Antitrust & Competition Policy Blog

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

Friday, August 20, 2010

Success in Pharmaceutical Research: The Changing Role of Scale and Scope Economies, Spillovers and Competition

Posted by D. Daniel Sokol

Tatiana Plotnikova (DFG Research Training Program "The Economics of Innovative Change", Friedrich-Schiller-University Jena, Germany) explores Success in Pharmaceutical Research: The Changing Role of Scale and Scope Economies, Spillovers and Competition.

ABSTRACT: This paper investigates the determinants of success in the development of new drugs. In specific, it explores the factors of success in drug development programs at different stages of innovation process. We use economies of scale, scope, R&D competition and technological spillovers as explanatory variables and test whether the effect of these variables on the success of a project differs in relation to the discovery and development stages of innovation, respectively. Our main finding is that spillovers, including spillovers from collaboration, are important in explaining the success of projects during the discovery stage of innovation, while in the later development stage, the effects of competition outweigh any benefits from spillovers.

August 20, 2010 | Permalink | Comments (1) | TrackBack (0)

Antitrust Screening: Making Compliance Programs Robust

Posted by D. Daniel Sokol

Rosa M. Abrantes-Metz, LECG, LLC, Leonard N. Stern School of Business - Department of Economics, Patrick Bajari, University of Michigan at Ann Arbor - Economics, National Bureau of Economic Research (NBER), and
Joseph E. Murphy have a new short paper on Antitrust Screening: Making Compliance Programs Robust.

ABSTRACT: One of the prime issues in the antitrust and competition law1 compliance field is how to deal with the risk of collusive or cartel behavior which involves willful violations of the law. In the past much of antitrust compliance work has focused on training, perhaps accompanied by an antitrust compliance manual. But regardless of the amount of employee training they conduct and the existence of written materials, it is likely that most practitioners feel they do not have a handle on this area of risk. In this paper we discuss the role that empirical screens for conspiracies and manipulations can play in assisting compliance programs, by looking at certain quantifiable red flags and applying statistical analysis to determine priority areas which merit further focus.

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

Timing Vertical Relationships

Posted by D. Daniel Sokol

Richard Ruble (EMLYON & CNRS, GATE),Bruno Versaevel (EMLYON & CNRS, GATE), and Étienne de Villemeur (Toulouse School of Economics (IDEI & GREMAQ)) explore Timing Vertical Relationships.

ABSTRACT: We show that the standard analysis of vertical relationships transposes directly to investment timing. Thus, when a rm undertaking a project requires an outside supplier (e.g. an equipment manufacturer) to provide it with a discrete input, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in rm decisions is characterized by a Lerner index, which is related to the parameters of a stochastic downstream demand. When feasible, vertical restraints restore eciency. For instance, the upstream rm can induce entry at the correct investment threshold by selling a call option on the input. Otherwise, competition may substitute for vertical restraints. In particular, if two rms are engaged in a preemption race downstream, the upstream rm sells the input to the rst investor at a discount that is chosen in such a way that the race to preempt exactly osets the vertical external! ity, and this leader invests at the optimal market threshold.

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

Thursday, August 19, 2010

Revised DOJ/FTC Horizontal Merger Guiddelines Released

Posted by D. Daniel Sokol

See here.

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

Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model

Posted by D. Daniel Sokol

Pierre Dubois and Sandra Jódar-Rosell (both Toulouse Economics) discuss Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model.

ABSTRACT: We develop a model of competition between retailer chains with a structural estimation of the demand and supply in the supermarket industry in France. In the model, supermarkets compete in price and brand offer over all food products to attract consumers, in particular through the share of private labels versus national brands across all their products. Private labels can serve as a differentiation tool for the retailers in order to soften price competition. They may affect the marginal costs of all products for the retailer because of eventual quality differences and also by helping retailers to obtain better conditions from their manufacturers. Differentiation is taken into account by estimating a discrete-continuous choice model of demand where outlet choice and total expenditures are determined endogenously. On the supply side, we consider a simultaneous competition game in brand offer and price between retailers to identify marginal costs. After estimation by simulated maximum likelihood, the structural estimates allow to simulate the effect on the equilibrium behavior of retailer chains of a demand shock through an increase in transportation costs for consumers and a merger between two retailer chains.

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

The Follower Phenomenon: Implications for the Design of Monopolization Rules in a Global Economy

Posted by D. Daniel Sokol

Jorge Padilla (LECG) and Michal Gal (University of Haifa - Law) explain The Follower Phenomenon: Implications for the Design of Monopolization Rules in a Global Economy.

Abstract: Laws are oftentimes modeled, at least in part, on those of jurisdictions with established antitrust regimes, a trend we call “the follower phenomenon.” Follower behavior might involve a transplant of a legal rule, its interpretation, or both.

This article analyzes the main causes of the follower phenomenon in antitrust and its welfare effects, both on the following jurisdiction and on the followed one. It argues that the proliferation of one's antitrust prohibitions can sometimes act as a boomerang, negatively affecting the welfare of the followed jurisdiction as well as third jurisdictions. This boomerang effect can result from three main causes: (a) the limited ability of the followed jurisdiction's domestic firms to monopolize or cartelize foreign markets due to stricter antitrust policies of the following jurisdiction based on a correct following of the followed jurisdiction’s antitrust prohibitions; (b) the abandonment of neutral or procompetitive conduct by firms based in the followed jurisdiction (or trading in it) due, for example, to increased costs resulting from parallel and often similar regulation in several following jurisdictions; and (c) negative externalities resulting from increased error costs due, for example, to the misapplication of the followed jurisdiction's complex rules in following jurisdictions with limited institutional capabilities.

Based on the above findings, we then propose ways for the followed jurisdiction, as well as for other jurisdictions, to increase the positive externalities and limit the negative externalities resulting from the follower phenomenon. We suggest that under certain circumstances the followed jurisdiction could anticipate the follower phenomenon and modify its choice of optimal rule to account for the boomerang effect. Less extreme methods are also explored, such as aiding and directing less experienced jurisdictions in the correct application of their antitrust laws.

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

The EU/US Cooperation in the Field of Antitrust Law Enforcement – Some Challenges to Future Cooperation

Posted by D. Daniel Sokol

Charlotte Leskinen, Instituto de Empresa analyzes The EU/US Cooperation in the Field of Antitrust Law Enforcement – Some Challenges to Future Cooperation.

ABSTRACT:  Today, undertakings frequently operate in an international environment where cross-border arrangements are common. As a result, it is easier for them to circumvent national competition laws by taking advantage of differences between countries. Consequently, this has increased the risk of cross-border anti-competitive conduct. In order to cooperate better and lessen differences in the application of their competition laws, the European Union and the United States have concluded different agreements and understandings between them.

This paper aims to examine how these agreements and understandings have worked in practice and to define the main problems in the application of the EU and US antitrust rules in situations, which might also have an impact on the territory of the other contracting party. In addition, it intends to outline the main challenges for a functioning cooperation, particularly in light of the intention of the European Commission to foster private enforcement of the antitrust rules.

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

Competition and Mergers Among Nonprofits

Posted by D. Daniel Sokol

Jens Prufer, TILEC and CentER, Department of Economics, Tilburg University has a paper on the very interesting topic of Competition and Mergers Among Nonprofits.

ABSTRACT: Should mergers among nonprofit organizations be assessed differently than mergers among for-profit firms? A recent debate in law and economics, boosted by apparently one-sided court decisions, has produced the result that promoting competition is socially valuable regardless of the particular objectives of producers. In this paper, I challenge the general validity of this result by showing that it may indeed depend on the particular objectives of producers whether a merger between two nonprofits is welfare decreasing or increasing. This implies that it is impossible to assess the net effects of a merger between two nonprofits without examining the objectives of the owners involved.


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

Wednesday, August 18, 2010

Counterfactual Analysis of Bank Mergers

Posted by D. Daniel Sokol

Pedro P. Barros, Universidade Nova de Lisboa, Diana Bonfim, Banco de Portugal, Moshe Kim, Universitat Pompeu Fabra - Faculty of Economic and Business Sciences, University of Haifa - Department of Economics, and
Nuno C. Martins, Bank of Portugal, Universidade Nova de Lisboa provide Counterfactual Analysis of Bank Mergers.

ABSTRACT: Estimating the impact of bank mergers requires a framework distinguishing endogenous changes in market structure and conduct from exogenous changes. Conventionally, the literature relies on differential analysis, considering market structure as exogenous by using concentration indexes such as the HHI. We introduce an econometric methodology relying on a structural model of the credit market from which we derive a counterfactual scenario of what would have happened if mergers had not occurred. We find that mergers increased firms' access to credit, but had an opposite effect on households. Moreover, we find that mergers led to a widespread decrease in interest rates.


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

Interpreting and Enforcing the Voluntary FRAND Commitment

Posted by D. Daniel Sokol

Roger G. Brooks, Cravath, Swaine & Moore LLP and Damien Geradin, Howrey LLP, Tilburg University - Tilburg Law and Economics Center (TILEC) discuss Interpreting and Enforcing the Voluntary FRAND Commitment.

ABSTRACT: Technical standards are far from a new phenomenon. Since the late eighteenth and early twentieth centuries, national and international bodies - in many cases purely private and voluntary bodies - have been promulgating standards in a wide array of commercially important technical fields. Over the years, thousands of such standards have been developed, approved, and used in industry. Until recently, all this was very largely the domain of engineers; until the last decade, despite their commercial and international importance, technical standards attracted very little litigation or legal commentary.

But times have changed. Now, lawyers are studying intensively each stage of the standardization process: membership rules of standards-setting organizations ('SSOs'), policies concerning disclosure of potentially relevant patents, licensing of 'essential' patents, and enforcement in the case of alleged violations of SSO policies - all are now transformed into legal topics.

In this new world of standards, one of the currently most contentious issues concerns the meaning of a commitment by the holder of patents 'essential' to the practice of a standard to license such patents on 'fair, reasonable, and nondiscriminatory' (FRAND) terms and conditions. The body of legal literature addressing this question is by now substantial, and growing. While not necessarily reaching similar conclusions, a number of authors have addressed this issue as a question of economic theory: what limitations (if any) on the freedom of the parties negotiating a license to essential patents will best ensure efficient outcomes?

As a response to this question, authors have variously argued that, in order to satisfy a 'fair and reasonable' commitment, a patent holder: Must charge no more than the incremental value of his invention over the next best technical alternative; Must not negotiate for a royalty-free cross-license as part of the consideration for a license; Must set his royalty rate based on a mathematical proportion of all patents essential to the practice of a standard; Must set his royalty rate in such a way as to prevent cumulative royalties on the standardised product from exceeding a low percentage of the total sale price of that product; Must not raise requested royalty rates after the standard has been adopted, or after the relevant market has grown to maturity; Is not entitled to seek injunctive relief against a standard implementer should they fail to agree on license terms.

The types of economic arguments relied on by these authors to justify these restrictive regimes may well be useful in debating public policy and the proper application of antitrust rules - although one of the present authors and others have elsewhere critiqued the merits of many of these calls for what is essentially government intervention in the private licensing process. But in this paper we step back to ask a different question: What do these arguments and proposed regimes have to do with the contract which is the source of the FRAND obligation?

This paper is divided in four Parts. Part I reviews the basic fact that a FRAND commitment is the result of a voluntary contract between essential patent holders and a standards-setting organization, with the important corollary that the meaning of that commitment must be determined through the legal methods of contractual interpretation. Using a FRAND undertaking to ETSI as an example, it identifies the main categories of information potentially relevant to contract construction, including for instance the contract language itself, and the 'negotiation history' of the ETSI IPR Policy. Part II shows that none of these categories of information support any of the restrictive limitations listed at the opening of this introduction. On the contrary, ‘fair and reasonable’ are on their face flexible terms the specific content of which is substantially left to the negotiation between the parties. Our research also shows that all attempts made subsequent to the ETSI IPR Policy’s adoption to alter the balance of interests between essential patent holders and implementers by changing the meaning of FRAND have been rejected by the ETSI membership. Part III addresses issues regarding the judicial enforcement of a FRAND undertaking. First, we demonstrate that, when it is alleged that a patentee has failed to offer 'fair and reasonable' terms, the role of a court is not to determine what ‘fair and reasonable’ terms would be, but whether the terms offered, taking into account all of the specific circumstances between the parties and prevailing market conditions, fall outside the range of reasonableness contemplated by the FRAND commitment. Second, we conclude that a licencee should not be able to collaterally attack the enforceability of a licence based on a prior FRAND commitment. Third, we note that what is ‘fair and reasonable’ after full adjudication of infringement and validity may be higher than what would have been 'fair and reasonable' in the context of pre-litigation negotiations. Part IV offers a few observations as to the ‘intent of the parties’ with respect to the 'non-discriminatory' component of FRAND based on the deliberative record surrounding the adoption of the ETSI IPR policy, concluding that while the 'ND' of FRAND does impose requirements that in some contexts will go beyond the requirements of national competition law, it cannot be read as requiring the equivalent of universal 'most favored licensee' rights for all licensees.

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

Unilateral Effects with Differentiated Consumer Products: A Response to Werden

Posted by D. Daniel Sokol

Dave Scheffman (Cornerstone Research and Vanderbilt Owen School) and Joe Simons (Paul Weiss) respond to DOJ's Greg Werden with their article Unilateral Effects with Differentiated Consumer Products: A Response to Werden.

ABSTRACT: In the April 2010 issue of The Antitrust Source, we explained that the theoretical economic models underlying the Merger Guidelines’ treatment of unilateral effects for differentiated products make a technical mathematical assumption (“differentiability”) that leads to a mathematical result that the own-price elasticity of demand can be computed using only the margin (i.e., the “Lerner Equation”). This mathematical result, in turn, leads to the general result that all horizontal mergers involving “differentiated products” are predicted to increase prices due to anticompetitive unilateral effects, absent offsetting efficiencies. This extreme result is a mathematical theoretical curiosity, not an acceptable basis for a presumption. As we explained, the technical assumption and its result are contradicted by empirical consumer and economic research and by everyday experience. In his June 2010 response to our article, Gregory Werden challenged some of our analysis with respect to research on consumer demand, asymmetric competitor responses, and the significance of our example of “kinked demand.” We now reply.

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

Antitrust Law And Economics

Posted by D. Daniel Sokol

Keith Hylton has edited the interesting Antitrust Law And Economics.

BOOK ABSTRACT: This comprehensive book provides an extensive overview of the major topics of antitrust law from an economic perspective. Its in-depth treatment and analysis of both the law and economics of antitrust is presented via a collection of interconnected original essays. The contributing authors are among the most influential scholars in antitrust, with a rich diversity of backgrounds. Their entries cover, amongst other issues, predatory pricing, essential facilities, tying, vertical restraints, enforcement, mergers, market power, monopolization standards, and facilitating practices.

This well-organized and substantial work will be invaluable to professors of American antitrust law and European competition law, as well as students specializing in competition law. It will also be an important reference for professors and graduate students of economics and business.



1. The Economics of Antitrust Enforcement
Daniel A. Crane

2. Facilitating Practices and Concerted Action Under Section 1 of the Sherman Act
William H. Page

3. The Law of Group Boycotts and Related Economic Considerations
Jeffrey L. Harrison

4. The Economics of Monopoly Power in Antitrust
Roger D. Blair and Celeste K. Carruthers

5. The Law and Economics of Monopolization Standards
Keith N. Hylton

6. The Law and Economics of Predatory Pricing
Bruce H. Kobayashi

7. The Essential Facilities Doctrine
Thomas F. Cotter

8. Antitrust Analysis of Tying Arrangements and Exclusive Dealing
Alden F. Abbott and Joshua D. Wright

9. Vertical Restraints, Competition and the Rule of Reason
Shubha Ghosh

10. Market Concentration in the Antitrust Analysis of Horizontal Mergers
Jonathan B. Baker

11. Patent Litigation, Licensing, Nonobviousness, and Antitrust
Michael J. Meurer

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

David Lewis on Global Competition: Law, Markets, and Globalization

Posted by David Lewis

David Gerber’s recently published ‘Global Competition’ is a must-read.  ‘Magisterial’ is the adjective that comes most readily to mind – in geographic scale, in conceptual scope and in sheer ambition.  I have found Part II – ‘Domestic Experience and Global Competition Law’ – the most riveting and, I shouldn’t deny, the most politically gratifying.  Not least because of the attention that it gives to, without every underestimating the difficulties confronted by, the non-US and non-EU competition regimes.  Indeed he concludes this section of the book with the following statement:

These ‘other’ countries hold the key to the future development of competition law, and in order for a global competition law strategy to be effective, it will have to serve their ends as they understand them.  If it does not, they will either not accept it or, if induced to accept it, they are not likely to give it support . In which case competition law would remain a ‘fantasy’ in  much of the world as it so often has been in the past.

And then he adds:

The goal of generating a [global competition] regime in which there is a degree of uniformity, coordination and predictability may well depend on using these differences [between national competition regimes] as a starting point rather than ignoring them or marginalising them.

This is music to the ears of any competition activist who is neither from the US or the EU.  It speaks to a world in which recognition of what John Fingleton often refers to as ‘informed divergence’ becomes the potential glue that will hold together vast brick and mortar multilateral agencies  as well as constructive global networks like the ICN, which Fingleton chairs.

I don’t want to attempt a review of this great contribution to antitrust scholarship.  I do though want to riff off some of the welter of ideas that fill the volume and use them as an opportunity to say something about South Africa, the national regime that I know best, and that may have some resonance in other countries.

At the risk of gross caricature David Gerber draws a distinction between, on the one hand, those regimes in which competition is a fundamental social value, and those in which it is embedded to a lesser extent.  This pretty much distinguishes between the US, on the one hand, and the rest of the world, on the other.  The ‘rest of the world’ is located along a vast spectrum.  This  may range from those in which competition law and the markets which it seeks to defend are deeply embedded, to those for whom the passing of a competition law is little more than a requirement in a trade agreement or a condition for receiving a much needed loan. 

Germany, appears, in Gerber’s estimation, to be the other regime in which competition and markets attain the status of fundamental social values.  But this is interesting.  Not least, because although German competition law has a longer lineage than the period after the Second World War, it was undoubtedly imposed upon the defeated country by the victorious Americans.   And yet its foundation, the basis for its stature, diverges in the most fundamental way from that of the United States.  Whereas in the latter it is rooted in populism and in a deep regard for individual liberty and enterprise, in Germany it represented the core of the grand compromise between capitalism and society.   While this may come as no surprise to scholars of European economic  history, I was immensely struck by Gerber’s characterisation of German competition law as

‘ integral part of Ludwig Erhard’s highly successful social market economy concept [in which] the market was part of society and should serve social needs, but society was also responsible for supporting competition.’    

I repeat that this may reveal little more than my own ignorance, but, while I have always thought of the German social market as one in which the market – in particular the labour market – was moulded and massaged to meet social needs, I had never considered the other part of the bargain: society’s obligation to support, through the application of competition law, the market.  This strikes me as an even more enduring foundation for competition law than that underpinning US antitrust.

What of South Africa?    Our current competition regime is little more than a decade old.  It is based on a strong statute, on reasonably well-resourced and highly independent institutions.  It has engaged robustly in both its merger review and law enforcement activities.  Indeed over this short period, and particularly in the period of the last three or so years when anti-cartel enforcement  has moved to the top of its agenda, South Africa has developed what current competition speak would characterise as an  unusually strong ‘competition culture’, we have become a society in which competition enforcement has taken on the flavour of a social movement.

On the face of it, a cursory examination of the political environment would not have predicted this outcome.   The, African National Congress, the party that took power after the demise of apartheid and that has retained it ever since, came into government, avowedly left of centre, in an alliance with the Communist Party and the powerful trade union movement.  Its policy documents stressed, and have continued, to emphasise, the leading role of the state in generating growth and overcoming poverty.  None of this augurs well for robust antitrust and yet, even in its long years in exile, the founding principles of the ANC articulated its antipathy for the ‘monopolies’ and a commitment to robust antitrust.  It appears to have delivered on this promise.

The basis for the ANC’s support for strong antitrust resided in an antipathy towards powerful concentrations of economic power, an antipathy powerfully rooted in the fact that these centres of economic power were not only all white owned and managed but through apartheid economic policies – particularly its unique system of labour repression – were seen to be direct beneficiaries of that noxious social order.

This antipathy may have gone in several directions.  I have little doubt that had our democracy been born in the years of decolonisation following the 2nd World War it would, in the prevailing mode of the development economics of the time, have taken the form of widespread nationalisation and comprehensive state control of the economy.  But in the liberal era of economics that followed the collapse of the Berlin Wall this was not an option.  And so the alternative was strong antitrust.  The irony is obvious – an ideological standpoint that may, in different circumstances, have sought to replace the market with the state, saw the introduction, in the form of antitrust, of a robust defence of the market as the chosen instrument to discipline the powerful concentrations of private power that had been the product of apartheid.

This may have given rise to a particularly populist and punitive form of antitrust.  But several factors countered the possibility of this outcome.  The negotiated consensus that ended apartheid, one in which all major pieces of economic and social legislation were formally negotiated through institutions in which business’ enjoyed a formal status, a parliamentary democracy in which major social interests, including business, were given voice, and a constitutional order which extended powerful protections not only to individuals but also juristic persons – notably business entities – ensured a more orthodox form of antitrust.  Not, I should add, an orthodoxy of the then prevailing American variety, but rather one somewhat more German in its character as evidenced by the inclusion of social, non-competition interests in the application of antitrust.   The orthodox nature of antitrust was consolidated by the strong association between the fledgling South African competition  authorities and their counterparts in institutions like the ICN and the OECD.  And so the outcome was robust antitrust, but antitrust that, though with a strong South African flavour and content, was firmly located in the broad and sometimes divergent global mainstream that characterised the practice of competition law in the last decades of the 20th century and the first decade of the present millenium.

And so we have developed, with the strong support of the public and endorsement of the government, a strong culture of competition law enforcement, but I would hesitate to claim that competition has been enshrined as a fundamental social value.  The weakness of competition is manifest in government policies and practices that demonstrate what, at best , is a tenuous regard for competition policy.  And so the prevailing centrality of an interventionist industrial policy, the lack of concern for publicly erected entry barriers, a still powerful community of strong state owned enterprises overseen by weak and captured  regulators, all speak to an environment that has simultaneously managed to practice robust competition law in combination with a weak competition policy.

These are bound to come into conflict with each other.  Not only are antitrust decisions undermined by inadvertently contradictory government policies, but as politically well connected business people leverage their political connections to enter the mainstream of big business, so too will the competition law project itself be called into question.  After all, given the historical basis of robust competition law in South Africa, why have strong antitrust when the friends of the political elite have gained entry to the corporate kingdom?

I hasten to add that while this gloomy prognosis remains a distinct possibility, it is not yet a reality.  And nor need it become so.  However, if the beachhead established by strong antitrust enforcement is to elevate competition into a fundamental social value, then the competition authorities are going to have to give considerably more attention to the public restraints and the public policies that, sometimes purposefully, mostly inadvertently, threaten the place of competition in the dominant set of society’s social values.


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

Collectively Bargained Age/Education Requirements: A Source of Antitrust Risk for Sports Club-Owners or Labor Risk for Players Unions?

Posted by D. Daniel Sokol

Marc Edelman, Barry Law School and Joseph A. Wacker ask Collectively Bargained Age/Education Requirements: A Source of Antitrust Risk for Sports Club-Owners or Labor Risk for Players Unions?

ABSTRACT: With both the NFL and NBA collective bargaining agreements expiring in 2011, America’s two premier winter sports leagues will soon need to renegotiate their terms and conditions of employment. In doing so, both leagues’ club-owners and players associations will bargain over the rules governing player eligibility, including their age/education requirements.

This article addresses both the antitrust and labor law risks of sports leagues’ collectively bargained age/education requirements. Part I of this article discusses the history of the NFL age/education requirement, beginning with the NFL requirement’s inception in the year 1920. Part II discusses the history of the NBA age/education requirement, which emerged many years later. Part III discusses the antitrust risk that sports club-owners assume for enforcing collectively bargained age/education requirements. Finally, Part IV analyzes the labor risk that sports unions incur when they agree with club-owners to implement an age/education requirement.

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

Tuesday, August 17, 2010

Nurturing the Accumulation of Innovations: Lessons from the Internet

Posted by D. Daniel Sokol

Shane Greenstein (Northwestern - Kellogg) explains Nurturing the Accumulation of Innovations: Lessons from the Internet.

ABSTRACT: The innovations that became the foundation for the Internet originate from two eras that illustrate two distinct models for accumulating innovations over the long haul. The pre-commercial era illustrates the operation of several useful non-market institutional arrangements. It also illustrates a potential drawback to government sponsorship – in this instance, truncation of exploratory activity. The commercial era illustrates a rather different set of lessons. It highlights the extraordinary power of market-oriented and widely distributed investment and adoption, which illustrates the power of market experimentation to foster innovative activity. It also illustrates a few of the conditions necessary to unleash value creation from such accumulated lessons, such as standards development and competition, and nurturing legal and regulatory policies.

August 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Camilleri on Global Competition: Law, Markets, and Globalization

Posted by Enrico Camilleri

Professor Gerber's book is, for many reasons,  definitely a remarkable one and, as such, it stimulates reflections on a wide range of issues. Should I summarize my positive impressions on it, I'd say that it clearly shows a “red line” connecting many “points” (national/regional competion laws), at a first glance only weakly related each other. I mean, however, not a merely backwards “line”; Gerber's analysis  doesn't  just consist  in a going back over - by describing the influences that the US “model” has had over the genesis of the most foreign  competition laws as well as by recostructing the failed attempts to shape a global competion law in the past – but it rather shows  a “line of action” for the future. Moving from the increased need for legal rules, deputed to shape global markets and regulate the conducts of (global) market actors, Gerber  argues for a new way of thinking to trans-national competition law, as to its substantial premises ( an “economic approach” to competition  law and the consumer welfare as its Pole Star) and to the “procedural” tools to reach such a stage ( the “multilateral agreements” method instead of the “unilateral jurisdictions”  system). The blog symposium format doesn't allow me to spend further words in describing the value of  Gerber's sophisticated analysis; I've however had the occasion to do that in a more detailed review of the book for the italian law journal “Europa e Diritto Privato” (forthcoming). Therefore I wish to say something about what seems to me  the “critical” point  in Gerber's thesis: the possibility to build up a global competition law on the premise of  “consumer welfare” as the the main - and more desiderable - goal among others, these latter in a sort of ancillary position in respect of the former. I may, at first, refer to the claim that some authoritative scholars have already moved against the possibility , at least right now, to think about a global competition law : the lack of homogeneity in political and economic conditions between  developed, developing and  underdeveloped countries makes unlikely that they could share  the same values regarding the market structure and its legal order. Well, from the point of view I'm talking about, it could be  said that the consumer welfare is just a “late stage”  goal in a market economy regulation, and therefore unfit to be the cornestone of competition law regimes other than those of the developed countries. It's true, on this respect,that Gerber's objection according to which a pathway strategy means multilateral agreements whose obbligations on the involved parties (states) are not all immediately applicable seems to reduce the impact of that critical assertion (see at page 318). By the way, more generally speaking and apart from any “binding” effect of  multilateral agreements , there are, I think,  not few  elements inducing to be more  sceptical towards the economic approach to competition law and its corollaries in terms of goals. This issue is, for example, much more debated in Europe than it can be thought from outside: It's here enough to refer to the “Communication from the Commission — Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings” (see §§ 5 and 6) where the Commission seems to move back to a different conception of competition law and its golas, much more in line with the ECJ approach that has been prevailing up to know .  

Do we really think that any antitrust regime - expecially those operating where the development of the free market values can play as a flywheels for democracy and well-being - can  be neutral towards redistributive goals and so exempt from any “political” use?

August 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Waller on Global Competition: Law, Markets and Globalization

Posted by Spencer Waller

I am indebted to David Gerber on two very different levels.  Besides being been a friend and mentor, his scholarship has been an inspiration and an often under-appreciated contribution to international competition policy.  His earlier book “Law and Competition in Twentieth Century Europe: protecting Prometheus” made a compelling case that there is a European competition law that stands apart from US antitrust law and policy. . He documented how EU competition law and its national analogues share common roots going back to prior to World War II as a true pan-European body of law with indigenous roots and a common frame of reference.  He was the probably one of the very few US writers to be able to pull off this feat given his ability to do primary research in English, German, French, and Swedish and the ability to tie together the various strands of discourse in multiple legal systems.

Gerber now expands his field of inquiry to global competition policy in “Global Competition: Law, Markets and Globalization.”  He both describes and analyzes the history and current state of national and international solutions to international competition law and set forth a path forward where past efforts have failed.

The key to understanding Gerber’s arguments is to appreciate his view that the past efforts did not fail, or at least did not fail as to the substance of the idea that global markets require global solutions to prevent private anticompetitive conduct on a global scale.  He provides one of the best and most nuanced accounts of attempts in the 20th century to develop international competition law and the forces outside of the competition arena that prevented their adoption. 

He begins with the League of Nations conference in the 1920s on global cartels and the glimmering of a consensus that some conduct based rules against cartel abuses were appropriate.  These efforts were overwhelmed by forces outside the competition debate itself such as the failure of the US to ratify the League Charter, the advent of the Great Depression, the eventual rise of the Axis powers, and the collapse of the League itself.

Gerber tells a similar story of consensus on emerging competition norms following World War II in the draft Havana Charter of the International Trade Organization.  Here the heavily negotiated compromise provisions were undermined by the failure of the US to ratify the Charter for other reasons and the almost immediate division of the world in the ensuing Cold War between market and planned economies.  He continues with a similarly sophisticated telling of the more familiar story of post-war US jurisdictional unilateralism as a partial solution for the next fifty years and the promise (and limitations) of convergence as a strategy in more recent times following the collapse of the Soviet Union.  It is fascinating to reflect on what might have emerged decades ago, but for these external factors and the second best solutions that arose in their place.

Throughout Global Competition Gerber uses a much wider and more cosmopolitan lens than the often US-centric approach to these issues.  He is as interested in the EU and the rest of the world, in addition to the US, in figuring out the possibilities of the current and past approaches and his proposals for what he dubs a “commitment pathway” in lieu of continued sole reliance on soft harmonization and convergence. 

He has a unique ability to pull back and make big sweeping connections between competition, trade, and development law and policy and then focus in closely on the impact of a single event or scholar on the progress toward or away from international consensus on competition norms.  In places, this ability to pull back and then swoop in reminds me of one of my favorite science documentaries “Powers of Ten.”  There, the filmmakers show two picnickers in a park “with the area of each frame one-tenth the size of the one before.  Starting from a view of the entire known universe, the camera gradually zooms in until we are viewing the subatomic particles on a man's hand.”   Like the film, Gerber demonstrates the ability to show both the vast and the miniature in international competition law and have it make sense and reveal new perspectives.  This is uniquely Gerber and wonderfully done.

August 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Reconsidering Competition and the Goals of Competition Law

Posted by D. Daniel Sokol

Maurice E. Stucke, University of Tennessee College of Law suggests Reconsidering Competition and the Goals of Competition Law.

ABSTRACT: In light of the financial crisis and the empirical findings from behavioral economics, policymakers should reconsider two fundamental questions: First, what is competition? Second, what are the goals of the competition laws? One cannot answer the second question, without addressing the first. Only in understanding competition can one understand what competition can or cannot achieve under certain circumstances.

This Article reexamines one premise of competition, namely the extent to which firms and consumers are rational and act with perfect willpower. In varying this assumption, Part I maps four scenarios of competition. Given these different conceptions of competition, this Article addresses why a single well-defined objective for competition law is unrealistic and proposes how to account for competition policy's multiple objectives into the legal framework.

Competition authorities should revisit their conception of competition, including the underlying assumptions, to better understand the competitive dynamics in different industries. In engaging in this review, competition authorities should consider the developments in several inter-disciplinary fields, such as behavioral economics, new institutional economics, and evolutionary economics. The literature can provide competition authorities a richer understanding of observed behavior in the marketplace, how consumers choose, and additional remedial options, such as default options. Ultimately, these interdisciplinary economic theories can improve antitrust analysis by helping us understand first what competition is, second what competition can achieve for us, and finally how competition can promote the good life.

August 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Chen on Global Competition: Law, Markets and Globalization

Posted by Ruohong Chen

The development of global competition law is undoubtedly a complex problem. It involves complicated factors such as economic globalization, unilateral jurisdictionalism, various competition law systems and historical, cultural and political elements behind each system. For such a complex problem, professor David Gerber’s insightful book presents a complex but clear analytical framework.


1. Perspective

The historical and in-depth comparative perspectives of the author reveal by themselves the significance and altitude of the book. Tracing back to the emerging period of global competition law project, professor Gerber clearly shows us how those efforts emerged and where they fell down. The meaning of such clarification, as I see it, is to differentiate between real “competition dispute” and disputes arising out of other concerns, so as to focus our discussion on real competition disputes and stay away from detracted argument. Also, only with the foundation of such clarification can we work out a workable strategy which helps avoid similar “fall down”. In the latter part of this book, Professor Gerber develops strategy which clearly corresponds to his historical analysis. (E.g, pp 286-292, “Convergence as a Global Competition Law Strategy”)


Prospect of global competition law relies on the closing of the gap between competition thoughts in different systems. Professor Gerber’s profound comparative competition law discussion can greatly help us walk out the puzzle when we try to perceive foreign competition laws. I am deeply impressed by two characteristics in his comparative competition law discussion. One is, he clearly shows the uniqueness of elements contributing to the shaping of each competition law system and cautiously warns the reader to bear in mind the function of these elements. The other is, he develops insightful thought from the trial-and-error experience of US antitrust law. I believe, with such enlightening in-depth comparative narratives, people from different competition law systems will find it easier to understand each other, and head toward a more communicative and constructive discussion of global competition law.


2. Reference system

In the book, Professor Gerber use US antitrust law as a reference for discussion of competition law development. Whether you are fascinated by US antitrust system or remains skeptical toward it, there is no denying that, “The US model’s role as a common reference point is associated with its role as a heuristic-a cognitive device for thinking about complicated issues”(p.152). At least, people could draw some lessons from its evolution process and trial-and-error experience. After explaining his consideration for setting such reference, Gerber brings to everyone’s attention the key feature and general tendency of this system----narrow focus and exclusion or marginalization of political and social factors in considering antitrust law and its influence. Following all these steps, Professor Gerber tries to invoke further discussion----“to conceptualize the distance between systems, provide a way of measuring increases or decreases in distance”.


3. Methodology

As mentioned in the preface of the book, “equally great is the need for effective use of a broad range of economic and other social science insights in developing competition law. Yet the full breadth and richness of thought applicable to these issues often remains unexplored and unused”. Undoubtedly, this insightful book presents to us the author’s solid understanding of history and effective use of theoretical analysis----those thought-provoking insights derive from his historical, sociological, legal and economic methodologies.


When we observe competition in biological world and human society, we may find that competition is always associated with variety. It is among the varieties that competitive ones which can better adapt to environment attract more resources, gain strength and grow stronger. It is notable that, thorough exploration of varieties can be seen in many parts of Professor Gerbers book, just to name a few: competition law systems, global competition law development path, methodology,etc. By doing so, the author is initiating a complex discussion of the complex problem of global competition law, hopefully, a solid academic foundation can be laid for the emerging of a competitive global competition law system.


August 17, 2010 | Permalink | Comments (0) | TrackBack (0)

Consumer Choice as the Best Way to Recenter the Mission of Competition Law

Posted by D. Daniel Sokol

Robert H. Lande, University of Baltimore - School of Law advocates Consumer Choice as the Best Way to Recenter the Mission of Competition Law.

ABSTRACT: This article will (1) define the consumer choice approach to competition law or antitrust law and show how it differs from other approaches; (2) discuss the types of situations where a consumer choice focus is likely to make a difference in enforcement outcomes, producing better results than the other paradigms; (3) show that another important advantage of using the consumer choice approach would be to nudge decisions in the right direction; and (4) offer a brief overview of implementation issues.

This is a chapter of a forthcoming ASCOLA book, and is a condensation and update of Neil W. Averitt & Robert H. Lande, 'Using The "Consumer Choice" Approach to Antitrust Law', Antitrust Law Vol. 74, 2007, available at


August 17, 2010 | Permalink | Comments (0) | TrackBack (0)