarded as central questions in economics. This essay reviews the literature that makes progress toward answering both questions.

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

Robustness to strategic uncertainty in price competition

Posted by D. Daniel Sokol

Ola Andersson (Dept. of Economics, Stockholm School of Economics), Cédric Argenton (Tilburg University), and Jörgen Weibull (Dept. of Economics, Stockholm School of Economics) explore Robustness to strategic uncertainty in price competition.

ABSTRACT: We model a player's uncertainty about other player's strategy choices as probability distributions over their strategy sets. We call a strategy profile robust to strategic uncertainty if it is the limit, as uncertainty vanishes, of some sequence of strategy profiles in each of which every player's strategy is optimal under his or her uncertainty about the pthers. We apply this definition to Bertrand games with a continuum of equilibrium prices and show that our robustness criterion selects a unique Nash equilibrium price. This selection agrees with available experimental findings.

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

8th Experts' Forum on New Developments in European State Aid Law

Posted by D. Daniel Sokol

8th Experts' Forum on New Developments in European State Aid Law

9 June 2010, Workshop, Le Châtelain, Brussels
10/11 June 2010, Conference, Bibliothèque Solvay, Brussels

Conference on 10 & 11 June 2010
Regular: € 765,–
Reduced for EStAL-subscribers: € 645,–
reduced for full-time academics: € 495,–

Workshop on 9 June 2010
Regular: € 1.500,–
Reduced for EStAL-subscribers: € 1.400,–

Workshop on 9 June 2010 and Conference on 10 & 11 June 2010
Regular: € 2.095,–
Reduced EStAL-subscribers: € 1.890,–

VAT will be added if applicable.

If you wish to receive a personal invitation please contact Nikola Bock.

Overview

The conference agenda centres major recent developments in the field of EC State aid law such as:

• The Reform of the Rules Pertaining to SGEI
• State Aid Control over the Financing of Social Housing and Hospitals
• Fiscal Measures and the Application of the MEIP – Questions Arising from the
  Recent Ruling in EdF
• The Exit Strategy from Aids to Banks

Keynote speech: Joaquín Almunia
European Commissioner in charge of Competition and Vice-President of the Commission

The preceding high-level workshop is targeted at a maximum of 25 qualified delegates.

Target Group

EC competition lawyers working at a competition authority, in-house, or in private practice, private legal practitioners, economists, academics and industry representatives with an interest in the law and economics of European State aid.

Benefits of Attending

Since its launch in 2003 this event has grown to be the leading platform to present and discuss the latest developments in European State aid control. As it has been the case in previous years, private legal practitioners, economists, academics and industry representatives will have the opportunity to benefit from exchanging their views on the rules that will guide European State aid control for the coming years.

The high quality of the presentations as well as the analyses provided by our active participants guarantee a professional update on the most important issues.

Furthermore the prestigious Bibliothèque Solvay - located in Parc Léopold right next to the European Parliament - serves as an excellent venue to get in touch with the decision makers of tomorrow’s State aid law. Overall we expect to welcome delegates from all of the European Union’s 27 Member States – and beyond.

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

Behavioral Economics and Merger Analysis

Posted by D. Daniel Sokol

Alison Oldale (U.K. Competition Commission) explains Behavioral Economics and Merger Analysis.

ABSTRACT: The papers in this volume by Eliana Garcés, and Matthew Bennett, John Fingleton, Amelia Fletcher, Liz Hurley & David Ruck provide a very clear overview of behavioral economics and its application to competition policy generally. In this note I will comment on some implications of what they have to say for merger analysis.

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

Wednesday, April 21, 2010

Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102 TFEU to Abusive Exclusionary Conduct Useful?

Posted by D. Daniel Sokol

Damien Geradin, Howrey LLP, Tilburg University - Tilburg Law and Economics Center (TILEC), University of Michigan Law asks Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102 TFEU to Abusive Exclusionary Conduct Useful?

ABSTRACT: In December 2008, the European Commission (hereafter, the “Commission”) published a guidance paper on its enforcement priorities in applying Article 82 of the EC Treaty (now Article 102 TFEU) to abusive exclusionary conduct by dominant undertakings (hereafter, the “Guidance Paper”). This document is of a sui generis nature as it “sets out the enforcement priorities that will guide the Commission’s action in applying Article [102] to exclusionary conduct by dominant undertakings.” The Commission does not therefore state or restate the way in which Article 102 should be interpreted, a task which falls within the exclusive remit of the European Court of Justice (hereafter, the ECJ”), but explains the circumstances in which a given dominant firm’s conduct is likely to be subject to enforcement action by the Commission.

Against this background, this paper seeks to answer the following question: Is the Guidance Paper useful? Considering that the Guidance Paper has generally been well received by commentators, one could be tempted to respond to this question positively, but a careful review of the document suggests that the answer may be less straightforward than would appear at first blush. To respond to the question posed above, this paper is divided into five parts. Part I explains the context leading to the adoption of the Guidance Paper. Part II briefly describes the content of the Guidance Paper, focusing on the general principles that will guide the Commission’s assessment of foreclosure rather than on its review of the various types of conduct that are likely to fall within the purview of Article 102. Part III addresses the question of whether the Guidance Paper provides sufficient guidance to dominant firms and their advisors as to whether certain conduct they may wish to pursue is compatible with Article 102. Part IV discusses whether the Commission is likely to comply with the effects-based approach promoted in its Guidance Paper or is likely to revert to a form-based approach when this better suits its enforcement objectives. Finally, Part V concludes that while the Guidance Paper gives encouraging signs that the Commission will adopt a modern, effects-based approach when defining its enforcement priorities questions remain as to the practical impact of this document for dominant firms. First, the principles contained in the Guidance Paper are subject to significant exceptions and caveats and provide no safe harbors, hence reducing the overall level of guidance provided for in this document. Second, the approach taken by the Commission in the Intel case suggests that the Commission may still be tempted to rely on the formalistic case-law of the ECJ in order to ensure that its decision does not become subject to a successful appeal.


 

April 21, 2010 | Permalink | Comments (0) | TrackBack (0)

Class Certification in Antitrust Cases: An Economic Framework

Posted by D. Daniel Sokol

Hal J. Singer, Navigant Economics LLC and Robert B. Kulick, Navigant Economics address Class Certification in Antitrust Cases: An Economic Framework.

ABSTRACT: A number of recent appellate court decisions pertaining to class certification in antitrust cases have spawned uncertainty and debate about the future course of antitrust enforcement through the class-action mechanism. One leitmotif of these decisions is that Federal Rule of Civil Procedure’s 23(b)(3) “predominance” standard can only be satisfied by “rigorous analysis.” Some antitrust practitioners have argued that these statements regarding rigorous analysis must indicate that many issues traditionally thought of as merits issues must now be resolved during the class-certification inquiry. Yet the same decisions by appellate courts have emphasized that the class-certification process is a limited inquiry and that plaintiffs are not required to prove the validity of their claims regarding violation and impact to achieve class certification.

In this article, we propose an economic framework for interpreting the rule 23(b)(3) predominance standard. We believe that our analysis resolves the apparent conflict between the principle of conducting a rigorous analysis during the class certification inquiry and the principle of conducting an inquiry that implicates the validity of allegations at issue. Our approach also gives a specific economic meaning to the principle articulated by the Supreme Court in Amchem that class certification ultimately comes down to a question of whether a proposed class is sufficiently cohesive to warrant certification. Furthermore, our approach provides a compelling economic justification for a specific puzzle in antitrust class-action jurisprudence: Plaintiffs seeking class certification have often been successful when they have been able to prove that (1) the prices paid by all class members are linked by a common element of pricing, and (2) this common element was altered by the challenged conduct in a way that harmed plaintiffs. Despite the fact that this argument is often advanced through economic expert testimony, some antitrust practitioners have suggested that this approach lacks an economic basis. We review several cases where plaintiffs successfully used this approach to certify a class and show how our framework provides an economic basis for the court’s affirmative decisions in these cases. Our framework also suggests a specific delineation of the responsibilities of class-certification experts, liability experts, and damages experts.

April 21, 2010 | Permalink | Comments (0) | TrackBack (0)

What Does Behavioral Economics Mean for Competition Policy?

Posted by D. Daniel Sokol

Matthew Bennett, John Fingleton, Amelia Fletcher, Liz Hurley, & David Ruck (U.K. Office of Fair Trading) ask What Does Behavioral Economics Mean for Competition Policy?

ABSTRACT: This paper looks at whether behavioral economics fundamentally changes our understanding of competition policy. We argue that behavioral economics is an important incremental advance in our understanding, just as informational economics was before it. But this does not mean that all previous economic models of competition and markets are now irrelevant. For the most part, they still provide valid and valuable insights. Importantly, behavioral economics does not question our belief in competition policy as a tool for making markets work well for consumers.

Nevertheless, the existence of behavioral biases does have a number of implications for the way in which markets work. Behavioral biases on the consumer side emphasize the importance of the demand side in making markets work well, and the important synergies between consumer policy and competition policy. Behavioral biases may also have implications for anticompetitive behavior. In spite of this, behavioral economics does not necessarily imply more intervention. Markets can often solve their own problems and even where they can’t, there are dangers inherent in over-paternalism limiting consumer choice. Behavioral economics also emphasizes the difficulties that authorities can have in trying to correct for such biases.

April 21, 2010 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 20, 2010

Antitrust Division Issues 2010 Edition of Its Annual Newsletter

Posted by D. Daniel Sokol

The Department of Justice's Antitrust Division issued its annual newsletter today, which can be found here.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Professor Robert Pitofsky Receives the Justice Department's 2010 John Sherman Award

Posted by D. Daniel Sokol

In recogonition for a lifetime of important academic and policy contributions, the DOJ has awarded Bob Pitofsky its John Sherman Award.  The DOJ press release is here.


I would appreciate if former students, FTC staffers and A&P colleagues would post comments on Bob's career.  He has been a major force in antitrust.  Note that all comments need to be approved by the moderator (me) so don't worry if your comment does not post immidiately.  Otherwise, 80 percent of responses would be for cheap pharmaceuticals from Canada or the augmentation of various body parts.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Efficiency and Market Power Gains in Megabank Mergers

Posted by D. Daniel Sokol

Erik Devos, University of Texas at El Paso - College of Business Administration - Department of Economics and Finance, Srinivasan Krishnamurthy, NC State University, SUNY at Binghamton - School of Management, and Rajesh P. Narayanan, Louisiana State University have some interesting findings on Efficiency and Market Power Gains in Megabank Mergers.

ABSTRACT: This paper uses Value Line forecasts to estimate and trace merger-related gains to their ultimate sources in efficiency improvements and enhanced market power. Sidestepping methodological issues that have hampered past attempts at assessing bank mergers, this approach yields estimates that indicate that, on average, megabank mergers generate gains that derive from improvements in cost efficiencies. With the removal of restrictions on bank expansion, these gains decline and previously observed efficiency gains give way to gains that arise at the expense of customers as the extent of geographic overlap between the merging banks increases. In mergers where the resulting size of the combination allows merging banks potential access to previously unavailable regulatory subsidies, gains are substantial and arise from projected revenue increases that are linked to increased risk taking.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

The Limits of Antitrust and the Chicago School Tradition

Posted by D. Daniel Sokol

George Priest (Yale Law) offers his thoughts on The Limits of Antitrust and the Chicago School Tradition.

ABSTRACT: I situate Frank Easterbrook's article, The Limits of Antitrust, within the Chicago School antitrust tradition. I demonstrate the link between the article and the works of Aaron Director and Ronald Coase, in particular their emphasis (1) on the superior effect of markets to government attempts to correct monopoly behavior and (2) the expectation of judicial error. The Easterbrook article is shown to have extended the Director-Coase antitrust program.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Draft Merger Guidelines for Public Comment Released

Posted by D. Daniel Sokol

The DOJ and FTC have released the new draft Merger Guidelines for public comment on the eve of the Spring Meeting.  It should make the meeting even more exciting this year.  I was away from the internet from this morning and by the time I just checked my messages, I already had 12 different emails letting me know that the draft version of the Guidelines were up.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

An Introduction to Competition Law and Policy in the Modern Automobile Industry

Posted by D. Daniel Sokol

Conor C. Talbot, European University Institute - Department of Law provides An Introduction to Competition Law and Policy in the Modern Automobile Industry.

ABSTRACT: The automobile sector is one that never ceases to demand the attention of regulators and commentators alike because of its economic importance, strategic and systemic influence and its traditional status as a source of prestige and national pride. Thus a distinct competition policy had to be created for it over the years on both sides of the Atlantic. This piece begins by outlining the specificities of the motor industry before detailing two particular issues where competition decision-makers have had to bend rules for the car sector: namely regarding trade protections and distribution systems. The paper then concludes by looking to how previous experience could influence the approach of the authorities towards auto-makers in the current troubled economic times.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

ABA Antitrust Spring Meeting Begins Tomorrow

Posted by D. Daniel Sokol

Wednesday begins the ever important ABA Antitrust Spring Meeting - the most attended and most important antitrust conference every year.

Spring Meeting 2010

We hope you are planning to be in Washington for the 58th ABA Section of Antitrust Law Annual Spring Meeting. The conference has long been the best-attended and most comprehensive review of developments in antitrust and consumer protection law available anywhere.

On the agenda are cutting-edge antitrust and consumer protection issues featuring a faculty that includes leading antitrust lawyers from the U.S. and non-U.S. enforcement agencies, corporate law departments and law firms, as well as economists and academics. There will be a track for international sessions, another for litigation, and, for the first time, a track for consumer protection/privacy sessions. Ethics credits will also be available.

Wednesday highlights include:

  • Fundamentals of antitrust, consumer protection and antitrust economics.
  • Breakfast with the Deputy Assistant Attorney Generals of the US Department of Justice
  • The Spring Luncheon (seating is limited) followed by a luncheon program: Innovation, Antitrust and the Big Picture presented by Richard Rapp.
  • Committee Connection Welcome Reception where all can visit with the leaders of the committees that do the Section’s work

Thursday highlights include:

  • Breakfast with the State Antitrust Enforcers
  • The Chair’s Showcase
  • A mock jury trial demonstrating the deliberations of the mock jury and offering an opportunity for questions of mock jurors, with presentations from some of the country’s most experienced antitrust litigators
  • Spring Dinner (limited availability) with guest speaker Joel I. Klein.

Friday highlights include:

  • Breakfast with the Bureau Directors from the Federal Trade Commission
  • The traditional “Roundtable Conference” in which top antitrust enforcement officials engage in a wide-ranging, spirited discussion of current “hot” topics

Throughout the Conference, high-speed internet and coffee will be available at The Bookstore. More importantly, this is the location to discover the Section of Antitrust Law publications and products or you can do so now by clicking here.

Those traveling from outside of the Washington DC area may want to secure hotel accommodations at this time. Spring Meeting rooms do tend to sell out quickly, especially at the JW Marriott Hotel.

We look forward to seeing you in April.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

The Role of Behavioral Economics in Competition Law: A Judicial Perspective

Posted by D. Daniel Sokol

Vivien Rose  (U.K. Competition Appeal Tribunal) explains The Role of Behavioral Economics in Competition Law: A Judicial Perspective.

ABSTRACT: To date, the literature on the role of behavioral economics in the context of competition policy has largely focused on the development of the theory and practice of behavioral economics in the analysis of competition cases. It is also useful, however, to consider how arguments about behavioral economics are likely to be received in a judicial setting.

It will take longer for academic writings on behavioral economics to filter through into the arguments before and judgments of the Tribunal or the High Court than it does in the U.S. courts—indeed that might never happen. But, in fact, what courts have been doing all along may be closer to behavioral economics than to more conventional economic theories of rational behavior.

April 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Monday, April 19, 2010

Global Competition Law, Markets and Globalization

Posted by D. Daniel Sokol

David Gerber (Chicago Kent) has produced a marvelous piece of scholarship in Global Competition Law, Markets and Globalization.  This is a book that I encourage all competition academics and practitioners to buy.

ABSTRACT: Global competition now shapes economies and societies in ways unimaginable only a few years ago, and competition (or 'antitrust') law is a key component of the legal framework for global competition. These laws are intended to protect competition from distortion and restraint, and on the national level they reflect the relationships between markets, their participants, and those affected by them. The current legal framework for the global economy is provided, however, by national laws and institutions. This means that those few governments that have sufficient 'power' to apply their laws to conduct outside their own territory provide the norms of global competition. This has long meant that the US (and, more recently, the EU) structure global competition, but China and other countries are increasingly using their economic and political leverage to apply their own competition laws to global markets. The result is increasing uncertainty, costs, and conflicts that burden global economic development.

This book examines competition law on the global level and reveals its often complex and little-understood dynamics. It focuses on the interactions between national and international legal regimes that are central to these dynamics and a key to understanding them.

Part I examines the evolution of the current global system, the factors that have shaped it, how it operates today, and recent efforts to alter that system-e.g., by including competition law in the WTO. Part II focuses on national competition law systems, revealing how national laws and experiences shape global competition law dynamics and how global factors, in turn, shape national laws and experiences. It examines the central roles of US and European law and experience, and it also pays close attention to countries such as China that are playing increasingly important roles in the global competition law arena. Part III analyzes current strategies for improving the legal framework for global competition and identifies the factors that may contribute to a system that more effectively supports global economic and political development. This analysis also suggests a pathway for moving toward that goal.  

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Predatory Pricing - Economics and Law in the United States and the European Union

Posted by D. Daniel Sokol

Adrian Emch, Sidley Austin LLP and Gregory K. Leonard, National Economic Research Associates Inc. address Predatory Pricing - Economics and Law in the United States and the European Union.

ABSTRACT: We discuss the history of the economics and law of predatory pricing in the United States and European Union and identify the key features required for a sound antitrust approach to predatory pricing.

April 19, 2010 | Permalink | Comments (0) | TrackBack (0)