Antitrust & Competition Policy Blog

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

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Monday, January 18, 2010

Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland

Posted by D. Daniel Sokol

Elizabeth M. Bailey and Gregory K. Leonard (both NERA) explain Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland.

ABSTRACT: The Supreme Court’s decision in Leegin was, and continues to be, controversial. In early 2009, the Federal Trade Commission held a series of workshops to assess situations in which RPM will be pro-competitive, anti-competitive, or competitively neutral. In addition, the United States Congress and some states have considered legislation as a means to circumvent Leegin. The State of Maryland, for example, enacted a statute in response to Leegin that characterizes a manufacturer’s setting of a minimum price below which a retailer cannot sell as "an unreasonable restraint of trade," thereby restoring the per se standard.

From an economist’s perspective, the Maryland statute, which went into effect on 1 October 2009, provides a natural experiment that can be used to analyze the effect of RPM on retail prices. We consider the effect of the legislation on video game prices in Maryland. Video games are a product for which manufacturers have historically been known to set minimum prices. RPM for video games may make good business sense, and be pro-competitive, as presale demonstration services (i.e., opportunities for potential consumers to try out video games in-store) are likely to be important drivers of consumer demand. Our empirical analysis is the first—and only—study of which we are aware in the new post Le

egin world. As we discuss below, we find virtually no change in retail prices before and after the legislation went into effect.

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

The economic performance of cartels: evidence from the New Deal U.S. sugar manufacturing cartel, 1934-74

Posted by D. Daniel Sokol

Benjamin Bridgman (Bureau of Economic Analysis), Shi Qi (University of Minnesota), and James A. Schmitz, Jr (Federal Reserve Bank of Minneapolis) analyze The economic performance of cartels: evidence from the New Deal U.S. sugar manufacturing cartel, 1934-74.

ABSTRACT: We study the U.S. sugar manufacturing cartel that was created during the New Deal. This was a legal-cartel that lasted 40 years (1934-74). As a legal-cartel, the industry was assured widespread adherence to domestic and import sales quotas (given it had access to government enforcement powers). But it also meant accepting government-sponsored cartel-provisions. These provisions significantly distorted production at each factory and also where the industry was located. These distortions were reflected in, for example, a declining industry recovery rate, that is, the pounds of white sugar produced per ton of beets. It declined from about 310 pounds in 1934 to 240 pounds in 1974. The cartel provisions also distorted the location of industry. For example, it kept production in California and the Far West. Since the cartel ended in 1974, California's share of sugar production has dropped dramatically.

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

Incomplete Regulation, Competition and Entry in Increasing Returns to Scale Industries

Posted by D. Daniel Sokol

Sara BIANCINI (THEMA, Université de Cergy Pontoise) explains Incomplete Regulation, Competition and Entry in Increasing Returns to Scale Industries.

ABSTRACT: The paper analyzes the effects of liberalization in increasing returns to scale industries. It studies the optimal regulation of an incumbent competing with an unregulated strategic competitor, when public funds are costly. The model shows a trade off between productive and allocative efficiency. Moreover, the welfare gains of liberalization, as compared with regulated monopoly, are a non monotonic function of the cost of public funds. Finally, in the case of severe cash constraint of the government, incomplete regulation may also dominate full regulation of duopoly.

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

Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions

Posted by D. Daniel Sokol

The FTC has released a study Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions.

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