Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, December 14, 2010

Does Schumpeterian Creative Destruction Lead to Higher Productivity? The effects of firms’ entry

Posted by D. Daniel Sokol

Carlos Carreira (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal) and Paulino Teixeira (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal) ask Does Schumpeterian Creative Destruction Lead to Higher Productivity? The effects of firms’ entry.

ABSTRACT: This paper discusses the impact of newly created firms on industry productivity growth. Our central hypothesis is that there are two potential effects of new firms on productivity growth: a direct effect, as entrants may be relatively more productive than established firms; and an indirect effect, through increased competitive pressure that stimulates incumbents to elevate their productivity in order to survive. The results of the decomposition exercise of aggregate productivity growth suggest that the direct contribution of entry is small. In turn, the regression analysis on the effect of entry on productivity growth of incumbents indicates that the higher is the former, the higher is the latter, which is equivalent to say that the greater is the competitive pressure generated by new entrants, the higher is the expected aggregate productivity level.

December 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Antitrust Rules and Standard-Setting: A New Dawn in China?

Posted by D. Daniel Sokol

Adrian Emch (Hogan Lovells) asks Antitrust Rules and Standard-Setting: A New Dawn in China?

ABSTRACT: How China’s incipient antitrust regime applies to standard setting is a relatively unexplored question. In the past few months, however, a flurry of draft rules dealing with the antitrust/standards issue have been released for public consultation in China and the European Union (EU). This commentary undertakes a brief analysis and comparison.

December 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Monday, December 13, 2010

University of Melbourne Cartel Project Initial Report

Posted by D. Daniel Sokol

The Cartel Project team from the University of Melbourne has produced its initial report on a major survey of the Australian public completed in July this year relating to the government’s recent decision to criminalise cartel conduct. 

The report is published on here.

The survey provides the first robust empirical evidence of the views of the Australian public on issues such as whether cartel behaviour should be a criminal offence, whether individuals should be jailed for it and how it should be viewed in terms of its seriousness.   It also provides valuable insights into the extent to which business people know about the law governing cartel conduct and how business people are likely to respond to the prospect of criminal sanctions.

The survey is one of three empirical components of the Cartel Project, the other two components comprising interviews with stakeholders to investigate and document how and why cartel criminalisation has become bipartisan policy in Australia, and interviews with prior offenders under the previous civil regime to investigate issues surrounding compliance with and the deterrent effect of enforcement action.    For more information about the Project, you can view its website at http://www.cartel.law.unimelb.edu.au.

The results of this survey are essential reading for anyone involved or interested in competition law enforcement.

 

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Call for Papers: Second Annual Conference on Internet Search and Innovation

Posted by D. Daniel Sokol

The Searle Center on Law, Regulation, and Economic Growth is issuing a call for original research papers to be presented at the Second Annual Conference on Internet Search and Innovation. The conference will be held at the Northwestern University School of Law in Chicago, IL. The conference will run from noon Tues. June 7 to 3:00 p.m. Wed., June 8, 2011. The submission deadline is Feb. 7, 2011

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

EU Antitrust Enforcement in 2025: “Why Wait? Full Appellate Jurisdiction, Now”

Posted by D. Daniel Sokol

Damien Gerard (University of Louvain) predicts EU Antitrust Enforcement in 2025: “Why Wait? Full Appellate Jurisdiction, Now”.

ABSTRACT: In a series of speeches delivered over the past few weeks, EU Competition Commissioner Almunia and DG COMP Director General Italianer engaged various audiences on the sensitive topic of due process and competition enforcement. The objective was presumably to weigh in the current intense debate over the compatibility of the EU antitrust enforcement system with the requirements of Art. 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms ("ECHR") on the right to a fair trial, in the context of the impending accession of the Union to the ECHR, as provided for by the Treaty of Lisbon, and of a growing consensus over the (quasi-)criminal nature of EU antitrust proceedings. The message was clear: "major structural changes to [the] competition enforcement and institutional structures are not an option" even though the Commission is "open to local changes that would improve [the] system." So much for those advocating a radical departure, "within five years," from the current organization centralizing investigator, prosecutorial, decisional, and policy-making functions in the hands of the Commission.

Among the reasons justifying their overall satisfaction with the current enforcement system, the chief EU antitrust enforcers referred systematically to the review of the Commission decisions by the European courts, which "represent[...] the ultimate guarantor for due process" and is "very close and very careful." "I certainly believe that it should be so," Commissioner Almunia once added. Various prominent representatives of the EU antitrust bar have voiced somewhat different views in recent months. Besides concerns pertaining to the duration of court proceedings or specific inconsistencies, they pointed in particular to what they perceive as a creeping expansion of self-imposed limitations on the degree of scrutiny exercised by the EU Courts over Commission decisions, as a result of the spread of the so-called "manifest error of assessment" standard. Underlying those concerns lies a growing sense of frustration at what is perceived as a disturbing discrepancy between, on the one hand, the transformation of the EU antitrust enforcement paradigm over the past decade and the corollary expansion of the Commission discretion and, on the other hand, the shrinking of the intensity of judicial review and the contraction of the EU Courts' unlimited jurisdiction with respect to fines.

This short note considers the substance of those claims in section 1, which discusses the emergence of a gap between the modernization of antitrust enforcement over the past decade and the hybrid character of the EU Courts' jurisdiction. To bridge that gap, section 2 advocates a re-balancing of the EU antitrust enforcement system by endowing the EU Courts with full appellate jurisdiction "to review decisions whereby the Commission has fixed a fine or periodic penalty payment." It then finds that Art. 31 of Regulation 1/2003 constitutes an appropriate legal basis to implement that solution. Hence it wonders: why wait for 2025?

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Why More Antitrust Immunity for the Media is a Bad Idea

Posted by D. Daniel Sokol

Maurice E. Stucke, University of Tennessee College of Law and Allen P. Grunes, Brownstein Hyatt Farber Schreck, LLP explain Why More Antitrust Immunity for the Media is a Bad Idea.

ABSTRACT: With their financial difficulties, some traditional media firms have called for greater leniency under the federal antitrust laws. The Federal Trade Commission, for example, in recent hearings inquired as to whether antitrust immunity is necessary for newspapers’ collaboration and under what circumstances, if any, antitrust immunity for certain joint conduct could be justified.

Our essay explores why relaxing the federal antitrust laws for traditional media will not help consumers or the marketplace of ideas. We discuss the past problems with antitrust immunity generally and for the media industries specifically. We address the failures of the Newspaper Preservation Act, how deregulation that followed the Telecommunications Act of 1996 failed to promote competition in the radio industry, and why further liberalizing the FCC’s cross-ownership rules to permit greater media consolidation will not promote competition in the marketplace of ideas.

We conclude that, because our democracy’s health depends on competition among traditional media, the cost of allowing already dominant firms to acquire the assets of their remaining competitors outweighs the benefits of looser antitrust laws.

 

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Consumers and sellers heterogeneity, search costs and spatial price dispersion in retail food markets

Posted by D. Daniel Sokol

Anania G. and Nisticò R. (Department of Economics and Statistics, University of Calabria, Arcavacata di Rende (Cs), Italy) examine Consumers and sellers heterogeneity, search costs and spatial price dispersion in retail food markets.

ABSTRACT: Price dispersion, i.e. a homogeneous product sold at different prices by different sellers, is among the most replicated findings in empirical economics. The paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores, side by side with large supermarkets. The extent of observed price dispersion is quite high, suggesting that, despite their large number, monopolistic competition prevails among sellers as a result of the heterogeneity of services offered. When prices in an urban area (where the spatial concentration of sellers is much higher and consumer search costs significantly lower) have been compared with those in smaller towns and rural areas, differences in search costs and the potentially higher degree of competition did not ! yield lower prices; quite the contrary, they were, on average, higher for 11 of the 14 products considered. Supermarkets proved to be often, but not always, less expensive than traditional retailers, although average savings associated to food shopping at supermarkets were extremely low. Finally, the results of the study suggest that sellers behave differently in their pricing decision strategies; these differences emerge both at the firm level and, for supermarkets, within the same chain. The fact that products considered were homogeneous, purchases frequently repeated, the number of sellers large, and search costs relatively low, did not suffice to keep price dispersion low. Based on the results presented in the paper, it is clear that more important in explaining price dispersion is the contemporaneous heterogeneity of retailers (in terms of services rendered) and consumers (in terms of their propensity to search and shopping preferences), which makes it possible for a m! onopolistic competition structure of the market to emerge and for smal l traditional food retail stores to remain in business.

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Deregulation of shopping hours: The impact on independent retailers and chain stores

Posted by D. Daniel Sokol

Tobias Wenzel (Dusseldorf Institute for Competition Economics (DICE) Department of Economics) looks at Deregulation of shopping hours: The impact on independent retailers and chain stores.

ABSTRACT: This paper studies shopping hour decisions by retail chains and independent competitors. We use a Salop-type model where retailers compete in prices and shopping hours. Our results depend significantly on efficiency differences between retail chain and independent retailer. If the efficiency difference is small, the independent retailer may choose longer shopping hours than the retail chain and may gain from deregulation at the expense of the retail chain. The opposite result emerges when the efficiency difference is large. Then, the retail chain may benefit whereas the independent retailer loses from deregulation

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Concerted Refusals to License Intellectual Property Rights

Posted by D. Daniel Sokol

Christina Bohannan, University of Iowa - College of Law and Herbert J. Hovenkamp, University of Iowa - College of Law synthesize Concerted Refusals to License Intellectual Property Rights.

ABSTRACT: Unilateral refusals to license intellectual property rights are almost never antitrust violations, as is true of most unilateral refusals to deal. Concerted refusals to deal are treated more harshly under the antitrust laws because they can facilitate collusion or, in the case of technology, keep superior products or processes off the market.

In its Princo decision the Federal Circuit en banc held for the first time that §271(d) of the Patent Act protects concerted as well as unilateral refusals to license from claims of patent misuse. The provision itself is worded in the singular and makes no distinction between unilateral and concerted refusals.

Blanket legality for concerted refusals to license patents, and unused patents in particular, would have serious implications for competition and innovation. A concerted refusal to license a plant or other input can facilitate collusion by denying resources to rivals unless they can find other sources. Of course, not every concerted refusal to license should be unlawful per se. In antitrust, they are appropriately covered by the ancillary restraints doctrine. Naked agreements not to license are unlawful per se, while refusals reasonably necessary to further joint research or production would be unlawful only if market power and anticompetitive effects were proven. By contrast, reading §271(d) to authorize all concerted refusals is likely to harm both competition and the incentive to innovate. In its Independent Ink decision the Supreme Court virtually equated the scope of antitrust liability with the scope of misuse as defined by §271(d).

Blanket legality for concerted refusals to license patents, and unused patents in particular, would have serious implications for competition and innovation. A concerted refusal to license a plant or other input can facilitate collusion by denying resources to rivals unless they can find other sources. A concerted refusal to license an unused patent can go much further. Not only does it deny rivals that particular technology but it also prevents them from developing any technology independently that would infringe one or more of that patent’s claims.

December 13, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, December 12, 2010

Sixth Annual Competition and Regulation European Summer School and Conference (CRESSE)

Posted by D. Daniel Sokol

Sixth Annual Competition and Regulation European Summer School and Conference (CRESSE)

The Athens University of Economics and Business (AUEB) will organise the Sixth Annual Competition and Regulation European Summer School and Conference (CRESSE) which will take place at the RODOS PALACE HOTEL (see Accommodation) from the 24th of June to the 8th of July, 2011 (Conference: 1-3 July), in the seaside resort of Ixia in Rhodes, Greece.

The CRESSE Conference will be on "Advances in the Analysis of Competition Policy and Regulation".

The CRESSE Summer School brings together many of the top European and USA economists and legal experts in Competition and Regulation, from over 25 distinguished Universities, as well as from law practices, authorities and economic consultancies (see School Faculty - Modules - Teaching Schedule).

CRESSE also organises specialised customer-tailored training courses on Competition and Regulation delivered on-site to any interested organisation throughout the world.

Organisation - Management, Scientific and Advisory Committee

Rationale and Objectives

Competition Policy and Sectoral (Network Industry) Regulation have undergone dramatic changes in the past two decades. This has been accompanied by an intellectually vibrant economic literature. Economists have developed new theories to characterize firm behavior and to assess which market contexts warrant government intervention – see for example Prof. M. Motta (CRESSE Lecturer and Member of the Scientific Committee, 2006-2010) “Competition Policy: Theory and Practice”, Cambridge University Press, 2004. Traditional views of which situations warrant intervention have changed substantially. The economic approach has gained ground both in policy making and in case law, sometimes challenging conventional views. Also, following the liberalization of many network industries, Sectoral Regulation has been increasingly adopting Competition Policy approaches to assess market power. 

The aim of the Summer School is to familiarize participants with the new economic literature and with recent legal developments and to establish a clear link between the new theories and the day to day work of practitioners. It enables participants to face and answer difficult questions about the practical matters they come across in their work in an economically and legally informed manner. It is designed for Professionals (Public Officers, Managers, Policy Makers, Law and Economic Consultants or Analysts), working in the wider areas of Competition Policy and Network Industry Regulation, in:

  • Competition Authorities and in Regulatory Bodies.
  • Ministries or International Organizations (like the European Commission).
  • Economic or Law Consultancies.
  • Private and Public firms and organizations affected by interference in the form of sectoral regulation or antitrust and merger policies.

Postgraduate (and Doctoral) students specialising in Competition, Regulation and Privatisation are also encouraged to apply (at significantly reduced special rates).

A number of teaching methods are used that have been selected to meet the aims of the course and intended learning outcomes, exploiting the organisers' long experience in designing and delivering Executive training. 

December 12, 2010 | Permalink | Comments (0) | TrackBack (0)

Imagining EU antitrust enforcement in 2030

Posted by D. Daniel Sokol

Ken Daly (Sidley Austin) discusses Imagining EU antitrust enforcement in 2030.

ABSTRACT: On October 20, 1932, in the midst of the Great Depression, the Pittsburgh Press reported on a meeting of American Institute of Steel Construction at which representatives of 166 steel concerns heard Charles N. Fitts, president of the Institute, and Charles F. Abbott, executive director, deliver their annual reports.

Fitts berated law-makers for the lack of assistance available in the recessionary climate and highlighted the:

"...narrow policy of our legislators who enact laws to guarantee the freedom of competition, but offer no assistance to those who are forced into bankruptcy because of ruthless competition."

He added that:

"Our antiquated Anti-Trust Laws with many uncertainties prevent any group action to stabilize either prices or profits. They will undoubtedly be clarified by intelligent interpretation or modified to bring them into harmony with modern conditions."

Following the same theme, his colleague Abbott advocated a government program with the aim of "educating industrialists to the realization that it is for their own good to co-operate and not indulge in cut-throat competition."

Even today's gloomy economic climate seems mild in comparison to what Fitts and Abbott were witnessing. In the three years prior to their 1932 meeting, industrial stocks had lost 80 percent of their value, 10,000 banks had failed, GNP had fallen 31 percent, over 13 million Americans had lost their jobs, and international trade had fallen by two-thirds. 

Despite these astonishing conditions (and Fitts and Abbotts' impassioned entreaties for "reform"), the key tenets of competition law found in the U.S. Sherman Act of 1890 not only survived the Depression unchanged, but also remain substantially unchanged to this day. In short, the core principles of competition law seem so engrained in Western economies that even great shocks are unlikely to bring about major changes at the level of principle. In 1991, then EU Commissioner for Competition Sir Leon Brittan, mulled the constancy of competition law and the limitations of each Commissioner's role:

I am ever conscious that I have inherited responsibility for a system with an impressive constitutional pedigree. The founding fathers showed considerable foresight in grounding the Community competition scheme in Treaty rules. Not only have these rules, as part of the Community's highest law, been accepted by twelve Member States with widely varying traditions, but the rule of law has been reinforced by the existence of a firm set of principles which can only be altered by means of an amendment to the Treaty itself. Neither I, nor any of the competition Commissioners before me, write competition policy on a clean slate. Rather, we come to a structure whose broad contours have been in place for some time and whose architecture we must respect."

The former Commissioner's point is compelling for two reasons. First, (like in the United States) no changes had been made to the base principles of EU competition law between their adoption in 1957 and his 1991 speech, and no changes have been made since. Second, the twelve Member States he referred to serve as a reminder that so much else has changed within the EU and the global economy in a relatively short time-span, but the core competition principles have remained constant.

December 12, 2010 | Permalink | Comments (0) | TrackBack (0)