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 22, 2010

The Relationship between Competition Authorities and Sectoral Regulators: An International-Comparative Perspective

Posted by D. Daniel Sokol

Maher Dabbah, Queen Mary - Law, explores The Relationship between Competition Authorities and Sectoral Regulators: An International-Comparative Perspective.

ABSTRACT: The relationship between competition authorities and sectoral regulators is one of the most important, yet most difficult and controversial topics we have around. The debate that was started in the 1990s in particular on how the parameters in this relationship should be set has never been settled; in many respects, the debate has even become more heated.

The purpose behind this article is to shed some fresh light on the topic and to present an international-comparative perspective on this important relationship. Among the issues which the article considers are: the differences and similarities between the instruments of competition law and special sectoral regulation; areas of potential overlap and conflict between competition enforcement and access, economic, and technical regulation; situations of concurrency between competition authorities and sectoral regulators and the exact role a competition authority should perform in this context, be that an enforcement, a supervisory or an advocacy function; the different ‘options’ or ‘models’ which may be adopted by countries (and their competition authorities) when determining the question of sectoral regulation and the application of competition law in the sectors; and the role of government in sectoral regulation.

Specific reference is made throughout the article to detailed examples from practice taken from different regimes around the world, most notably: the USA, Australia, the UK and EU Member States. In doing so, the article seeks to place the topic in its proper (wider) context of institutional cultures, the socio-economic environment prevailing in countries and the public policy choices made by governments and public authorities (including competition authorities) more specifically.

The article concludes with a set of reflections and recommendations which hopefully would be useful in understanding the manner in which a competition authority should design its policy approach to the topic in order to respond effectively to changes in time and in the economic reality of the sectors.

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

Friday, May 21, 2010

Enforcement Policy of the Egyptian Competition Law

Posted by D. Daniel Sokol

Mohamed Elfar, Queen Mary - University of London discusses Enforcement Policy of the Egyptian Competition Law.

ABSTRACT: This article explores the enforcement policy adopted by the Egyptian Competition Authority (ECA). Due to the lack of any published guidelines in this regard the author traces its policy through the publications made by the ECA and a number of key cases.

It is revealed that there are some ambiguities and inconsistencies in the enforcement policy. In certain cases the ECA strictly applies per se prohibitions and rejects any efficiency defences. However, in other cases it adopts a rule of reason analysis and focuses on proving effect rather than applying the stipulated per se prohibition. These factors and others reduce the credibility of the ECA and increase the ambiguities among the business community.

However, it is finally noted that the ECA needs more time to adjust its policies and to adopt the most relevant approach thereafter.

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

Standard for Merger Review

Posted by D. Daniel Sokol

The OECD has published its Roundtable discussion on Standard for Merger Review.

ABSTRACT: Most competition authorities rely on one of two main tests applied to assess whether a merger has anti-competitive effects: (i) the dominance test; and (ii) the significant lessening of competition (SLC) test. Some have a hybrid test. There may be a difference in the scope of the dominance and SLC standards, whereby the assessment of certain situations could lead to different outcomes depending on which test is used. Many jurisdictions have changed and others are contemplating changing the legal standard for the review of mergers from a standard based on the creation or strengthening of a dominance position to an SLC standard. No country reported changing over the last twenty years from the SLC standard to the dominance standard. While for most countries the change to an SLC test has made little difference in their practice, it has nevertheless made an impact on various aspects of merger review. Overall, the experience with changing from dominance to an SLC standard has been positive.

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

Financial Crisis Remedies in the European Union: Balancing Competition and Regulation in the Conditionality of Bailout Plans

Posted by D. Daniel Sokol

Damien Gerard, Law, Louvain University, has posted Financial Crisis Remedies in the European Union: Balancing Competition and Regulation in the Conditionality of Bailout Plans.

ABSTRACT: This contribution illustrates the European Commission’s reliance on EU state aid rules to pursue a complex mix of competition and regulatory objectives in the framework of the financial crisis. Section 1 sketches the framework that enabled the Commission to review bailout plans and condition their implementation. Section 2 then shows how the Commission attempted to address some of the regulatory failures that allowed for “unrestricted and exaggerated risk taking” (dixit Commissioner Kroes) by credit institutions. Section 3 explains, subsequently, how the Commission undertook to prevent or mitigate market distorting effects resulting from the implementation of bailout plans. In closing, Section 4 questions some of the competition policy options pursued by the Commission in dealing with the crisis, notably with regards to compatibility with the EU internal market policy. The contribution also points to various instances where the conditions imposed and/or negotiated by the Commission impacted on the structure of credit institutions and their business practices (including retail banking services), with potentially long-term consequences.

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

Competition and Dynamics in Market Structure in Corn and Soybean Seed

Posted by D. Daniel Sokol

William W. Wilson & Bruce Dahl (North Dakota State University) describe Competition and Dynamics in Market Structure in Corn and Soybean Seed.

ABSTRACT: There has been a sharp increase in planting of genetically modified ("GM") crops in the past decade and further expansion is expected in the United States as well as other countries, as well as in new crops. Firms in this industry have substantial economies of scale due to the high costs of research and development ("R&D). As a result, there have been many mergers and acquisitions, and there are now fewer firms in some of these functional areas. Research to develop genetically-engineered ("GE") traits is high cost, very risky, takes a substantial amount of time to develop, and is subject to a great deal of uncertainty regarding trait efficiency, government approvals, market acceptability, and prospective impacts of competitor traits. Firms can spend in excess of $100 million to develop a trait and, for varying reasons, not have it commercialized. On the other hand, traits may be developed that have a high degree of trait efficiency and, if other sources of uncertainty are reconciled, these traits may have substantial market penetration.

Firms in the agbiotechnology industry confront important strategic choices. The most important choices concern spending on R&D, how that money is spent, intellectual property ("IP") protection strategies, and technology distribution strategies. Different approaches have been taken to these strategic decisions, particularly regarding R&D spending and seed and trait distribution.

This article describes the dynamics of R&D investments, IP, and the structure of the seed distribution sector. These topics are crucially important in understanding the structure and conduct of the agriculture industry. Some of these issues are the subject of recent papers, pending litigation and investigations, and recently prompted a set of hearings by the Departments of Justice and Agriculture on competition in agriculture markets.

These issues also come at a very strategically important time for this industry, which is confronting several pressures. The first wave of GM traits is scheduled to come off-patent commencing in 2014. Second, a new set of traits is on verge of being commercialized. These are more prolific and no individual firm is dominant. Third, the major rivals are in legal proceedings regarding, among other matters, the terms of their contracts. Finally, concerns have been expressed about excessive market power and concentration.

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

Save the Date: November 19, 2010 for Antitrust Conference in New Delhi

Posted by D. Daniel Sokol

We will have details soon but I am one of a number of planners of what will be an amazing international antitrust conference in New Delhi, India for Friday November 19, 2010, so please save the date.

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

A First Principles Approach to Antitrust Enforcement in the Agricultural Industry

Posted by D. Danielo Sokol

Geoffrey Manne (Int'l Center for Law & Economics) & Joshua Wright (George Mason University - Law) provide their thoughts on A First Principles Approach to Antitrust Enforcement in the Agricultural Industry.

ABSTRACT: In March 2010, the Department of Justice ("DOJ") and the United States Department of Agriculture began a series of workshops aimed at addressing competition policy issues facing the agricultural sector in the 21st century. While antitrust enforcement has a long history in the agricultural sector, the current workshops, combined with recent policy speeches by Antitrust Division officials and enforcement activity, suggest a reinvigorated regulatory interest in the sector. As Assistant Attorney General Christine Varney noted in her remarks kicking off the recent workshops, it is certainly true that competition policy in agriculture markets has some unique features that generate intense interest from a variety of economic and political stakeholders. Varney sensibly emphasized the unprecedented nature of the workshops:

This really is a historic undertaking. These workshops have brought together all the governmental agencies with a stake in the improvement of agricultural markets-Congress, the Department of Agriculture, the Department of Justice, the Commodity Futures Trading Commission, state executives and state law enforcement-and they have elicited an impressive level of popular engagement. We have received voluminous comments, and are extremely enthusiastic about the energy and initiative that all involved have shown in bringing these workshops together. It gives us confidence that we will be able to achieve our goal: a holistic and interdisciplinary look into how we can all work better, together, to strengthen and support fair and efficient markets in American agriculture.

There are very few industries that can attract the attention of Congress, multiple federal and state agencies, consumer groups, economists, antitrust lawyers, the business community, farmers, ranchers, and academics as the agriculture workshops have. Of course, with intense interest from stakeholders comes intense pressure from potential winners and losers in the political process, heated disagreement over how gains from trade should be distributed among various stakeholders, and certainly a variety of competing views over the correct approach to competition policy in agriculture markets.

These pressures have the potential to distract antitrust analysis from its core mission: protecting competition and consumer welfare. The economic approach to antitrust that has generated remarkable improvements in antitrust over the last fifty years has rejected simplistic and misleading notions that antitrust is meant to protect "small dealers and worthy men," fulfill non-economic objectives, that market concentration is a predictor of market performance, or that competition policy and intellectual property cannot peacefully co-exist.

Indeed, the economic approach is not without its shortcomings. Economic analysis that abstracts from real world conditions is a poor guide for policy in the real world:

While legal scholars typically avoid rigorous attempts to work through the available economic theory and evidence when discussing the optimal design of legal rules, economists frequently fail to assess their analyses in a realistic institutional setting and avoid incorporating the social costs of erroneous enforcement decisions into their analyses and recommendations for legal rules.

In the case of antitrust analysis in the agricultural sector the admonition is particularly significant. Perhaps no industry in the United States is more politicized than the agricultural industry. For this reason, it can and should be expected that optimal antitrust enforcement in theory will little resemble actual antitrust enforcement in practice, and evidence-based policy prescriptions must account for the substantially increased risk of antitrust error.

Unfortunately, in the run-up to and during the workshops much of the policy rhetoric encouraged adopting these rejected approaches, especially one that would favor one group of stakeholders over another rather than protecting the competitive process. In this essay, we argue that a first principles approach to antitrust analysis is required to guarantee the benefits of competition in the agricultural sector, and discuss three fundamental principles of modern antitrust that, at times, appear to be given short-shrift in the recent debate.

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

Thursday, May 20, 2010

‘Too big to fail, but not too big to be unbundled?’ Investigating the Banks – The importance of competition

Posted by D. Daniel Sokol

Peter Freeman (Competition Commission) has an interesting speech posted on ‘Too big to fail, but not too big to be unbundled?’ Investigating the Banks – The importance of competition.

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

Transgenic Seed: The High Technology Test of Antitrust

Posted by D. Daniel Sokol

Diana Moss (AAI) explores Transgenic Seed: The High Technology Test of Antitrust.

ABSTRACT: The recent flurry of publicity in transgenic (also known as genetically modified or "GM") seed reveals a broader controversy over competition policy in high technology industries. What constitutes conduct by a patent-holder that is legitimately within its rights, versus what exceeds the scope of a patent? More specifically, how should antitrust deal with a patent-holder that is also a dominant firm, and alleged to have maintained or leveraged its monopoly by selectively enforcing its licenses? Does such conduct unduly control or influence competition and innovation, to the detriment of consumers?

Agricultural biotechnology giant Monsanto is at the center of the debate over the intersection between patent law and antitrust law in transgenic seed. In the spotlight are the markets for genetic traits and the complementary markets for transgenic seed. There are two categories of genetic traits: input and output. Input traits affect the agronomic performance of the plant in order to enhance yield, including tolerance to herbicides (Ht traits) such as glyphosate and resistance to insects (Bt traits). These traits in corn, soybeans, and cotton have been established for some time. But other input traits (e.g., drought resistance) and output traits are more novel. Output traits affect the characteristics of the plant's output (e.g., high oleic soybeans) and therefore the value of the crop.

With substantial market shares in genetic traits for corn (about 75 percent), soybeans (about 95 percent), and cotton (about 97 percent), Monsanto potentially holds sway over the market. But there are growing complaints about substantial price increases for seed—about 25 to 30 percent for corn and soybeans in recent years. Moreover, seed companies have complained that they cannot access Monsanto technologies for the purposes of developing commercially valuable transgenic products, despite the firm's policy of licensing broadly.

Together, the foregoing factors have had a catalyst-like effect. For example, there is an ongoing investigation into Monsanto's conduct by the U.S. Department of Justice ("DOJ"). Momentum could be gaining in several states to bring an antitrust suit against the firm. And a series of high profile DOJ/U.S. Department of Agriculture workshops on competitive issues in agriculture are scheduled throughout 2010. This article explores what is driving these antitrust concerns. Given that Monsanto's blockbuster Ht trait Roundup Ready 1® (RR1®) for soybeans goes off patent in 2014, it is also important to explore what policy tools are needed to best promote generic competition.

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

State of Play: Vertical Merger Review

Posted by D. Daniel Sokol

Vertical_wide2

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

Concentration, Contracting and Competition: Problems In Using The Packers & Stockyards Act To Supplement Antitrust

Posted by D. Daniel Sokol

Michael Sykuta (University of Missouri-Ag and Applied Econ) addresses Concentration, Contracting and Competition: Problems In Using The Packers & Stockyards Act To Supplement Antitrust.

ABSTRACT: The past two decades have witnessed significant changes in the structure and organization of the agriculture sector. Virtually every stage of the agrifood value chain in the United States, from farm inputs to farming to processing to retail, has experienced increased consolidation. These changes have been accompanied by an unprecedented integration of international food markets, with multinational firms weaving together supply networks that literally span the globe and deliver a cornucopia of food products to retail grocery shelves and consumers' plates. Despite the fact that U.S. consumers spend less money on food now (as a percentage of disposable income and have a greater variety and convenience of food products from which to choose than any time in the past 50 years, increased levels of concentration have fueled concerns and allegations of anticompetitive behavior among large agribusinesses.

Concerns over the competitive effects of consolidation have given rise to increased political and regulatory scrutiny of the agricultural sector. In April 2010, the U.S. Departments of Justice ("DOJ") and Agriculture ("USDA") held the first in a series of joint public workshops to learn more about the state of competition in the sector. U.S. Senator Charles Grassley (R-Iowa), speaking during the opening panel of the workshop, captured the tenor of underlying concerns stating, "Bigger isn't per se bad, but it can lead to predatory business practices and behavior. And that is what we have to be concerned about."

These workshops represent an historic collaboration of DOJ and USDA. While DOJ has primary jurisdiction to enforce antitrust laws, USDA has regulatory authority over various aspects of agricultural production and food safety. In particular, USDA is charged with enforcing the Packers and Stockyards Act of 1921 ("PSA"), which regulates meat packers by prohibiting unfair, discriminatory, or deceptive practices. Under the rubric of "big is not per se bad, but can lead to predatory business practices," the partnering of DOJ and USDA represents a move to apply antitrust and the PSA as two blades of a scissor to cut down practices deemed inappropriate by regulators. However, neither economic theory nor empirical evidence provides a substantial basis for the concerns underlying this regulatory tag-team's offensive, although the consequences could be far-reaching.

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

Wednesday, May 19, 2010

The Packers and Stockyards Act: A History of Failure to Date

Posted by D. Daniel Sokol

Peter Carstensen (University of Wisconsin-Law) discusses The Packers and Stockyards Act: A History of Failure to Date.

ABSTRACT: Where there are serious problems of market failure effective regulation can often remedy the problem and restore economically desirable competition. Unfortunately, the Secretary has—up to now—failed to provide an appropriate market facilitating set of regulations.

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

The Law and Economics of Trademarks: Product Differentiation, Market Power and New Directions in Antitrust

Posted by D. Daniel Sokol

P. Sean Morris, University of Helsinki - Faculty of Law describes The Law and Economics of Trademarks: Product Differentiation, Market Power and New Directions in Antitrust.

ABSTRACT: The purpose of this paper is to clarify the relationship between trademarks and market power and their implication for antitrust law and policy by using law and economics approaches. The interaction of trademarks and antitrust continues to be an enigmatic area of intellectual property rights and policy making. Antitrust law protects competition and the competitive process by preventing certain type of conduct that threatens a free market. Trademark law protect the owners brand and for the owner to reap the economic incentive from its protection. In this paper, I argue that both the law and economics of trademark should steer new directions for both policy goals. Do trademarks confer market power? Are well known marks too dominant? If so, what do current antitrust law tells us about the interaction of intellectual property rights and competition? This research paper will offer a discourse into product differentiation and monopolistic competition in trademarks. While current law and economics model of trademark law argues that trademarks serves to lower consumer search costs, I argue that trademarks are monopolist in nature.


 

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

Geographic Deregulation and Competition in the U.S. Banking Industry

Posted by D. Daniel Sokol

H. Semih Yildirim, York University - Atkinson School of Administrative Studies and Sunil Mohanty, University of St. Thomas - College of Business investigate Geographic Deregulation and Competition in the U.S. Banking Industry.

ABSTRACT: We examine the effects of geographic deregulation on state-level competition in U.S. banking markets over the period 1976-2005. The empirical results confirm that the U.S. banks in general operated under monopolistic competition during the period examined. After partitioning the sample based on bank size we find that the market competition for large banks in Delaware, Oregon, and Rhode Island can be characterized as monopolistic while small banks in Arizona and Massachusetts seem to have operated under the conditions of perfect competition. The removal of geographic restrictions appears to have very limited and non-uniform effect on state-level competitive conduct. There is some evidence that the U.S. banking industry might have actually experienced a less competitive behavior in recent years due to increased market power of larger banks.

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

First European Commission Cartel Settlement

Posted by D. Daniel Sokol

See the press release here.

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

Federal Trade Commission, Department of Justice, and U.S. Patent and Trademark Office to Hold Workshop on Promoting Innovation

Posted by D. Daniel Sokol

Federal Trade Commission, Department of Justice, and U.S. Patent and Trademark Office to Hold Workshop on Promoting Innovation Workshop on May 26 to Explore the Intersection of Patent Policy and Competition Policy and its Implications for Promoting Innovation

Audio only--Dial-in: 1-888-790-1808
Passcode: 5956352

WASHINGTON – The Department of Justice, the Federal Trade Commission (FTC), and the Department of Commerce’s United States Patent and Trademark Office (USPTO) announced today that they will hold a joint public workshop on the intersection of patent policy and competition policy and its implications for promoting innovation.  Assistant Attorney General for the department’s Antitrust Division Christine Varney, Under Secretary of Commerce for Intellectual Property and Director of the USPTO David J. Kappos, and U.S. Chief Technology Officer Aneesh Chopra will give opening remarks at the morning session of the workshop.  FTC Commissioner Edith Ramirez will open the afternoon session.

The workshop will be held on May 26, 2010, at the USPTO’s campus at 600 Dulany Street, Madison Building Auditorium, Alexandria, Va. The general public and press are invited to attend and view the proceedings. Seating will be on a first-come, first-served basis.

In recent years, federal agencies and the courts have recognized that patents and competition share the overall purpose of promoting innovation and enhancing consumer welfare.  Timely, high-quality patents promote investment in innovation.  The competitive drive of a dynamic marketplace fosters the introduction of new and improved products and processes. By contrast, delay, uncertainty, and poor patent quality can create barriers to innovation.  Additionally, where standards for violating antitrust law are unclear, or where the threshold for antitrust violations is set too low or too high, innovation can be stifled. The workshop will address ways in which careful calibration and balancing of patent policy and competition policy can best promote incentives to innovate. 

“Since innovation is the only sustainable source of America’s competitive advantage, the relationship between intellectual property, which captures the value of innovation, and competition policy, which maintains a dynamic marketplace for innovation, is of paramount importance,” noted Under Secretary of Commerce David Kappos.  “This conference is designed to explore the relationship between competition policy and intellectual property policy and how it fosters innovation.”           

“We will benefit from working together with our PTO and FTC colleagues to ensure that the United States is using patent and competition policy that maximizes the potential for innovation, which is the primary driving force of economic growth in the 21st century,” said Assistant Attorney General Christine Varney. 

FTC Chairman Jon Leibowitz agreed. “The FTC appreciates this opportunity to work with the DOJ and the USPTO to explore a balance of patent and competition policy that most benefits consumers, by spurring more innovative products and lower prices.” 

The first morning panel of experts will examine how challenges posed by the patent backlog affect the competitive strategies of patent applicants and innovators.  The second morning panel will examine the impact of the Supreme Court’s 2006 opinion in eBay Inc. v. MercExchange L.L.C. on permanent injunctions for patent infringement in district courts and at the U.S. International Trade Commission (USITC).  The afternoon panel will evaluate the role of patents in connection with industry standards and the impact such standards have on competition.  The workshop will conclude with reflections on the panel discussions by the chief economists of the department’s Antitrust Division, the FTC, and the USPTO.

The schedule for the workshop is as follows: 

WELCOMING REMARKS

9:00 a.m.-9:30 a.m.

David Kappos, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office

Christine Varney, Assistant Attorney General, Antitrust Division, Department of Justice

Aneesh Chopra, U.S. Chief Technology Officer, Executive Office of the President

 

PANEL 1:       The Patent Application Backlog:  The Competitive Challenges for Innovators

9:30 a.m.-11:00 a.m.

Panelists

John F. Duffy, Oswald Symister Colclough Research Professor of Law,

The George Washington University Law School

Josh Makower, M.D., Founder & CEO, ExploraMed Development LLC

Michael Meurer, Professor of Law, Boston University School of Law

Richard T. Ogawa, Esq., Ogawa P.C.

Scott Stern, Joseph and Carole Levy Professor, Kellogg School of Management, Northwestern University and Visiting Professor,  MIT Sloan School of Management 

Break

11:00 a.m.-11:15 a.m. 

PANEL 2:       Permanent Injunctions in the District Courts and ITC:  Effects on Competition and Innovation

11:15 a.m.-12:45 p.m. 

Panelists

Bernard J. Cassidy, Executive Vice President and General Counsel, Tessera Technologies Inc.

Colleen Chien, Assistant Professor of Law, Santa Clara Law

Alice A. Kipel, Partner, Steptoe & Johnson LLP

Christine McDaniel, Economic Adviser to Chairman Shara L. Aranoff,

U.S. International Trade Commission

William Barr, former General Counsel, Verizon Communications Inc.

Emily Ward, Vice President and Deputy General Counsel, eBay Inc. (invited)

Lunch Break

12:45 a.m.-2:15 p.m. 

Introductory Remarks

2:15 a.m.-2:30 p.m. 

Edith Ramirez, Commissioner, Federal Trade Commission 

PANEL 3:       Standard Setting, Patent Rights, and Competition Policy

2:30 p.m.-4:00 p.m.

Panelists

Mark Chandler, Senior Vice President & General Counsel, Cisco Systems Inc. 

Patrick Gallagher, Director, National Institute of Standards & Technology,

Department of Commerce

Brian Kahin, Senior Fellow, Computer & Communications Industry Association

Anne Layne-Farrar, Director, LECG

Amy A. Marasco, General Manager, Standards Strategy, Microsoft Corp.

A. Douglas Melamed, Senior Vice President & General Counsel, Intel Corp.

Break

4:00 p.m.-4:15 p.m.

Wrap-Up Discussion

4:15 p.m.-5:15 p.m.

Carl Shapiro, Deputy Assistant Attorney General for Economic Analysis, Antitrust Division,

 Department of Justice

Joseph Farrell, Director, Bureau of Economics, Federal Trade Commission

Stuart Graham, Chief Economist, U.S. Patent and Trademark Office

Directions to the USPTO’s Madison Building Auditorium, 600 Dulany Street, are available on the agency’s website at www.uspto.gov/about/contacts/locations/directions.jsp.

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

Antitrust Enforcement Under Endogenous Fines and Price-Dependent Detection Probabilities

Posted by D. Daniel Sokol

Harold Houba, VU University Amsterdam - Department of Econometrics, Tinbergen Institute, Evgenia Motchenkova, VU University Amsterdam - Department of Economics, TILEC, and Quan Wen, Vanderbilt University - College of Arts and Science - Department of Economics explain Antitrust Enforcement Under Endogenous Fines and Price-Dependent Detection Probabilities.

ABSTRACT: We analyze the effectiveness of antitrust regulation in a repeated oligopoly model in which both fines and detection probabilities depend on the cartel price. Such fines are closer to actual guidelines than the commonly assumed fixed fines. Under a constant detection probability, we confirm the long-run neutrality result with respect to fixed fines reported in Harrington (2005) and extend his result to the case where fines are directly proportional to illegal gains. In addition, we report that the profit-maximizing cartel price lies below the monopoly price when policy design features non-constant price-dependent detection probability. This offers partial support for current practice.

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

Tuesday, May 18, 2010

Happy Shavuot 2010

Posted by D. Daniel Sokol

Tonight begins Shavuot, the Jewish celebration of God giving the law (see here) to the people of Israel. With a major holiday (one of the three pilgrimage holidays to Jerusalem along with Passover and Sukkot/Feast of Tabernacles) celebrating the giving of the law, is it really surprising that there are so many Jewish lawyers and law professors?

May 18, 2010 | Permalink | Comments (1) | TrackBack (0)

A Missing Step in the Modernisation Stairway – Any Role for Block Exemption Regulations in the Realm of Regulation 1/2003?

Posted by D. Daniel Sokol

Francisco Marcos, Instituto de Empresa Business School and Albert Sánchez Graells, Pontifical University Comillas of Madrid ask if there is "A Missing Step in the Modernisation Stairway – Any Role for Block Exemption Regulations in the Realm of Regulation 1/2003?

ABSTRACT: Block exemption regulations (BER) survived the modernisation of EC competition law. According to the European Commission and some commentators, BER have a major role to play in the system instituted by Regulation 1/2003. Others are more critical and consider that BER are hard to nest within the new system, but that they can continue to play a role in providing legal certainty. Still others adopt a more critical approach and propose their axing. This paper adopts the latter approach. In view of the mixed messages that the European Commission is sending in the recent and current review of existing general and sector - specific BER, this paper undertakes to revisit the institution of BER, its justification and need in the modernised and decentralised system brought forward by Regulation 1/2003 and the more economic approach to EC competition law. After reminding the initial justification for BER under the prior enforcement system, the paper stresses the difficulties for its fitness within the new paradigm - with particular focus on the distortions that BER can generate for an effective and consistent enforcement of EC competition law. The paper concludes with the recommendation of a complete repeal of the BER mechanism and its substitution with general guidance through non‐binding guidelines.

May 18, 2010 | Permalink | Comments (0) | TrackBack (0)

Bates White’s Seventh Annual Antitrust Conference

Posted by D. Daniel Sokol

Bates White’s Seventh Annual Antitrust Conference

PANEL SESSIONS

Merger Review and Enforcement Under New Guidelines

Richard Feinstein, Director, Bureau of Competition, FTC

Janet L. McDavid, Partner, Hogan Lovells

Bruce J. Prager, Partner, Latham & Watkins

Marius Schwartz, Professor of Economics, Georgetown University

George Rozanski, Partner, Bates White (moderator)

Topics will include:

  • Will the agencies be able to challenge a merger successfully without defining markets?
  • Do the draft Guidelines give the agencies substantially more leeway in merger investigation? Is this appropriate?
  • Is it appropriate that the draft Guidelines call out particular techniques like merger simulation and critical loss analysis? Does this lessen the value of other techniques that are not called out?
  • While the discussion of coordinated effects has been substantially updated, do these changes signal a substantial change in coordinated effects analysis?
  • While the Guidelines are not law, they have been widely cited by courts. Will this change with the revisions?
  • Will the suggestion that SSNIP size be based on the "value" that firms contribute give parties and agencies too much leeway in determining an appropriate SSNIP?

Single-Firm Conduct: A Sea Change in Enforcement?

William Cavanaugh Jr., Deputy Assistant Attorney General, DOJ

Wayne Dale Collins, Partner, Shearman & Sterling

Deborah A. Garza, Partner, Covington & Burling

Howard A. Shelanski, Deputy Director, Antitrust, Bureau of Economics, FTC

Cory Capps, Partner, Bates White (moderator)

Topics will include:

  • Has enforcement changed under the new administration?
  • Is U.S. enforcement moving towards a European abuse of dominance standard?
  • How would more active agency Section 2 enforcement affect private litigation?
  • Do firms have appropriate visibility into the types of conduct that are likely to result in agency investigations?

DINNER KEYNOTE

A Framework for Competitive Analysis of Exclusionary Conduct

B. Douglas Bernheim, Bates White Partner and Edward Ames Edmunds
Professor of Economics, Stanford University

PROGRAM TIMELINE

Registration

2:30–3:00 p.m.

Merger Guidelines Panel

3:00–4:15 p.m.

Single-Firm Conduct Panel

4:30–5:45 p.m.

Reception

6:00–7:00 p.m.

Dinner and Keynote Address

7:00–9:30 p.m.



DATE AND LOCATION

Monday, June 7, 2010

Ronald Reagan Building
1300 Pennsylvania Ave, NW
Washington, DC 20004

Panel Sessions

Horizon Room

Reception and Dinner

Rotunda Room



RSVP BY JUNE 1, 2010


To register, please email Claudine Roshanianor call her at 202.216.1801.

May 18, 2010 | Permalink | Comments (0) | TrackBack (0)