Antitrust & Competition Policy Blog

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

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Saturday, December 11, 2010

New Frontiers of Antitrust Conference 11 February 2011

Posted by D. Daniel Sokol

New Frontiers of Antitrust

2nd Annual international Concurrences conference

House of Parliament, Paris

11 February 2011

 

 

08.30

Welcome by Frédéric JENNY

08.45

Antitrust enforcement in the EU in 2011


JOAQUIN ALMUNIA
EU Commissioner responsible for Competition Policy

09.30

Patent ambush in the US and the EU: How wide is the gap?

 

 

 

 

 

Cecilio MADERO
Deputy Director General, DG Competition, European Commission, Brussels
Dennis CARLTON*
Professor of Economics, University of Chicago
Jean-Yves ART
Associate General Counsel, Microsoft, Brussels
Jacques-Philippe GUNTHER
Partner, Willkie Farr & Gallagher, Paris

 

Coffee break

11.30

Quantifying damages in civil proceedings: Can economist and should competition authorities help?

 

 

 

 

 

Frédéric JENNY
Judge, French Cour de Cassation - Professor of economics, ESSEC, Paris
Damien NEVEN
Chief Economist, DG COMP, Brussels
Jorge PADILLA
Economist, LECG, Madrid/Brussels
Olivier d’ORMESSON
Partner, Linklaters, Paris

 

Lunch

14.30

Consumers associations in competition proceedings: Why so little engagement?

 

 

 

 

 

Bill KOVACIC
Member, Federal Trade Commission, Washington DC
Laurence IDOT
Professor, University Panthéon-Assas, Paris - President of the Scientific Committee of Concurrences Review
Phil EVANS
Member, UK Competition Commission - FIPRA, London
David ORTEGA
Member, OCU-BEUC, Madrid
 

Coffee break

16.45

Procedural fairness: How much remains to be done?

 

 

 

 

 

Nils WAHL
Judge, General Court of the European Union, Luxembourg
Bruno LASSERRE
President, Autorité de la concurrence, Paris
Wouter WILS
Hearing Officer, European Commission, Brussels - Visiting Professor, KCL London
Jean-Paul TRAN THIET
Partner, White & Case, Paris

18.30
Reception & Concurrences Thesis Award

December 11, 2010 | Permalink | Comments (0) | TrackBack (0)

EU Competition Policy in 2025: A Vision of an European Internationalist Future?

Posted by D. Daniel Sokol

Alan Riley (City Law School) has posted EU Competition Policy in 2025: A Vision of an European Internationalist Future?

ABSTRACT: This is a view of future EU competition policy through looking at the way cases could be decided taking into account current trends.

I would argue that there are three trends that are already making themselves felt. The first is the dominance of the European model of antitrust over that in the United States. Articles 101 and 102 as well as the Merger Regulation are overwhelmingly the antitrust models adopted by the world's competition agencies. As major antitrust regimes develop around the world the impact of that choice will become much more pronounced. Antitrust agencies will look first to European case law and procedures and not to the United States. This will provide DG Competition with the potential of obtaining enormous influence and "soft power" across the globe. However, for that influence to be maximized, DG Competition has to be ready to learn and adapt to what will be increasingly intellectually sophisticated and original centers of antitrust thought located far from Europe.

Furthermore, the failure of the U.S. economic model and the limitations of the classic Chicago School in antitrust economics are likely to further boost that influence. I personally doubt that we will have the development of a neo-ordo liberalist school in Europe, but we are likely to end up with a broader antitrust assessment standard. That standard is likely to include assessments as to supply security and systemic risk as well as a greater concern for the social impact of competition. The European Union case law, being far less fixated on Chicago economics and with an alternative quasi-ordo liberalist narrative within its case law to draw upon, will be able to more easily respond to the intellectual and economic challenges of the twenty-first century.

The second major trend is international co-operation. As more sophisticated antitrust agencies develop in the major twenty-first century centers of business in and beyond Brazil, Russia, India, and China ("BRICS"), international co-operation will become a dominant feature of major antitrust cases. International co-operation is, of course, already a feature of many merger and cartel cases. However, for the moment there are very few really significant international co-operation procedures. What is likely to happen over the next 15 years is that those procedures will develop, permitting greater direct co-operation in cartel cases, joint remedies in merger cases and case selection, and prosecution delegation in abuse of dominance cases.

The third major trend will be the adoption of quasi-criminal procedures in price-fixing cases. This will be in part because of the demand for corporate executives to be held personally accountable and in part because of the European Court of Human Rights ("ECHR") standards imposed by the Lisbon Treaty. Despite the corporate demands for greater ECHR compliance the irony is that the greatest victor out of a more quasi-criminal procedure is the Commission. Notwithstanding Commissioner Kroes' tenure, DG Competition underplays its hand in relation to price-fixing cases by running the cases behind closed doors. A quasi-criminal procedure would open up the cases to the public, increasing public understanding and support for DG Competition (and probably generating political careers for some DG Comp officials). It would also make guilty settlement pleas the majority choice of most corporate price-fixers as only the most desperate firms would choose a public trial.

Below I have not mentioned damages actions. This is because I am focusing on DG Competition's operations. Nevertheless, one of the major trends of the next fifteen years will be the development of antitrust damages litigation in all the major centers of antitrust practice across the planet. By 2025 a damages litigation culture is likely to have made itself felt in Europe, and will be beginning to appear in other major jurisdictions. In Europe by 2025 one would expect a number of centers to be established with a functioning antitrust litigation bar such as Amsterdam, London, Warsaw, Istanbul and Dusseldorf-and almost all major antitrust cases to have a significant damages component.

December 11, 2010 | Permalink | Comments (0) | TrackBack (0)

Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions

Posted by D. Daniel Sokol

Erik Brouwer, Tilburg Law and Economics Center (TILEC) and Fatih Cemil Ozbugday, Tilburg Law and Economics Center (TILEC), Tilburg University - Department of Economics address Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions.

ABSTRACT: This paper provides an analysis of the European Commission (EC) decisions on state aid control using data on 550 state aid cases approved by the EC between 1998 and 2009. More specifically, we measure the determinants of the duration of state aid, total budget of state aid and daily budget of state aid. By using these imperfect proxies, we try to identify the extent of European state aid control. Our results suggest that aid with multiple objectives to achieve has both longer durations and higher amounts of budget. We also find that for some aid objectives or industries, the EC approves cases of aid with both longer durations and higher levels of budget. On the other hand, for some class of aid objectives and industries, there is a trade-off between duration and the level of budget so as to counter-balance the undesired effects. The interpretation of the results imply that the European state aid control, which once was originally intended to address concerns about export subsidies and strategic trade, recently puts more emphasis on market failures mostly associated with externalities and public goods.

December 11, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, December 10, 2010

Antitrust, Governance, and Postseason College Football

Posted by D. Daniel Sokol

Michael McCann, Vermont Law School has posted Antitrust, Governance, and Postseason College Football.

ABSTRACT: This Article examines the compatibility of the Bowl Championship Series (“BCS”) with federal antitrust law and the appropriateness of the federal government using its formal and informal powers to encourage a new format for postseason college football. The Article begins by examining the legality of the BCS under Sections 1 and 2 of the Sherman Antitrust Act. It then discusses the appropriateness of government actors concerning themselves with, and expending taxpayer dollars on, the scheduling of college football games. The Article concludes by offering possible changes to the scheduling structure of postseason college football, with an emphasis on voluntary, efficiency-promoting changes by the colleges, universities, and conferences currently associated with the BCS.

December 10, 2010 | Permalink | Comments (0) | TrackBack (0)

India's New Antitrust Regime

Posted by D. Daniel Sokol

Aditya Bhattacharjea (University of New Delhi) explains India's New Antitrust Regime.

ABSTRACT: India passed a new Competition Act in 2002 to replace its Monopolies and Restrictive Trade Practices ("MRTP") Act of 1969. Enforcement of the new legislation was, however, delayed by more than six years. First, the Indian Supreme Court held that the qualifications and appointment procedure specified for Members of the proposed Competition Commission of India ("CCI") violated the Constitutional separation of powers between the executive and judiciary. A single Member who was appointed to the CCI in 2003 before the Supreme Court's strictures were pronounced remained in office for nearly five years. But along with his skeleton staff, he could only engage in capacity building and competition advocacy without being able to take up any cases.

An amending Act was passed in 2007 to meet the Supreme Court's objections. It provided for a Competition Appellate Tribunal ("Compat") headed by a judge to hear appeals from CCI decisions, and to exercise powers regarded as the prerogative of the judiciary (awarding compensation or imprisonment). The amending Act also made extensive changes to the sections of the law dealing with mergers and anticompetitive practices. It was not until May 2009, however, that the government appointed a new seven-member CCI and brought into force sections of the Act that empowered it to initiate investigations and to hear cases relating to anticompetitive agreements and abuse of dominance. In September 2009, the MRTP Act was finally repealed, the MRTP Commission was abolished, and its backlog of pending investigations was transferred to the CCI, with the even larger backlog of pending cases going to the Compat.

The Competition Act is not, therefore, inscribed on a blank slate. However, I shall argue that the manner in which the MRTP Act was structured, amended, interpreted, and enforced left India with very little experience or expertise relevant for enforcement of the more economically informed Competition Act. In particular, the MRTP Commission's caseload, especially in the last two decades, was dominated by matters that had little or nothing to do with competition. Many of the complaints coming before the CCI seem to be based on similar issues. For these reasons, and because some of the competition jurisprudence developed by the MRTP Commission and the Supreme Court may influence the interpretation of the Competition Act, I provide a brief review of the working of the earlier Act before turning to its successor.

December 10, 2010 | Permalink | Comments (0) | TrackBack (0)

Litigation Under China's Anti-Monopoly Law

Posted by D. Daniel Sokol

Lester Ross (Wilmer Hale) addresses Litigation Under China's Anti-Monopoly Law.

ABSTRACT: Although China's Anti-monopoly Law (the "AML"), which entered into effect on August 1, 2008, is primarily enforceable by the three designated enforcement agencies, it also provides for civil liability. Article 50 provides:

If an undertaking engages in monopoly conduct and causes losses to others, it shall bear civil liability in accordance with law.

This barebones sentence provides the basis for civil litigation but provides little guidance on standing, causation, or evidentiary rules. A plaintiff must prove that (i) one or more defendants engaged in monopoly conduct, actionable under the AML, (ii) the plaintiff suffered losses, and (iii) such losses were caused by the defendant's conduct. Monopoly conduct may consist of engaging in a monopoly agreement or concerted action under Chapter II, abuse of a market dominant position or unilateral conduct under Chapter III, or abuse by an administrative authority or organization with administrative functions under Chapter V claims. Defendants are "undertakings," defined in Article 12 as "any natural person, legal person or other organization that engages in the manufacture and transaction of commodities or provision of services."

December 10, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 9, 2010

Varney Provides Concluding Comments to Joint DOJ and USDA Agriculture Workshops

Posted by D. Daniel Sokol

See here.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Price competition between subsidized organizations

Posted by D. Daniel Sokol

Jan Bouckaert & Bruno De Borger (both University of Antwerp - Economics) discuss Price competition between subsidized organizations.

ABSTRACT: Many firms and organizations compete for customers while at the same time receiving substantial funding from outside sources, such as government subsidies. In this paper, we study the effects of two commonly observed, alternative subsidy systems on the behavior of price-competing firms. Specifically, we compare an open-ended per-unit price subsidy with a closed-ended subsidy, allocated according to the firms’ market shares. We find that, holding the total subsidy budget constant, the open-ended subsidy results in fiercer price competition, lower prices, higher output, and lower profits than the closed-ended, market-share based alternative. Second, the open system yields higher overall welfare for relatively modest subsidies and limited substitutability between goods; the closed system performs better at relatively high subsidy levels and when goods are closer substitutes. Third, a market-share based subsidy makes collu! sive behavior between firms much harder. Our results, therefore, suggest a potential trade-off between short-run and long-run objectives: subsidies designed to widen participation may stimulate collusive behavior.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Vertical mergers, foreclosure and raising rivals' costs: Experimental evidence

Posted by D. Daniel Sokol

Hans-Theo Normann (Düsseldorf Institute for Competition Economics) has posted Vertical mergers, foreclosure and raising rivals' costs: Experimental evidence.

ABSTRACT: The hypothesis that vertically integrated firms have an incentive to foreclose the input market because foreclosure raises its downstream rivals' costs is the subject of much controversy in the theoretical industrial organization literature. A powerful argument against this hypothesis is that, absent commitment, such foreclosure cannot occur in Nash equilibrium. The laboratory data reported in this paper provide experimental evidence in favor of the hypothesis. Markets with a vertically integrated firm are signifiantly less competitive than those where firms are separate. While the experimental results violate the standard equilibrium notion, they are consistent with the quantalresponse generalization of Nash equilibrium.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

You Better Watch Out, You Better Not Cry: China's Emerging Approach to Abuse of Dominance

Posted by D. Daniel Sokol

Martyn Huckerby & Sharon Wong (Mallesons) describe You Better Watch Out, You Better Not Cry: China's Emerging Approach to Abuse of Dominance.

ABSTRACT: Since the introduction of the Anti-Monopoly Law ("AML") in 2008 outside observers and investors in China have been carefully studying its provisions and monitoring cases considered by the regulators and courts. To date, it has been the merger control provisions that have attracted the most attention, with a significant number of cases (140 to date) reviewed by China's Ministry of Commerce ("MOFCOM") and several highly publicized instances of conditional approval of global transactions as well as the decision to block Coca-Cola's proposed acquisition of Huiyuan Juice. By comparison, regulators have been slow to take action in relation to the abuse of dominance provisions under the AML, with no formal investigations having yet taken place and delays in settling the draft implementation rules. However, the regulatory void has been filled, to some degree, by the decisions made by the Chinese courts in a number of high profile dominance cases. In this article we review the legislative progress to date, the enforcement structure, and select abuse of dominance cases. We conclude with a number of recommendations for firms operating or considering investing in China and some predictions about likely future developments in this area.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Too Big to Innovate? Scale (dis)economies and the Competition-Innovation Relationship in U.S. Banking

Posted by D. Daniel Sokol

Jaap Bos, Ryan van Lamoen, Claire Eonomidou (all Mastricht University) explore Too Big to Innovate? Scale (dis)economies and the Competition-Innovation Relationship in U.S. Banking.

ABSTRACT: This paper examines whether large U.S. banks have become ''too big to innovate''. We extend the theoretical work of Aghion et al. (2005b) by relaxing their assumption that unit costs are independent from output levels in order to investigate the effect of scale (dis)economies on the competition-innovation nexus. With our model we can derive conditions under which the innovation behavior of firms with scale diseconomies becomes more or less responsive to competitive changes. Our empirical results show that decreases in the level of competition lead to very large drops in innovation. Large banks, already operating beyond the minimum efficient scale, have indeed become ''too big to innovate''.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Legal and illegal cartels in Germany between 1958 and 2004

Posted by D. Daniel Sokol

Justus Haucap, Ulrich Heimeshoff, Luis Manuel Schultz (all Düsseldorf Institute for Competition Economics) have some new empirical findings in Legal and illegal cartels in Germany between 1958 and 2004.

ABSTRACT: This paper offers a new and broad insight into the landscape of German cartels, utilizing a unique dataset of all illegal horizontal cartels detected by the German Federal Cartel Office (FCO) between 1958 and 2004 and all legal cartels authorized during the same time period. We also provide the first comparison of legal and illegal cartels in Germany. Legal cartels tend to last longer and to have more members than illegal cartels, while there are little differences with respect to the industries involved. The construction industries are the most cartelized sectors in Germany (29.8% of all legal cartels, 43.2% of all illegal cartels) followed by manufacture of metals and machinery (21.9% of all legal cartels, 30.6% of all illegal cartels). How the number of cartel members affects the duration of cartels is ambiguous. Cartels with no more than 12 members tend to last longer than cartels with more than 12 members. However, ! cartels with 5 to 12 members also tend to last longer than cartels with less than 5 members.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

OECD Report on Generic Pharmaceuticals

Posted by D. Daniel Sokol

See here.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Coming Soon - Yearly Ranking of Most Downloaded Antitrust Law Professor

Posted by D. Daniel Sokol

Once again, prepare for the rankings for most downloaded antitrust professor of the past year.  We will rank full time faculty plus rank adjunct faculty separately.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Does the Fourth Entrant Make Any Difference? Entry and Competition in the Early U.S. Broadband Market

Posted by D. Daniel Sokol

Mo Xiao (University of Arizona) and Peter F. Orazem (Iowa State University) ask Does the Fourth Entrant Make Any Difference? Entry and Competition in the Early U.S. Broadband Market.

ABSTRACT: We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms’ competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct.

December 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 8, 2010

Downstream mergers in a vertically differentiated unionized oligopoly

Posted by D. Daniel Sokol

Borja Mesa Sánchez (Dpto. Fundamentos del Análisis Económico) explains Downstream mergers in a vertically differentiated unionized oligopoly.

ABSTRACT: In the context of an international unionized oligopoly, with vertical differentiation and downstream and upstream firms locked in a bilateral monopoly, the pattern of downstream mergers is investigated. In such a setting, a downstream merger leads to a reduction in the price of the inputs. Such reduction is greater the more homogeneous the participants’ products are. However, it turns out that most of the market structure equilibria consist of mergers among differentiated producers. I find that firms’ strategic behaviour impedes mergers between similar producers, avoiding that input prices fall to their marginal costs. Given that firms can be harmed by rivals’ mergers, through the important reduction in input prices that those trigger, an scenario of preemptive mergers emerges. A brief social welfare analysis is also presented. It is shown that the market structure outcome is never socially optimal, neither in term! s of consumer surplus nor social welfare. Nevertheless, the optimum could be achieved if antitrust authorities block some strategic mergers, precisely those involving more than two firms. 

December 8, 2010 | Permalink | Comments (0) | TrackBack (0)

Private benefits and market competition

Posted by D. Daniel Sokol

Jacques Thépot (LaRGE Research Center, Université de Strasbourg) has posted Private benefits and market competition.

ABSTRACT: This paper deals with corporate governance issues and competition policy. The impact of private benefits extraction on the values of oligopolistic firms is analyzed. Private benefits are assumed to generate costs which create price distortion on the product market. For a wide range of industry concentrations, we prove that this may affect the profit (i.e. the value) of the firms in a positive sense since the intensity of rivalry is reduced by the price distortion. Antitrust implications are discussed. In oligopoly, private benefits extraction may enhance the profits while still generating a welfare loss: this suggests that corporate governance cannot be divorced from competiton policy in industries where managerial opportunism generates operating costs.

December 8, 2010 | Permalink | Comments (0) | TrackBack (0)

The Brewer, the Baker, and the Monopoly Maker

Posted by D. Daniel Sokol

Diana Weinert Thomas, Utah State University - College of Business - Department of Economics and Peter T. Leeson, George Mason University - Department of Economics have an interesting new paper on The Brewer, the Baker, and the Monopoly Maker.

ABSTRACT: This paper examines how productive entrepreneurial activities, such as innovation, influence unproductive entrepreneurial activities, such as regulatory rent seeking. We argue that the former may increase the latter. Confronted with a situation in which innovation erodes their monopoly returns, legally protected producers and policymakers reregulate industry to recapture lost rents. Regulation policy under such reregulation tends to be more encompassing, and thus produces more unproductive entrepreneurial activity, than preinnovation regulation policy. This reflects the greater number or variety of producers that new regulation policy must encompass for reregulation to recreate rents. To investigate our argument we consider Bavaria’s brewing industry in the 14th through 16th centuries.

 

December 8, 2010 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 7, 2010

Shapiro Provides an Update on the Antitrust Division

Posted by D. Daniel Sokol

Carl Shapiro (DOJ) has a speech out on Update on the Antitrust Division, which he gave at the American Bar Association Section of Antitrust Law Fall Forum.

December 7, 2010 | Permalink | Comments (0) | TrackBack (0)

Cumulative Innovation and Competition Policy

Posted by D. Daniel Sokol

Alexander Raskovich and Nathan H. Miller (DOJ) have an interesting new paper on Cumulative Innovation and Competition Policy.

ABSTRACT: We model a “new economy” industry where innovation is sequential and monopoly is persistent but the incumbent turns over periodically. In this setting we analyze the effects of “extraction” (e.g., price discrimination that captures greater surplus) and “extension” (conduct that simply delays entry of the next incumbent) on steady-state equilibrium innovation, welfare and growth. We find that extraction invariably increases innovation and welfare growth rates, but extension causes harm under plausible conditions. This provides a rationale for the divergent treatment of single-firm conduct under U.S. law. Our analysis also suggests a rule-of-thumb, consistent with antitrust practice, that innovation proxies welfare.

December 7, 2010 | Permalink | Comments (0) | TrackBack (0)