Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, August 30, 2010

The Penguin and the Cartel: Rethinking Antitrust and Innovation Policy for the Age of Commercial Open Source

Posted by D. Daniel Sokol

Steohen Maurer (Berkeley - Goldman School of Public Policy) has a new paper on  The Penguin and the Cartel: Rethinking Antitrust and Innovation Policy for the Age of Commercial Open Source.

ABSTRACT: Modern open source (“OS”) software projects are increasingly funded by commercial firms that expect to earn a profit from their investment. This is usually done by bundling OS software with proprietary goods like cell phones or services like tech support. This article asks how judges and policymakers should manage this emerging business phenomenon. It begins by examining how private companies have adapted traditional OS institutions in a commercial setting. It then analyzes how OS methods change companies’ willingness to invest in software. On the one hand, OS cost-sharing often leads to increased output and benefits to consumers. On the other, these benefits tend to be limited. This is because sharing guarantees that no OS company can offer consumers better software than any other OS company. This suppresses incentives to invest much as a formal cartel would. In theory, vigorous competition from non-OS companies can mitigate this effect and dramatically increase OS output. In practice, however, de facto cartelization usually makes the OS sector so profitable that relatively few proprietary companies compete. This poses a central challenge to judges and policymakers.

Antitrust law has long recognized that the benefits of R&D sharing frequently justify the accompanying cartel effect. This article argues that most commercial OS collaborations can similarly be organized in ways that satisfy the Rule of Reason. It also identifies two safe harbors where unavoidable cartel effects should normally be tolerated. That said, many OS licenses contain so-called “viral” clauses that require users who would prefer to develop proprietary products to join OS collaborations instead. These clauses aggravate the cartel effect by further reducing the number of companies willing to adopt proprietary business models. Although viral licenses may sometimes be needed to stabilize OS collaborations against free-riding, practical experience suggests that many viral licenses (notably including the GPL) are too broad to survive a Rule of Reason analysis. The article concludes by asking how policymakers can use taxes and government spending to mitigate the cartel effect and/or increase OS software production.

August 30, 2010 | Permalink | Comments (0) | TrackBack (0)

Broadband Openness Rules Are Fully Justified by Economic Research

Posted by D. Daniel Sokol

Nic Economides (NYU - Stern) argues that Broadband Openness Rules Are Fully Justified by Economic Research.

ABSTRACT: This paper responds to arguments made in filings in the FCC’s broadband openness proceeding (GN Dkt. 09-191) and incorporates data made available since my January 14th filing in that proceeding. Newly available data confirm that there is limited competition in the broadband access marketplace. Contrary to some others’ arguments, wireless broadband access services are unlikely to act as effective economic substitutes for wireline broadband access services (whether offered by telephone companies or cable operators) and instead are likely to act as a complement. Nor will competition in the Internet backbone marketplace constrain broadband providers’ behavior in providing “last mile” broadband access services. The last mile, concentrated market structure, combined with high switching costs, provides last mile broadband network providers with the ability to engage in practices that will reduce social welfare in the ! absence of open broadband rules. Furthermore, the effect of open broadband rules on broadband provider revenues is likely to be small and can be either positive or negative. Unfortunately, various filings have misstated or mischaracterized the results on the economics of two-sided markets. Contrary to what some have argued, allowing broadband providers to charge third party content providers will not necessarily result in lower prices being charged to residential Internet subscribers. This is true under a robust set of assumptions. Despite some parties’ mischaracterization of the economic literature, price discrimination by broadband providers against third party applications and content providers will reduce societal welfare for numerous reasons. This reduction in societal welfare is especially acute when price discrimination is taken to the extreme of exclusive dealing between broadband providers and content providers. Antitrust and consumer protection laws are insufficient to protect societal welfare in the absence of open broadband rules.

August 30, 2010 | Permalink | Comments (0) | TrackBack (0)

SOEs in China and Their Impact on Private Businesses

Posted by D. Daniel Sokol

This weekend I read an excellent work in progress by Wentong Zheng (University of Buffalo Law) on the Chinese AML and SOEs.  It should go out to the law reviews soon.  SOEs has been a topic of interest of mine for some time in terms of both governance and competition concerns.  Today's NY Times has a long story about the competitive impact of SOEs on private businesses, lending support to how a raising rival's cost strategy is rational for state owned firms who lack hard budget constraints.

August 30, 2010 | Permalink | Comments (0) | TrackBack (0)

Who gains and who loses from credit card payments?: theory and calibrations

Posted by D. Daniel Sokol

Scott Schuh, Oz Shy, Joanna Stavins (all Federal Reserve Bank of Boston) explain Who gains and who loses from credit card payments?: theory and calibrations.

ABSTRACT: Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or “cash”) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. On average, and after accounting for rewards paid to households by banks, the lowest-income household ($20,000 or less annually) pays $23 and the highest-income household ($150,000 or more annually) receives $756 every year. We build and calibrate a model of consumer payment choice to compute the effects of merchant fees and card! rewards on consumer welfare. Reducing merchant fees and card rewards would likely increase consumer welfare.

August 30, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, August 29, 2010

SSRN TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy eJournal June 30, 2010 to August 29, 2010

Posted by D. Daniel Sokol

RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy eJournal

June 30, 2010 to August 29, 2010



Rank Downloads Paper Title
1 322 Estimating the Economic Impact of Mass Digitization Projects on Copyright Holders: Evidence from the Google Book Search Litigation
Hannibal Travis,
Florida International University College of Law,
Date posted to database: July 5, 2010
Last Revised: August 2, 2010
2 210 Reconsidering Competition and the Goals of Competition Law
Maurice E. Stucke,
University of Tennessee College of Law,
Date posted to database: July 22, 2010
Last Revised: July 22, 2010
3 193 Explaining the Importance of Public Choice for Law
D. Daniel Sokol,
University of Florida - Levin College of Law,
Date posted to database: June 16, 2010
Last Revised: June 30, 2010
4 183 European Competition Law & Control of Energy Market Restructuring
Michael D. Diathesopoulos,
University of Cambridge - Faculty of Law,
Date posted to database: June 24, 2010
Last Revised: July 19, 2010
5 175 When a Monopolist Deceives
Maurice E. Stucke,
University of Tennessee College of Law,
Date posted to database: July 18, 2010
Last Revised: July 18, 2010
6 170 European Energy Market After Deregulation: A Process of Limited Restructuring and the Role of European Competition Law
Michael D. Diathesopoulos,
University of Cambridge - Faculty of Law,
Date posted to database: June 24, 2010
Last Revised: July 20, 2010
7 124 An Evaluation of the Rights of Defense During Antitrust Inspections In the Light of the Case Law of the ECTHR: Would the Accession of the European Union to the ECHR Bring About a Significant Change?
Charlotte Leskinen,
Instituto de Empresa,
Date posted to database: May 29, 2010
Last Revised: May 29, 2010
8 124 The Coming of Age of EU Regulation of Network Industries and Services of General Economic Interest
Leigh Hancher, Pierre Larouche,
Tilburg University - Tilburg Law and Economics Center (TILEC), Tilburg University,
Date posted to database: June 24, 2010
Last Revised: June 24, 2010
9 114 From Energy Sector Inquiry to Recent Antitrust Decisions in European Energy Markets: Competition Law as a Means to Implement Sector Regulation
Michael D. Diathesopoulos,
University of Cambridge - Faculty of Law,
Date posted to database: July 15, 2010
Last Revised: July 15, 2010
10 111 The Firm as Cartel Manager
Christopher R. Leslie, Herbert J. Hovenkamp,
University of California, Irvine - School of Law, University of Iowa - College of Law,
Date posted to database: June 21, 2010
Last Revised: August 17, 2010

August 29, 2010 | Permalink | Comments (0) | TrackBack (0)