Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, September 25, 2010

EU Competition Law An Analytical Guide to the Leading Cases - Second Edition

Posted by D. Daniel Sokol

Ariel Ezrachi (Oxford Law) has just published EU Competition Law An Analytical Guide to the Leading Cases - Second Edition.

BOOK ABSTRACT: This book is designed as a working tool for the study and practice of European Competition Law. It is an enlarged and updated second edition of the highly practical guide to the leading cases of European Competition Law, first published in 2008.

This second edition focuses primarily on Article 101 TFEU (Ex Article 81 EC), Article 102 TFEU (Ex Article 82 EC) and the European Merger Regulation. In addition it explores the public and private enforcement of Competition Law, the intersection between Intellectual Property Rights and Competition Law and the application of Competition Law to State action.

Each chapter begins with an introduction which outlines the relevant laws, regulations and guidelines for each of the topics, providing the analytical framework for the case entries that follow. The case entries are then set out is summary form, accompanied by analysis and commentary.

September 25, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, September 24, 2010

Making Sense of Non-Binding Retail-Price Recommendations

Posted by D. Daniel Sokol

Dennis Gartner (St. Galen - Econ) and Stefan Buehler (Zurich - Econ) are for Making Sense of Non-Binding Retail-Price Recommendations.

ABSTRACT: We model non-binding retail-price recommendations (RPRs) as a communication device facilitating coordination in vertical supply relations. Assuming both repeated vertical trade and asymmetric information about production costs, we show that RPRs may be part of a relational contract, communicating private information from manufacturer to retailer that is indispensable for maximizing joint surplus. We show that this contract is self-enforcing if the retailer’s profit is independent of production costs and punishment strategies are chosen appropriately. We also extend our analysis to settings where consumer demand is variable or depends directly on the manufacturer’s RPRs. Keywords: vertical relationships, relational contracts, asymmetric information, price recommendations.

September 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Dynamic Entry with Cross Product Spillovers: An Application to the Generic Drug Industry

Posted by D. Daniel Sokol

A. Ronald Gallant, Duke University - Fuqua School of Business, Economics Group, New York University - Department of Economics, Han Hong, Duke University - Department of Economics, and Ahmed Khwaja, Duke University - Fuqua School of Business, Duke University, Fuqua School of Business-Economics Group, Duke University - Department of Economics, analyze Dynamic Entry with Cross Product Spillovers: An Application to the Generic Drug Industry.

ABSTRACT: Experience in one product market can potentially improve firm performance in a related product market in the future. Thus, entry into a market is determined not just by profits in that market but also by its future impact on profitability in other markets. We formulate and estimate a dynamic model of entry decisions of firms in the presence of such spillovers using data on the generic drug industry. Spillovers imply that a firm’s unobserved “ability” to profit in a product market not only changes stochastically but is also is endogenous to past entry decisions. Therefore, the model needs to accommodate unobserved state variables that are endogenous to firm actions and serially correlated. We address the methodological challenge of estimating such a model using a sequential importance sampling based technique. Our estimates show significant spillover effects of entry on future profits. On average, each entry reduces costs by 7% at the next entry opportunity. On average there are eight entry opportunities annually. The average cumulative benefit of a firm that enters all eight markets in a year is 51%. We conclude that spillovers are critical in the equilibrium evolution of the structure of the generic drug industry.

September 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Pricing and Reimbursement in U.S. Pharmaceutical Markets

Posted by D. Daniel Sokol

Ernst R. Berndt, Massachusetts Institute of Technology (MIT) - Sloan School of Management, and Joseph P. Newhouse, Harvard Medical School discuss Pricing and Reimbursement in U.S. Pharmaceutical Markets.

ABSTRACT: In this survey chapter on pricing and reimbursement in U.S. pharmaceutical markets, we first provide background information on important federal legislation, institutional details regarding distribution channel logistics, definitions of alternative price measures, related historical developments, and reasons why price discrimination is highly prevalent among branded pharmaceuticals. We then present a theoretical framework for the pricing of branded pharmaceuticals, without and then in the presence of prescription drug insurance, noting factors affecting the relative impacts of drug insurance on prices and on utilization. With this as background, we summarize major long-term trends in copayments and coinsurance rates for retail and mail order purchases, average percentage discounts off Average Whole Price paid by third party payers to pharmacy benefit managers as well as average dispensing fees, and generic penetration rates. We conclude with a summary of the evidence regarding the impact of the 2006 implementation of the Medicare Part D benefits on pharmaceutical prices and utilization, and comment on very recent developments concerning the entry of large retailers such as Wal-Mart into domains traditionally dominated by large retail chains and the "commoditization" of generic drugs.

September 24, 2010 | Permalink | Comments (0) | TrackBack (0)

GCR's 2010 Competition Law Review, 16 & 17 November, Brussels

Posted by D. Daniel Sokol

GCR's 2010 Competition Law Review, 16 & 17 November, Brussels

A unique opportunity to hear some of the most influential speakers debate and analyse the key developments in competition law.

The aim of this conference is to address recent developments in the field of competition law and policy over the past year. GCR has brought together leading figures in the field from both Europe and the US, including the European Commission, the Federal Trade Commission, in-house counsel, lawyers in private practice and consultant economists.
In association with ESMT Competition Analysis

European School of Management and Technology
"By far, one of the best competition law conferences this year. Content was topical and well balanced, covering all hot topics"
Past delegate, Kirkland & Ellis LLP
Register
Chairmen and speakers include:

  • Richard Whish
    Professor of Law, King's College London

  • Lars-Hendrik Röller
    President, European School of Management and Technology (ESMT)

  • Tony Reeves
    Partner, Clifford Chance LLP

  • Kris Dekeyser
    Head of Unit, DG Competition, European Commission

  • Gerwin van Gerven
    Partner, Linklaters LLP

  • Jackie Holland
    Director, Policy and Strategy, Office of Fair Trading

  • Gary Spratling
    Partner, Gibson Dunn & Crutcher LLP

  • Martin Low QC
    Partner, McMillan LLP

  • Kylie Sturtz
    Legal Director of Compliance and Competition, AB Inbev

  • Ian Forrester QC
    Partner, White & Case LLP
  • Fernando Castillo de la Torre
    Legal Service, European Commission

  • James S. Venit
    Partner, Skadden Arps Slate Meagher & Flom LLP

  • Laurent Geelhand de Merxem
    General Counsel Europe, Michelin

  • Andrzej Kmiecik
    Partner, Van Bael & Bellis

  • James Killick
    Partner, White & Case LLP

  • Stephen Kon
    Partner, SJ Berwin LLP

  • Dr John Temple Lang
    Cleary Gottlieb Steen & Hamilton LLP

  • Frank Wijckmans
    Partner, Contrast Law

  • Adrian Majumdar
    Partner, RBB Economics

  • Johannes Luebking
    Head of Merger Unit, DG Competition, European Commission

  • Simon Pritchard
    Partner, Allen & Overy LLP

  • William Baer
    Partner, Arnold & Porter LLP
  • Howard Shelanski
    Deputy Director for Antitrust for the Bureau of Economics, Federal Trade Commission

  • Matthias Pflanz
    Vice President, Charles River Associates

  • Simon Baxter
    Partner, Skadden Arps Slate Meagher & Flom LLP

  • Barbara Rosenberg
    Müssnich & Aragão, Advogados

  • Torsten Syrbe
    Partner, Clifford Chance LLP

  • Pallavi S. Shroff
    Partner, Amarchand Mangaldas

  • Feng Yao
    Partner, Broad & Bright

  • Thomas Vinje
    Partner, Clifford Chance LLP

  • Christian Duvernoy
    Partner, Wilmer Cutler Pickering Hale and Dorr LLP

  • Jean-Yves Art
    Director, Competition Law, Microsoft

  • Petri Kuoppamaki
    Vice President, Corporate Legal, Nokia

  • Andrea Lofaro
    Director, RBB Economics
Register
Topics will include:

  • The main competition law developments over the past 12 months
  • Trends and developments in cartel enforcement on both sides of the Atlantic - expansion of criminal sanctions and proliferation of leniency programmes
  • Competition law procedure post-Lisbon
  • Revised rules on horizontal cooperation agreements: recent developments - standards and information exchange
  • Vertical restraints - a practical look at the main changes
  • Recent developments in EU and US merger control
  • Enforcement priorities and merger control in the BRIC countries
  • Special focus: Dominance, antitrust and the internet

September 24, 2010 | Permalink | Comments (0) | TrackBack (0)

The EC Commission's Review of the EU Competition Rules on Horizontal Agreements

Posted by D. Daniel Sokol

Paul Lugard (Royal Philips Electronics, Tilburg Law & Economics Centre) discusses The EC Commission's Review of the EU Competition Rules on Horizontal Agreements.

ABSTRACT: It is no wonder that the revisions of the block exemption regulations for research and development agreements and specialization agreements, as well as the changes to the Horizontal Guidelines that the EC Commissions has proposed, have given rise to a lively debate on the proper regulation of agreements under EC antitrust law between actual and potential competitors and have uncovered some thorny policy issues. There are two principal reasons for this.

First, for many companies co-operation with competitors is key to their ability to develop and market both existing and innovative products. For instance, it is likely that the introduction of the CD technology as we know it would have been seriously delayed, or would not have taken place at all, if antitrust rules had prevented Philips and Sony from collaborating on optical storage technology in the 1970s and early 1980s. Similarly, the standard-setting activities in the telecommunications area that took place under the auspices of the European Telecommunications Standards Institute ("ETSI") involving many actual and potential competitors have greatly facilitated the introduction of the 3rd generation mobile phone standard. And absent the collaborative research by Genzyme and Novazyme, there may not have been a treatment for Pompe disease. Exchange of market information and benchmarking enables numerous smaller and larger firms to more intelligently adapt to market circumstances and to improve their productivity.

While many businesses are increasingly required to cooperate in globalizing markets with quickly changing market dynamics, many of these activities require significant upfront investments that companies may not be willing to undertake against the backdrop of restrictive, overly prescriptive, or uncertain requirements under antitrust law. It is therefore important that antitrust law preserves and stimulates the incentives for companies to enter into efficiency-enhancing collaborative activities. As the two block exemption regulations and the Horizontal Guidelines have a direct bearing on precisely those incentives, there is a need for a clear, consistent, and economically rational framework to be embodied in those regulations, allowing companies to assess with a reasonable degree of certainty the risks involved. More fundamentally, unjustified restraints on desirable innovative activity are potentially the most damaging Type 1 errors as innovation is a key driver of consumer welfare.

The existing regime under European antitrust law for research and development agreements, as well as production agreements, has been in force since 2000 and has functioned relatively well-despite a number of notoriously technical difficulties and uncertainties involved in applying the block exemption regulations. For instance, over the years practitioners dealing with joint research and development projects have struggled with the notions of "specialisation in research and development" and "specialisation in exploitation" within the meaning of Article 1 Regulation 2659/2000 on Research and Development ("R&D") agreements. The moderate satisfaction among practitioners and regulators with the current block exemptions and the current Horizontal Guidelines explains why the EC Commission believes that the current legislative framework does not require a radical overhaul. Instead, it has stated that it primarily seeks to update and clarify the existing rules.

However, as set out in the various contributions included in this special CPI Antitrust Chronicle issue, the proposed revisions do, in fact, raise a significant number of technical and more fundamental issues. This applies both to the proposed modifications of the two block exemption regulations, as well as-in particular-to the newly introduced chapter of the draft Horizontal Guidelines on the assessment of information exchange between companies and the largely revised section on standardization agreements.

The current EC competition law regime under EC competition law for horizontal cooperation consists of two block exemption regulations: Regulation 2659/2000 covers R&D agreements, while Regulation 2658/2000 applies to specialization and joint production agreements. The accompanying Horizontal Guidelines provide a framework for the assessment of specific types of horizontal agreements, such as joint commercialization, purchasing, standardization, and other types of agreements that are either not covered or not automatically exempted under the block two exemptions for horizontal agreements.

September 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, September 23, 2010

Internationalization in Grocery Retail: Much Ado About Not Very Much

Posted by D. Daniel Sokol

Marcel Corstjens, INSEAD - Marketing and Rajiv Lal, Harvard Business School have posted Internationalization in Grocery Retail: Much Ado About Not Very Much.

ABSTRACT: We find that internationalization in the grocery sector has steeply increased over the last 15 years, but is still surprisingly limited. Although internationalization has a number of undeniable advantages for grocery retailers, our statistical analysis shows that the degree of internationalization is not a significant driver of profits nor of growth for grocery retailers. This suggests that internationalization should be developed differently or that other, more profitable growth strategies exist for grocery retailers. We provide a typology of such strategies and identify ‘weightless brand ownership’ as a promising underexploited profitable growth opportunity for grocery retailers.

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Banking Competition, Monitoring Incentives and Financial Stability

Posted by D. Daniel Sokol

Vo Thi Quynh Anhy, Central Bank of Norway explores Banking Competition, Monitoring Incentives and Financial Stability.

ABSTRACT: This paper addresses the desirability of competition in banking industry. In a model where banks compete on both deposit and loan markets and where banks can use monitoring technology to control entrepreneurs' behavior, we investigate three questions: what are the effects of competition on banks' monitoring incentives? Does competition hurt banks' stability? What can be devices to correct potential negative effects of competition vis à vis financial stability? We find that impacts of competition on banks' monitoring incentives can be decomposed into two effects: one on the attractiveness of monitoring and the other on the monitoring efficiency. The first effect operates through the link between competition and loan margin. The second effect comes from the fact that marginal effect of monitoring on entrepreneur's effort depends on loan rate. We characterize the sufficient condition under which competition will increase monitoring incentives as well as banks' stability. For the third question, we focus on the role of capital requirement and claim that with capital requirement, we can attain a weak correction but not strong correction.

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

International Cooperation: Preparing for the Future

Posted by D. Daniel Sokol

Christine Varney's talk International Cooperation: Preparing for the Future from Monday's Georgetown antitrust conference is now on the web.

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Aftermarket Theories in Competition Law and an Empirical Analysis of Regulation on Motor Vehicles

Posted by D. Daniel Sokol

Sahin Ardiyok, Bilgi University Law School offers Aftermarket Theories in Competition Law and an Empirical Analysis of Regulation on Motor Vehicles.

ABSTRACT: One of the major assumptions of the perfectly competitive market is the availability of complete information for both buyer and seller. Until 1990’s, after Nobel laureate economist Stigler’s research on information asymmetry in cartels, market failures caused by a failure of the aforementioned assumption to hold was rarely discussed in the practice of competition law. US Supreme Court’s decision in the Kodak Case put the information asymmetry on the agenda again. The adoption of such a decision coincided in a period when courts, policymakers and members of the Chicago School, including Stigler, were convinced regarding the proper functioning of the market mechanism. According to some authors, the Kodak Case points out the need for a more detailed review of the market – that is theoretically supposed to operate properly. This case is considered the beginning of the Post-Chicago School era.

After the Kodak Decision, emanating and transferring information have become extremely easy due to flourished information technologies. Internet has enhanced the worldwide quantity and depth of information accessibility. This development makes accurate information more difficult to obtain and analyze.

In Kodak Case, the problem of information asymmetry was thoroughly discussed in a market with durable goods. The focus was on the after-sale costs of durable goods with respect to competition law. It appeared that in the analysis of after sale activities, we may categorize the market as either with “system theory” or with “market power in after sale market theory”. System theory implies that users of durable goods take into account both the sale price and the possible costs which would be due after the sale. In markets where latter theory is the case, we may expect that the firm can infringe competition rules depending on its market power in after sale products and services.

In our study, we have aimed to design a framework that may help to find which theory is applicable for which types of markets. In this way, we have explored six criteria to be available for this analysis. Unexpected pricing experienced by current customer base, switching costs, potential purchasers in the sales market and reputation, asymmetric information problem, agreements in after-sale markets, and oligopolistic structure of sales market found to be significant parameters to be used in the analysis. In addition we have identified three main defenses, namely intellectual property rights, quality control and protection of brand reputation, price discrimination, for firms having market power based on these six parameters.

After establishing theoretical foundations of our argumentation, we have tried to test it by an empirical study depending on a survey since we believe that general and literal judgments lacking econometrical evidences may lead competition authorities or courts to make Type I error. In this vein, we have planned to take one of six parameters (asymmetric information problem) and test it with real life application.

For this study, we decided to focus on the motor vehicle industry which has a big share in our durable goods expenditure. We handled Turkish Competition Authority’s (TCA) block exemption Regulation on motor vehicles which is a carbon copy of its EU counterpart. As this regulation applies power in the after sale market theory, the purpose of our empirical study was to show whether this normative choice is appropriate or not, at least in term of information asymmetry. And it seems that, our conclusion taken from the outcomes of survey supports this normative choice.


 

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Gerber Responds to Blog Symposium on Global Competition: Law, Markets and Globalization

[Editor's Note: In August 2010 we held a blog symposium on the excellent book Global Competition: Law, Markets and Globalization (Oxford University Press 2010) by David Gerber.  We assembled a group of scholars from around the world to discuss to book. The posts of these scholars are linked at the end of this post.]

Posted by David Gerber

My thanks to each of the participants in the blog symposium held in August to discuss  my new book, Global Competition: Law, Markets and Globalization (OUP, 2010) and to Prof. Danny Sokol for hosting the symposium.   Their contributions provide valuable perspectives on the book as well as keen insights into some of the issues it raises.

I take this opportunity to comment briefly on a few points that may help to put these and other reviews of the book in context.    I hope the comments will further clarify my objectives and perhaps correct one or two misunderstandings about the project that have surfaced in the symposium and in other discussions of the book.

One particularly important point is that the book’s objectives are primarily historical and analytical!  I did not set out to argue for a particular policy agenda, and I very much hope that the project will not be viewed as a pladoyer for such.    In fact, the policy suggestions emerged only after most of the rest of the book had been completed.   They were shaped and spurred by the analysis; they did not shape the analysis.   The book was certainly not written to support them.  

A central feature of the analysis is its combination of perspectives.    It seeks to understand the process of global competition law development and the issues that that process raises by looking at it from a variety of angles and then combining the pictures to “see” it more clearly.   This reveals often unseen dimensions of the process and provides a fuller a fuller and more valuable picture than could be provided in any other way.   

A central lens  is historical.   I look closely at the evolution of competition law in legislation and practice, the conceptual developments in economics and law that have influenced that evolution,  and the social, political and economic contexts in which those interactions have occurred.   The book does this on the global level as well as within important national jurisdictions.    Throughout the analysis, the focus is on the interactions and interrelationships between these two dimensions – national and transnational.    These domains of competition law have continually shaped and reshaped each other, and these interactions are, therefore, critical to understanding the dynamics of global competition law development.  I believe that the book breaks much new ground in treating these issues..  

One of my central objectives in the book is to provide a view of experience with competition law on the global level that is broader and more capacious than has previously been available.   The images of that experience that are referred to in recent discussions are often wrong, and at least highly misleading.    This is particularly important, because these distorted views tend to foster a particular set of policy perspectives and objectives, and they may also, therefore, lead to misguided policy options and choices.   For example, discussions of global competition law sometimes assume that the story starts in the 1990s (with the advent of globalization).   By ignoring earlier experience this assumption overlooks much accumulated experience and restricts the range of considerations and alternatives for discussion.   Informed observers sometimes mention briefly the failed efforts to include competition law in the institutional framework of world trade after the Second World War, but they typically dismiss that experience as an indication that competition law on a global scale is inevitably hopeless because it has never garnered widespread support.    Closer examination reveals not only that there was significant support for the basic idea both in the 1920s and in the postwar period, but that it often came from groups and countries generally resistant to such efforts today.  

The book also examines  national competition law experience from this broad perspective, seeking to place the discussion of competition law development in its political, economic and historical contexts.    Recent discussions of “models” for competition law development – i.e., the experiences  and systems that are looked to in evaluating current decisions – are often remarkably narrow.    They almost invariably focus on US experience.   Yet this eliminates extensive amounts of potentially relevant experience from the discussion.    In particular, European national experience in the twentieth century may have significant value for current thinking about competition law development on both the national and global level.   European states traversed many of the same issues and dealt with many of the same obstacles that newer competition law systems face today, and thus to omit this experience from view is to diminish and narrow thinking about the issues. 

The book’s analysis also breaks much new ground in going beyond US and European competition law experience, which have long dominated discussion of the issues, and integrating into global development dynamics the newer players in competition law from Asia, Latin America and Africa.    Much can be learned about the prospects for global competition law development from looking at these experiences and relating  them to the processes of globalization.  

A comparative lens is of particular value in this context.   Discussions of global competition law development all too often not only marginalize or exclude national experiences other than those of the US (and perhaps Europe), but also fail to provide adequate comparative analysis of the issues.    They may mention such other experiences, but there is seldom serious effort  to look carefully at patterns in their operations or at reasons why some solutions have been successful while others failed.   Many factors are potentially relevant, and careful comparative study can lead not only to a better understanding of the problems, but a fuller set of options for responding to them.    The book applies a comparative analysis that is designed to identify such patterns and factors and thereby to render  national experiences both relevant and useful to contemporary and future discussions.

Finally, I suggest some policy consequences that might be drawn from this examination.   As emphasized above, these conclusions emerged from the study of the data.    They did not precede or shape the analysis.   The main policy conclusions are (1) that there may be a significantly greater basis for support for some form of transnational coordination than is usually assumed in current discussions, (2) that progress on this level may provide important benefits that are not likely to be provided by simply waiting for countries to “converge” spontaneously around a single model (i.e., the US model), and  (3) that the effectiveness and “success” of any such coordination efforts must depend on their capacity to provide a voice and a role for all interests involved.    Only if there is sufficient political support for competition law can it be of value, and this is particularly true with regard to competition law on the global level.    This means that there is no necessary basis for believing that the US or any other national “model” can effectively serve as the basis for global competition law development.    Perhaps there will be widespread agreement that it should serve as a model, but it is far too early to predict such an outcome.  

On the basis of this analysis, I coin the term “commitment pathway” to refer to a process of coordination over time that holds promise for effective global competition law development, and I suggest some of the reasons why it might be effective.    I do not develop this proposal fully (that may be appropriate later), but I set out some of its basic ideas and components.  
 
Some have suggested that I am “optimistic” about the idea of a global competition law agreement.    While I am cautiously optimistic that progress can be made along the lines I mention, I also suspect that if there is to be real progress, the process will be a long one in which successes are based on gradually developing support for the project at national and sub-national levels.   An agreement that is “imposed” or “coerced” – whether directly or indirectly –  is not likely to be effective, and it may be more harmful than beneficial.    

This brief response to the blog symposium has highlighted some of the book’s main objectives and  clarified  the overall design.    I again express my sincere gratitude to each of  the participants and to Professor Sokol for hosting symposium.. 

Previous Posts for the Blog Symposium on Global Competition: Law, Markets and Globalization

Michal Gal

M. Elina Cruz

David Lewis

Enrico Camilleri

Spencer Waller

Damien Gerard

Ruohong Chen

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Motor Vehicle Restraints Block Exemption Regulation 2010

Posted by D. Daniel Sokol

Motor Vehicle Block Exemption Regulation Conference 2011

Discuss the impact of the new rules on the supply chain in the automotive industry

This conference has been arranged to discuss the Commission’s policy for the future legal framework that should apply to motor vehicle distribution and after-sales services agreements.

Key areas of focus:

  • The new automotive block exemption regulation
  • Market definition and market share calculation
  • Internet distribution of motor vehicles and spare parts 
  • Multi-branding and non-competes
  • Retail price maintenance
  • Agency agreements
  • Access to technical information
  • Components supply and spare parts distribution 
  • Service contracts
  • Distribution of e-vehicles
  • Practical impact on manufacturers, dealers and the aftermarket

For more information on the event see the MVBE draft agenda today.

September 23, 2010 | Permalink | Comments (1) | TrackBack (0)

Knowing Versus Telling Private Information About a Rival

Posted by D. Daniel Sokol

Mark Bagnoli and Susan G. Watts (both Purdue School of Management) explain Knowing Versus Telling Private Information About a Rival.

ABSTRACT: As part of a broad competitive intelligence strategy, firms expect to acquire information about their rivals’ customers and production processes. In this study, we examine the firms’ incentives to disclose this information. We find that firms adopt a policy of disclosing their information regardless of whether it concerns a rival’s customers or production costs or whether the firms are Cournot or Bertrand competitors. Firms that have private information about their rivals tell. Their willingness to disclose private information about their rivals contrasts with the results in the literature when the firm has information about itself. This literature shows that the chosen disclosure policy depends on whether information is about the firm’s own payoffs or industry demand and whether the firms’ strategies are substitutes or complements. 

September 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 22, 2010

TACTICS AND STIGLER FLEXIBILITY. PART I: linear differential model for a single-product firm

Posted by D. Daniel Sokol

Francesco Dell'Isola (Dipartimento di Ingegneria Strutturale e Geotecnica - Universita di Roma "La Sapienza", Laboratorio Strutture e Materiali Intelligenti - Fondazione Tullio Levi-Civita - Cisterna di Latina) describe TACTICS AND STIGLER FLEXIBILITY. PART I: linear differential model for a single-product firm.

ABSTRACT: A firm which sells its product in a free competition market where the exchange price remains stationary, determines the quantity of goods to be produced equaling marginal cost to marginal revenues. In this paper we consider the more general case of markets with price instabilities. To this aim we: i) propose a simple mathematical model for describing the structure of industrial organizations, ii) determine the mathematical concept which expresses the Stiglerian flexibility for an industrial organization. In this way we give a precise meaning to the classical definition of flexible industrial organizations which reads as follow: " a flexible industrial organization permit to approximate the best technology for any output, at the cost of not being able to use the best technology for any output " ( see [2] on pg. 315 ). In the framework of the aforementioned model it is possible to introduce the concept of tactics ( time de! pendent production regime ) chosen by a firm as a response to price instability and to prove that the presence of exchange price instability enriches the manifold of industrial organizations which are competitive. Indeed we characterize the manifolds of equally competitive industrial organizations as the level curves of the previously introduced profit function.

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

FTC, Fordham Law School To Hold Panel on New Horizontal Merger Guidelines and International Convergence on September 22

Posted by D. Daniel Sokol

According to the FTC Press Release:

The Federal Trade Commission and Fordham Law School will co-sponsor a panel discussion on September 22, 2010, on the recently revised Horizontal Merger Guidelines and their role in promoting closer consensus among international antitrust authorities regarding how they assess mergers among competitors. Panelists will include the Director of the FTC’s Bureau of Economics, Dr. Joseph Farrell, and other leading antitrust lawyers and economists.

The panel will be held from 4:00 to 6:00 p.m. in the McNally Amphitheater at Fordham Law School, 140 West 62nd Street, New York, New York. The public is invited, and registration is not required.

In addition to Dr. Farrell, other members of the panel will include:

  • Dr. Lawrence White, Professor of Business at New York University and former Director of the Economic Policy Office of the Department of Justice’s Antitrust Division;
  • Dr. Janusz Ordover, Professor of Economics at New York University;
  • William Blumenthal, Partner at Clifford Chance and former FTC General Counsel;
  • Abbott “Tad” Lipsky, Partner at Latham & Watkins and former Deputy Assistant Attorney General in the Department of Justice Antitrust Division;
  • Calvin “Cal” Goldman, Partner at Blake Cassels & Graydon LLP and former Director of the Canadian Competition Bureau;
  • Barbara Rosenberg, Partner at Barbosa, Mussnich & Aragao and former head of the Antitrust Department of Brazil’s Ministry of Justice;
  • Mark Clough Q.C., Partner at Addleshaw Goddard;
  • Catherine Moscatelli, Chief of the Mergers II Division in the FTC’s Bureau of Competition.

Alden Abbott, a deputy director in the FTC’s Office of International Affairs, will moderate. The revised Horizontal Merger Guidelines were released on August 19, 2010 and are available at http://www.ftc.gov/os/2010/08/100819hmg.pdf. Questions about this panel should be directed to Alden Abbott in the FTC’s Office of International Affairs at 202-326-2881 or Elizabeth Callison in the FTC’s Bureau of Economics at 202-326-3521.

Copies of the documents mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

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

Leegin, the Rule of Reason, and Vertical Agreement

Posted by D. Daniel Sokol

Herb Hovenkamp (Iowa Law) has authored Leegin, the Rule of Reason, and Vertical Agreement.

ABSTRACT: The Supreme Court’s Leegin decision overturned the longstanding rule of per se illegality for resale price maintenance and applied a rule of reason. One might think that the question whether a vertical “agreement” exists between a manufacturer and a dealer should not be affected by the mode of analysis to be applied after an agreement is found. First one asks whether an agreement exists, and determines whether the per se rule or rule of reason applies only after receiving an affirmative answer. Nevertheless, ever since Colgate the Supreme Court has generally taken a more restrictive approach on the agreement issue in resale price maintenance cases than in cases involving other vertical agreements.

Unlike horizontal agreements among competitors, which are relatively uncommon, vertical agreements between actual or would-be suppliers and customers are everywhere, and include sales, licenses, franchises, employment agreements, and information arrangements. Their very ubiquity indicates that only a few will be of antitrust concern. Given the ubiquity of vertical agreements, we need to be clear on which ones should be of concern to antitrust law. Too many cases have asked whether an agreement is present without considering the nature of the agreement sought. Indeed, virtually every case alleging resale price maintenance or other vertical restraints involves firms who are the parties to some agreement.

A curiosity of many dealer-complaint cases is their failure to identify the nature and content of the alleged complainer-manufacturer agreement. The apparent subject matter of the alleged agreement is not the plaintiff’s destruction but the manufacturer’s distribution policy and its implementation, the complainer’s future behavior, or both.

The tribunal must first define its concept of an agreement and then ask whether the defendant had a motive to enter into that agreement. If unilateral termination of a price cutter because of price cutting does not constitute an agreement, then no agreement exists unless there is a motive for and evidence of the manufacturer’s agreement with some third party. In any event, the consequences of not finding an agreement are not quite the same when the underlying restraint is addressed under the rule of reason. Both unilateral and multilateral conduct that result in reduced output and higher prices are actionable, although unilateral conduct must meet the somewhat stricter structural standards of §2’s monopolization or attempt offense.

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

Competition Law And Economics: Advances in Competition Policy Enforcement in the EU and North America

Posted by D. Daniel Sokol

Abel M. Mateus, (Professor of Economics, New University of Lisbon) and Teresa Moreira (Faculty of Law, University of Lisbon, Portugal) have edited Competition Law And Economics: Advances in Competition Policy Enforcement in the EU and North America.

ABSTRACT:  There is broad consensus on the fight against cartels, with some countries criminalizing this type of agreement. However there is also wide debate on the questions of monopolization and abuse of dominant position, vividly highlighted by the recent Microsoft case. Furthermore, there are today diverging views on the interplay of business strategies and the control of market power on both a national and international scale. The book discusses the perennial issue in Europe of the conflicts between competition and industrial policies, once again bringing the theme of national champions to the fore. The contributing authors provide opinion on the efforts which have been made towards modernization in both the USA and the EU.


Contents:

Preface

Introduction
Abel M. Mateus

PART I: OPENING SPEECHES
1. Speech by the President of the Republic at the Opening Session of the Second Lisbon Conference on Competition Law and Economics
Aníbal Cavaco Silva

2. Helping Europeans Get the Best Deal: A Sound Competition Policy for Well-functioning Markets
Neelie Kroes

3. Competition Policy and Consumer Protection in the EU
Meglena Kuneva

4. Competition Policy Enforcement in the European Union: State of Art and Major Challenges
Abel M. Mateus

PART II: JUDICIAL CONTROL OF ADMINISTRATIVE DECISIONS AND PRIVATE ENFORCEMENT
5. Costs and Benefits of Private and Public Antitrust Enforcement: An American Perspective
Douglas H. Ginsburg

6. Administrative Regulation versus Private Enforcement – the EU Perspective
John D. Cooke

7. Improving Judicial Control of Administrative Decisions in Competition Enforcement
Frédéric Jenny

8. The Effectiveness and Limitations of the Portuguese System of Competition Law Enforcement by Administrative and Civil Procedural Means
José Manuel Sérvulo Correia

PART III: MERGER CONTROL IN REGULATED MARKETS AND DYNAMIC ANALYSIS OF NETWORK MARKETS
9. Mergers in Regulated Industries: Electricity
Dennis W. Carlton

10. Modelling Competition and Regulation in Wireless Telecommunications: A Progress Report
Luís Cabral

PART IV: MODERNIZATION OF ANTI-TRUST RULES AND INSTITUTIONS
11. Competition Law and Policy Modernization: Lessons from the U.S. Common-law Experience
Thomas O. Barnett

PART V: ABUSES OF DOMINANT POSITION AND MONOPOLIZATION: CONCLUSIONS OF THE DEBATES IN THE EU AND USA
12. Abuses of Dominant Position and Monopolization: Conclusions of the Major Debates in the EU and USA
Emil Paulis

13. Abuses of Dominant Position, Intellectual Property Rights and Monopolization in EU Competition Law: Some Thoughts on a Possible Course of Action
Inge Govaere

14. Abuses of Dominant Position and Monopolization: An Economic Perspective
Patrick Rey

15. The Current Debate About Section 2 of the Sherman Act: Judicial Certainty versus Rule of Reason
Barry E. Hawk

16. The Legal Periphery of Dominant Firm Conduct
Herbert Hovenkamp

17. Monopolization and the Fading Dominant Firm
Timothy F. Bresnahan

PART VI: COMPETITION AND INDUSTRIAL POLICIES IN A GLOBALIZED WORLD
18. Do National Champions Have Anything to do with Economics?
Anne Perrot

19. Competition Policy and Competitiveness in Europe
John Fingleton

20. Ownership, Performance and National Champions
Damien Neven

21. Antitrust Policy and Industrial Policy: A View from the U.S.
Lawrence J. White

22. Recent Canadian Policy Towards Industry: Competition Policy, Industrial Policy and National Champions
Thomas W. Ross

PART VII: TOWARDS A MORE EFFICIENT APPROACH TO STATE AID
23. Economics in State Aid: Soon as Routine as Dentistry?
Lowri Evans and Harold Nyssens

24. The New Approach to State Aid: Contributions and Limits from Case Law of the European Courts
Massimo Merola and Marie Debieuvre

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

Vertical Restraints Block Exemption Regulation in the Internet Age 2010

Posted by D. Daniel Sokol

Vertical Restraints Block Exemption Regulation in the Internet Age 2010
                              A New Hope for the New Economy?                

Monday 24th January 2011, Le Plaza, Brussels, Belgium

Meet our chairman:
Oliver Bretz, Partner, Clifford Chance, UK
Meet our eminent line-up of speakers:
Julia Holtz, Senior Competition Counsel, Google, UK
Nelson Jung, Senior Team Leader – Services, Office of Fair Trading (OFT), UK
Johan Ysewyn, Head of Competition Group, Linklaters, Belgium
William Blumenthal, Partner, Clifford Chance, USA (Former General Counsel, Federal Trade Commission)
Sir Christopher Bellamy QC, Senior Consultant, Linklaters LLP, UK (Former President, Competition Appeals Tribunal, Former Judge, Court of First Instance now General Court)
Agenda: Monday 24th January 2011
08:40 Registration and coffee
09:30 Chair’s introduction
Oliver Bretz, Partner, Clifford Chance, UK
Opening address
09:40 A transatlantic debate: Contrasting the US and EU regimes
• Opportunities and risks – vertical restraints in the New Economy
• Overview of the US approach to vertical agreements
• Compare and contrast with the EU regime
• Transatlantic lessons?
William Blumenthal, Partner, Clifford Chance, USA (Former General Counsel, Federal Trade Commission)
10:15 Does the EU Block Exemption make economic sense
• The interface between economics and competition pragmatism
• Positive and negative impacts on the New Economy
• Is there a better approach – are there any screens?
10:50 Morning coffee break
11:10 Exclusive rights in the new economy: Necessity or market
tipping?
• Is the distinction between horizontal and vertical restraint meaningful in technology markets?
• Can 'one size fit all'?
• How do you balance the interests of competitors and consumers?
• Is the Block Exemption ever useful?
Julia Holtz, Senior Competition Counsel, Google, UK
11:50 Panel discussion: Content downloads, online selling, e-commerce
and vertical agreements
• Discussing practical challenges and legal complexities
Moderator:
Johan Ysewyn, Partner, Linklaters LLP, Belgium
Panellists include so far:
Julia Holtz, Senior Competition Counsel, Google, UK
Keynote address
12:30 A response from the European Commission
• Highlighting the Commission’s current policies and priorities, particularly in the new economy
13:20 Lunch
Joint presentation
14:30 Luxury and the internet – do we have the right balance?
• Online commerce v. luxury brands
• Practical challenges
• How to you balance the interests of the consumer?
15.15 Unilateral actions, agency models and other approaches
• Is it circumvention or just good business practice?
• Different distribution models, different issues
• How does it fit with the internal market
• Do members states have a consistent approach?
15:40 Afternoon tea break
16.00 How are vertical restraints enforced? The view from the bench
• How does the judiciary approach enforcement
• Discussing practical challenges
Sir Christopher Bellamy QC, Senior Consultant, Linklaters LLP, UK (Former President, Competition Appeals Tribunal, Former Judge, Court of First Instance now General Court)
16:40 Panel discussion: How are vertical restraints enforced? The view
from the Authorities
• What is the role of the Commission?
• What is the role of NCAs?
• Is private enforcement effective outside the confines of the Block Exemption?
• Is there a transatlantic disconnect?
Panellists include so far:
Nelson Jung, Senior Team Leader – Services, Office of Fair Trading (OFT), UK
William Blumenthal, Former General Counsel, Federal Trade Commission, Partner, Clifford Chance, USA
17:30 Chair’s closing remarks and close of conference

September 22, 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 addresses 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.

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

Tuesday, September 21, 2010

Democracy and Consumer Strength: Direct Evidence from Regulatory Reform in Developing Countries

Posted by D. Daniel Sokol

Stephen J. Weymouth, Georgetown University - Robert Emmett McDonough School of Business discusses Democracy and Consumer Strength: Direct Evidence from Regulatory Reform in Developing Countries.

ABSTRACT: The distributional implications of antitrust regulation imply a political cleavage between consumers and producers. I argue that the relative strength of these two groups depends on the level of democracy. In particular, an expansion of the franchise and competitive elections will increase the relative political weight of consumers, resulting in policies that favors their interests. An empirical implication of the argument is that the likelihood of effective competition policy reform increases with democracy. I test this proposition in two stages using an original dataset measuring competition agency design in 156 developing countries covering the period 1975-2007. First, I estimate hazard models on the timing of competition policy reform. Second, since “laws on the books” do not necessarily indicate a commitment to effective policy, I create an original index measuring governments’ commitments to antitrust policy. The index captures the independence of the agency, resource (budget and staffing) allocations, expert perceptions, and actual legal actions. The results of the empirical analysis support the proposition that democracy improves governments’ commitments to competition policy.  

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