Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, November 22, 2010

Antitrust Market Definition and Taxes

Posted by D. Daniel Sokol

We can be sure about two things - death and taxes.  It turns out that taxes come up, even in the antitrust context.  Fernando H. Navajas, Fundacion de Investigaciones Economicas Latinoamericanas (FIEL), Universidad Nacional de La Plata and Santiago Urbiztondo, National University of La Plata and FIEL, Argentina has a new paper on Antitrust Market Definition and Taxes.

ABSTRACT: This paper considers the effect of taxes on the definition of relevant markets in antitrust analysis by examining various measures used within the hypothetical monopoly test. We show that the use of net margins (between producer prices and marginal cost) is a proper correction, but that it is only sufficient in the absence of specific unit taxes. When the latter exist, the price-elasticity of net demand is lower than the estimated price-elasticity based on market prices, and the use of net margins is insufficient to avoid biased conclusions.

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

The 2010 Merger Guidelines and the “Litigation Mulligan”: Better Economics but Not (Necessarily) More Clarity Before the Agencies and the Courts

Posted by D. Daniel Sokol

Hill Wellford & Gregory Wells (Bingham McCutchen) explain The 2010 Merger Guidelines and the “Litigation Mulligan”: Better Economics but Not (Necessarily) More Clarity Before the Agencies and the Courts.

ABSTRACT: The new Horizontal Merger Guidelines, issued by the U.S. antitrust Agencies on August 19, 2010, mark a clear change from their 1992 predecessor.They reduce the importance of traditional market definition, increase Herfindahl-Hirschman Index ("HHI") thresholds, and expand the types of evidence considered. Most commentary to date has focused on the fact that the new Guidelines largely codify hitherto-unofficial (although widely known) practices of Agency staff, and this is true, with some key exceptions. But such commentary suggests a no-big-deal view of the new Guidelines that misses something important.

The big development of the new Guidelines is that, read as a whole, they embrace three trends with the potential to make merger work significantly longer and less predictable. Those trends are (1) the pursuit of economic-analytical perfection; (2) the identification of ever-smaller groups of customers that might be subject to a discrete, unquantifiable, or even speculative harm; and (3) an indifference to the growing divergence between merger advocacy before the Agencies and merger litigation before the courts. If these trends continue, the 2010 Guidelines will turn out to be a big deal indeed.

The Agencies' stated goal for the new Guidelines is to increase "clarity and transparency, and provide business with ... greater understanding of how we review transactions." This statement is more complex and controversial than it might immediately appear. If the focus is on the "we," meaning the Agencies, and the "how," meaning the process alone, then the 2010 Guidelines soundly accomplish the goal: they put merging firms on notice that the Agencies have changed their internal approach. But if the focus is on "clarity and transparency," the new Guidelines' impact is harder to judge. Merging firms are only tangentially interested in the "how" of the Agencies' internal processes. What firms really want is "clarity and transparency" as to the ultimate outcome of a merger review. That requires something the Guidelines do not necessarily improve: better prediction of ultimate agency decisions and, in hotly contested cases, outcomes of litigation or at least of hard-fought consent decrees that will be negotiated in (and thus colored by) litigation's shadow.

 

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

Boletin Latinoamericano de Competencia Issue 27 is Out

Posted by D. Daniel Sokol

BOLETIN LATINOAMERICANO DE COMPETENCIA


ARGENTINA
TEST CONSTITUCIONAL DEL PROGRAMA DE CLEMENCIA: NEMO TENETUR Por Luis D. Barry
EL PODER JUDICIAL Y LA LEY 25.156: CONFLICTOS DE JURISDICCION Y FALTA DE COMPRENSIÓN A UNA DÉCADA DE LA APROBACIÓN DE LA LEY Por Marco Botta

BRASIL
A REESTRUTURAÇÃO DO SISTEMA BRASILEIRO DE DEFESA DA CONCORRÊNCIA PROJETO DE LEI nº 6 / 2009 Por Maria Cecília Andrade y Adriana Rocha Cordeiro

PROTOCOLO DE COOPERAçÃO TÉNICA SBDC-ACP
ANTITRUST ACTIONS IN THE MINING SECTOR: EXPECTED DEVELOPMENTS By Leonardo Peres da Rocha e Silva & Ricardo Ferreira Pastore

COLOMBIA
RÉGIMEN DE COMPETENCIA EN MATERIA DE TECNOLOGÍAS DE LA INFORMACIÓN Y LAS COMUNICACIONES Por Mauricio Velandia
DECRETO N° 2896 DE 5/8/2010 QUE REGLAMENTA ART.14 DE LEY 1340-2009
DECRETO N° 2897 DE 5/8/2010 QUE REGLAMENTA ART. 7 DE LEY 1340-2009
MERCOSUR
LA PROTECCIÓN JURÍDICA DE LA COMPETENCIA EN LOS PAÍSES DEL MERCOSUR Por Belikova Ksenia
MEXICO
COMENTARIOS A LAS REFORMAS A LA LEY FEDERAL DE COMPETENCIA ECONÒMICA por Xavier Ginebra Serrabou
PARAGUAY
REVITALIZANDO EL PROYECTO DE LEY DE "DEFENSA DE LA COMPETENCIA" Por Bruno Hug de Belmont Valdominos
RUSSIA
ANTIMONOPOLY ROMAN (BYZANTINE) CONSTITUTIONS OF 473 AND 483 IN CONTEXT OF ACTUAL PROBLEMS OF COMPETITION DEFENSE FROM UNWARRANTED ACTS OF PUBLIC ADMINISTRATION IN MODERN RUSSIA By Pisenko Kirill

UNION EUROPEA
EL PAPEL DE LOS SERVICIOS PUBLICOS EN LA UE DE 2020 Por Joaquín Almunia
THE ADDED VALUE OF COMPETITION LAW PROVISIONS IN THE EU-MERCOSUR FTA By Pablo Sánchez Iglesias
PARLAMENTO EUROPEO: RELACIONES COMERCIALES UNION EUROPEA - AMERICA LATINA
NOTAS DE PRENSA SOBRE RESOLUCION DEL PE
UNA PELIGROSA LLAMADA A LA CREACIÓN DE CÁRTELES CRISIS: A PROPÓSITO DE LA STS DE 20/OI/2010 (CECASA) Por Francisco Marcos

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

Pricing, Advertising, and Market Structure with Frictions

Posted by D. Daniel Sokol

Pedro Gomis-Porqueras, Research School of Economics Australian National University, Benoit Julien, School of Economics & CAMA University of New South Wales and Chengsi Wang, School of Economics University of New South Wales address Pricing, Advertising, and Market Structure with Frictions.

ABSTRACT: This paper develops a model of pricing and advertising in a matching environment with capacity constrained sellers and uncoordinated buyers. Sellers' search intensity attracts buyers only probabilistically through costly informative advertisement. Equilibrium prices and profit maximizing advertising levels are derived and their properties analyzed. The model generates an inverted U-shape relationship between individual advertisement and market tightness which is robust to alternative advertising technologies. The well known empirical fact in the IO literature reflects the trade-off between price and market tightness-matching effects. Finally, in this environment we can alleviate the discontinuity problem, allowing for unique symmetric equilibrium price to be derived.

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