Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, May 8, 2010

What To Make of the Antitrust Legacy of Justice Stevens?

Posted by D. Daniel Sokol

Waller Spencer Waller of Chicago Loyola Law School provides an assessment of Justice Stevens and the Rule of Reason.

ABSTRACT: Over the past thirty plus years Justice Stevens has played a special role in the jurisprudence of antitrust. He came to the Supreme Court after a successful career as an antitrust litigator, scholar, law teacher, and federal appellate judge. Justice Stevens applied the special insights this background provided to articulate a unique voice in shaping antitrust. While much of the antitrust debate since World War II has concerned the proper legal standard for assessing the competitive impact of agreements under the antitrust laws, Justice Stevens has focused much of his analytical work for the Court on a more sophisticated, but no less important, question - how should a court actually determine whether an agreement unreasonably restricts competition in violation of the antitrust laws. In antitrust terms, the question for Stevens was not so much whether the per se rule or the rule of reason applied in a particular case, but what does the rule of reason actually mean and how should it be applied.

In this article, I examine the distinctive voice Justice Stevens brought to antitrust, some of the personal and professional influences that created this voice; and the impact of Justice Stevens on the antitrust jurisprudence of the Supreme Court in defining the rule of reason and its application. I argue that Stevens, more than any Justice, helped define the rule of reason as a single unitary continuum in analyzing agreements under Section 1 of the Sherman Act and further defined what counted as potential legitimate justifications under the rule.

Part I lays out Justice Stevens's student and early professional career and the influence that Professor James Rahl of Northwestern University School of Law had on Justice Stevens and his antitrust philosophy. Part II analyzes the litigation practice, scholarly writing, and limited antitrust appellate opinions of then Judge Stevens for further clues as to his evolving antitrust philosophy. Part III examines the numerous Supreme Court opinions authored by Justice Stevens which analyze the critical issue of what the rule of reason actually means when it applies in a case. Finally, I conclude that Justice Stevens' most important contribution in antitrust was to redefine the rule of reason from an empty analytical box in which defendants automatically prevailed into the core tool of modern antitrust law in which courts conduct a more meaningful analysis of the competitive impact of agreements.

May 8, 2010 | Permalink | Comments (0) | TrackBack (0)

The legacy of Neelie Kroes

Posted by D. Daniel Sokol

Carl Baudenbacher (President of the EFTA Court, Chairman of the St Gallen International Competition Law Forum) explains The legacy of Neelie Kroes.

May 8, 2010 | Permalink | Comments (0) | TrackBack (0)

An Elasticity Measure of Welfare Loss in Symmetric Oligopoly

Posted by D. Daniel Sokol

Tim James and Jolian McHardy (both Department of Economics, University of Sheffield)  provide An Elasticity Measure of Welfare Loss in Symmetric Oligopoly.

ABSTRACT: We derive a measure of welfare loss as a proportion of the value of sales under quantity-setting symmetric oligopoly in terms of the equilibrium industry price elasticity of demand, the number of firms in the industry and a conjectural variation term in the context of the standard linear model. This generalises the monopoly measure in James and McHardy (1997).

May 8, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, May 7, 2010

How Many Firms Should Be Leaders? Beneficial Concentration Revisited

Posted by D. Daniel Sokol

Hiroaki Ino (Kwansei Gakuin University) and Toshihiro Matsumura (University of Tokyo) ask and answer How Many Firms Should Be Leaders? Beneficial Concentration Revisited.

ABSTRACT: We investigate the relationship between the Herfindahl-Hirschman Index (HHI) and welfare. First, we discuss the model wherein m leaders and N - m followers compete. Daughety (1990) finds that under linear demand and constant marginal cost, the Stackelberg model yields larger welfare and HHI than the Cournot model. Thus, he demonstrates that beneficial concentration occurs. We find that this always occurs under general cost and demand functions when m is sufficiently large, but does not always occur when m is small. Next, we consider the free entry of followers, and find that beneficial concentration always occurs regardless of m. In particular, the more persistent the leadership, the more likely it is to be beneficial.

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

The application of European competition law in the transport sector

Posted by D. Daniel Sokol

Pierre Frühling, Charles Whiddington, John Cassels, and Elisabeth Decat  (all Field Fisher Waterhouse) explore The application of European competition law in the transport sector.

ABSTRACT: The economic crisis has affected the transport sector, particularly aviation where alliances are being formed and concentrations are taking place. The aviation industry is also giving rise to cartel investigations and a criminal prosecution. A new block exemption has been adopted for the maritime sector and the current exemption for the motor vehicle industry is under review. This article describes the main developments in the application of European Competition law in the transport sector during 2009. It provides an overview of the major European cases and decisions, as well as regulatory developments.

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

Coming Next Week: The Top 25 List of Female Antitrust Law and Economics Professors

Posted by D. Daniel Sokol

Next week I will be posting the "Best of" list for female professors around the world in antitrust law and antitrust IO economics.

Feel free to send me nominations of full time faculty via email.

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

How do market structures affect decisions on vertical integration/separation?

Posted by D. Daniel Sokol

Noriaki Matsushima (Institute of Social and Economic Research, Osaka University) and Tomomichi Mizuno (Competition Policy Research Center, Japan Fair Trade Commission) ask How do market structures affect decisions on vertical integration/separation?

ABSTRACT: We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms' decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium number of vertically integrated firms depends on the cost structure. When the local downstream monopolists merge, vertical separation tends to appear in equilibrium. When an upstream firm can price discriminate, the downstream firms vertically separate. When the downstream firms compete with each other, vertical integration tends to appear if the degree of product differentiation is lower.

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

Estimating the ‘Coordinated Effects’ of Mergers

Posted by D. Daniel Sokol

Peter J. Davis (Competition Commission UK) and Cristian Huse (Stockholm School of Economics) have an interesting paper on Estimating the ‘Coordinated Effects’ of Mergers.

ABSTRACT: Mergers can be blocked if they increase the likelihood of coordination. This paper presents the first empirical coordinated effects merger simulation model in a differentiated product market. We study the network server market. We find that the incentives to coordinate actually fell as a result of the merger between HP and Compaq and show, contrary to conventional economic logic, that incentives to coordinate will ceteris paribus often fall in this way after a merger. We extend the model to empirically examine the impact of multi-market contact, a competitive fringe, and the presence of an antitrust authority imposing punishments on tacit colluders in the form of fines.

Download Davis_Huse_Jan2010[1]

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

The Pharmaceutical Sector Inquiry and its Impact on Competition Law Enforcement

Posted by D. Daniel Sokol

Dominik Schnichels and Satish Sule (both DG Comp) explain The Pharmaceutical Sector Inquiry and its Impact on Competition Law Enforcement.

ABSTRACT: Legal Context: This article covers the application of competition law to the pharmaceutical sector in general as well as background, results and potential impact of the Pharmaceutical Sector Inquiry in particular, which was carried out by the Commission in 2008/2009 on the basis of Article 17 of Council Regulation (EC) No 1/2003 in order to investigate potential competition problems within the pharmaceutical sector. Competitive relationships between originator and generic companies as well as those between originator companies themselves were examined in this context as well as commentaries on the regulatory framework. Practices that were particularly examined concerned the use of patent rights (including patent strategies, disputes, litigation and settlements) as well as interventions before regulatory bodies and lifecycle strategies.

Key points: The report found on the one hand found potentially problematic practices of companies in this sector as well as shortcomings of its regulatory framework. Whereas in the first case patent settlements with reverse payments and defensive patenting strategies will be further examined in the future in the latter case the fragmented European patent system, as well as delays in marketing authorisation as well as pricing and reimbursement procedures have to be pointed out.

Practical Significance: Patent settlements and defensive patenting strategies have been highlighted by the report as objects of future competition scrutiny in this sector. Furthermore a number of recommendations have been made to improve the regulatory framework, namely by creating a common European patent system as well as a unified specialised patent judiciary.

May 7, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 6, 2010

Big Changes in Brazilian Antitrust Likely by the End of the Year

Posted by D. Daniel Sokol

I have been hearing for the last few years that we are just a year away from serious change in the Brazilian antitrust system - sort of like the common saying that Brazil is the country of the future.  Well, the future may be now on both counts.  On the antitrust front Arthur Badin (President of CADE) suggested that changes to the Brazlian competition system should be passed by the legislature by end of the year

For some insights into the Brazilian competition system, you might want to see some of these insightful chapters in my book (co-edited with Eleanor Fox), Latin American Competition Law and Policy.  See here for the table of contents.  Purchase the book here.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

On-line reselling and selective distribution networks: What can be learnt from the French experience?

Posted by D. Daniel Sokol

Robert Saint-Esteben, Olivier Billard, and Karin-Amélie Jouvensal (all Bredin Prat) ask On-line reselling and selective distribution networks: What can be learnt from the French experience?

ABSTRACT: The European Commission is reviewing the competition rules applicable to vertical restraints. In that context, an issue is how restrictions to Internet sales should be addressed. Such restrictions are frequent in selective distribution systems, where French courts and authorities have acquired a competence that may inspire the Commission.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Competition under Dynamic Lot Sizing Costs with Capacity Acquisition

Posted by D. Daniel Sokol

Hongyan Li (Aarhus School of Business, Aarhus University, Denmark) and Joern Meissner (Department of Management Science, Lancaster University Management School) describe Competition under Dynamic Lot Sizing Costs with Capacity Acquisition.

ABSTRACT: Lot-sizing and capacity planning are important supply chain decisions, and competition and cooperation affect the performance of these decisions. In this paper, we look into the dynamic lot sizing and resource competition problem of an industry consisting of multiple firms. A capacity competition model combining the complexity of time-varying demand with cost functions and economies os scale arising from dynamic lot-sizing costs is developed. Each firm can replenish inventory at the beginning of each period in a finite planning horizon. Fixed as well as variable production costs incur for each production setup, along with inventory carrying costs. The individual production lots of each firm are limited by a constant capacity restriction, which is purchased up front for the planning horizon. The capacity can be purchased from a spot market, and the capacity acquisition cost fluctuates with the total capacity demand of all! the competing firms. We solve the competition model and establish the existence of a capacity equilibrium over the firms and the associated optimal dynamic lot-sizing plan for each firm under mild conditions.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Quantification of Damages in Exclusionary Practice Cases

Posted by D. Daniel Sokol

Paolo Buccirossi (LEAR) provides his thoughts on Quantification of Damages in Exclusionary Practice Cases.

ABSTRACT: In order to make better use of economic tools in assessing damages resulting from exclusionary conduct there needs to be greater consideration of the ‘theory of harm’, which sharpens the understanding of how and why a rival's profitability has been damaged. This article argues for the necessity of ensuring a complete theory of harm and suggests practical ways in which this can be arrived at when some, or all, of the information is missing.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Former FTC Chairman Timothy J. Muris Named Recipient of 2010 Kirkpatrick Award

Posted by D. Daniel Sokol

One of the great antitrust minds in both academia and policy, Tim Muris, is being honored with the FTC's 2010 Kirkpatrick Award.  See here for the FTC press release. 

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Patent Application: Obstacle for Innovation and Abuse of Dominant Position under Article 102 TFEU?

Posted by D. Daniel Sokol

Joseph Straus (Professor of Law University of Ljubljana, and Munich) asks Patent Application: Obstacle for Innovation and Abuse of Dominant Position under Article 102 TFEU?

ABSTRACT: The Commission has recently acted under Article 102 TFEU (ex Article 82 EC) against firms filing patent applications. In this article, it is challenged whether these actions have any legal basis in EC law. It is also argued that they ignore principles established in intellectual property statutory and case law of the EU Member States as evidenced, for instance, by German statutes and jurisprudence. References to US law also demonstrate that there are no such precedents in the USA. It is further explained how the patent system balances the interests of patentees, on the one hand, and the public at large, on the other hand, before and after patent is granted by providing for research exemptions and compulsory licences, thus securing that neither patent applications nor patents can constitute an obstacle to innovation.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

The Review of the Current Regime for the Assessment of Horizontal Cooperation Agreements under EU Competition Rules

Posted by D. Daniel Sokol

College of Europe-Collège d'Europe
Global Competition Law Centre

The Review of the Current Regime for the Assessment of Horizontal Cooperation Agreements under EU Competition Rules

Donncadh Woods, DG COMP, European Commission

Axel Gutermuth, Arnold & Porter

June 2010 – Hilton Hotel, 38 Boulevard de Waterloo, 1000 Brussels

Lunch Talk Series

-

Programme

12:00 - 12:30: Sandwich lunch and socializing

12:30 - 13:00: Presentation

13:00 - 13:15: Comments

13:15 - 14:00: Roundtable discussion

Inquiries

Global Competition Law Centre

College of Europe, Bruges

E-mail:

[email protected]

Fax : +32 (0)2 533 57 54

http://gclc.coleurope.eu

The participation fee is Euro 25.

Please fill in the attached forms and return them either by fax +32 (0)2 533 57 54 or email at this address by 3 June 2010 for the 46th Lunch Talk. 

Download 46th_GCLC_Lunch_Talk_-_7_June_2010_-_Registration_Form[1]


May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

The Commission's Pharmaceutical Sector Inquiry - What's Next?

Posted by D. Daniel Sokol

College of Europe-Collège d'Europe
Global Competition Law Centre

The Commission's Pharmaceutical Sector Inquiry - What's Next?

Dominik Schnichels, Head of the Pharmaceutical Task Force, European Commission
James Killick, Partner, White & Case

20 May 2010 – Hilton Hotel, 38 Boulevard de Waterloo, 1000 Brussels

Lunch Talk Series

Programme

12:00 - 12:30: Sandwich lunch and socializing

12:30 - 13:00: Presentation

13:00 - 13:15: Comments

13:15 - 14:00: Roundtable discussion

Inquiries

Global Competition Law Centre

College of Europe, Bruges

E-mail:

Fax : +32 (0)2 533 57 54

http://gclc.coleurope.eu

The participation fee is Euro 25.

Please fill in the attached forms and return them either by fax +32 (0)2 533 57 54 or email at this address by 17 May 2010 for the 45th Lunch Talk


Download 45th_GCLC_Lunch_Talk_-_20_May_2010_-_Registration_Form[1]

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Antitrust Marathon IV: With Authority

Posted by D. Daniel Sokol

Philip Marsden, The British Institute of International and Comparative Law and Spencer Weber Waller, Loyola University Chicago School of Law give us Antitrust Marathon IV: With Authority.  It is better than Police Academy IV, although perhaps not to the level of Star Wars Episode IV.  The topics the Marathon covered are great ones, so please download the paper.

ABSTRACT: The Antitrust Marathons explore enduring issues of competition and consumer policy on a comparative basis through roundtable discussions of senior officials, practitioners, and academics in more depth than is possible in traditional conference format. Each Antitrust Marathon includes special issue papers and the edited transcript of the roundtable discussion. Antitrust Marathon IV held in Dublin, Ireland in October 2009 focused on how to integrate competition and consumer regulation and enforcement; concurrent regulation between competition authorities and sectoral regulations; competition policy and financial regulation in light of the global financial crisis; and institutional design questions of judicial, administrative, and mixed model for competition policy.


 

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Enhancing Competition Through The Cy Pres Remedy: Suggested Best Practices

Posted by D. Daniel Sokol

Bert Foer (AAI) suggests Enhancing Competition Through The Cy Pres Remedy: Suggested Best Practices.

ABSTRACT: TH E N O R M A L R E M E D I E S I N A private antitrust case are a combination of injunctions and treble damages that are paid out to the victim(s) of the anticompetitive activity.When an aggregate amount of damages is established, the primary objective is to distribute the damages to those who were injured. In antitrust class action litigation, however, it is often impossible or impracticable to compensate all victims. Administrative concerns may work against payments to individual plaintiffs, as in the case of an extremely large class where the fund is not sufficient to justify the transaction costs of distribution to individual claimants. Consequently, in some cases, there is money left over in the form of unclaimed funds. In such cases, courts sometimes employ the doctrine of “cy pres” to put the unclaimed funds to “the next best use,” which may include awarding funds to public interest organizations or charities for purposes related to the case. There is increasing interest in utilizing the cy pres doctrine as part of the remedy because of its potential to enhance competition. At the same time, cy pres opens up possibilities of corruption, waste, and public criticism. In this article, I provide background on the law of cy pres and suggest “best practices” for its invocation.

May 6, 2010 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 5, 2010

Competition Among Spatially Differentiated Firms: An Empirical Model with an Application to Cement

Posted by D. Daniel Sokol

Nathan H. Miller and Matthew Osborne (both DOJ Antitrust) have posted an interesting paper on Competition Among Spatially Differentiated Firms: An Empirical Model with an Application to Cement.

ABSTRACT: The theoretical literature of industrial organization shows that the distances between consumers and firms have first-order implications for competitive outcomes whenever transportation costs are large. To assess these effects empirically, we develop a structural model of competition among spatially differentiated firms and introduce a GMM estimator that recovers the structural parameters with only regional-level data. We apply the model and estimator to the portland cement industry. The estimation fits, both in-sample and out-of-sample, demonstrate that the framework explains well the salient features of competition. We estimate transportation costs to be $0.30 per tonne-mile, given diesel prices at the 2000 level, and show that these costs constrain shipping distances and provide firms with localized market power. To demonstrate policy-relevance, we conduct counter-factual simulations that quantify competitive harm from a hypothetical merger. We are able to map the distribution of harm over geographic space and identify the divestiture that best mitigates harm.

May 5, 2010 | Permalink | Comments (0) | TrackBack (0)