Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, January 8, 2011

2011 MILTON HANDLER LECTURE

Posted by D. Daniel Sokol

THE ANTITRUST AND TRADE REGULATION COMMITTEE OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK CORDIALLY INVITES YOU TO

THE 2011 MILTON HANDLER LECTURE

Professor Handler and the New York City Bar Association established the Milton Handler lectures in 1973 to explore significant developments in antitrust law and policy. With the help of a generous endowment created by Professor Handler, the lectures have since become a very important event for the antitrust community and have led to significant contributions to the advancement of antitrust law.

This year’s lecture is in keeping with Professor Handler’s original tradition of inviting leading scholars to discuss the development of antitrust law and policy. We have invited Professor Mark A. Lemley of Stanford Law School to present his views on the intersection between antitrust and intellectual property, and how both antitrust and IP can promote – and interfere with – innovation in different circumstances. Please join us for what promises to be a stimulating and enjoyable program.

TIME: Monday, February 7, 2011, 8:30 a.m

PLACE: The Great Hall of the Association

New York City Bar Association

42 West 44th Street

New York, NY 10036

SPEAKER: Mark A. Lemley, William H. Neukom Professor, Stanford Law School and partner, Durie Tangri LLP

RSVP: There is no charge for this program; however, since seating is limited, please register by February 1, 2011, by sending an email to Norma Taylor at ntaylor@avhlaw.com containing your name and email address.

For any questions, please contact Irina Rodríguez at icr@avhlaw.com or (212) 728-2208.

January 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, January 7, 2011

In Defense of Monopoly

Posted by D. Daniel Sokol

Richard B. McKenzie University of California, Irvine - Paul Merage School of Business has a provacative piece In Defense of Monopoly.

ABSTRACT: Standard economic analysis of monopoly asserts that if prices are above marginal costs, then market power exists and antitrust enforcers should step in to protect consumers. This thinking underlies recent antitrust actions in both the United States and Europe. This article argues that such thinking is flawed; markets with prices near marginal cost experience little innovation or entry by producers, to the detriment of consumers. Instead, markets with prices above marginal costs incentivize entry and finance innovation, to the considerable benefit of consumers.

January 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Collusion and the Choice of Auction: An Experimental Study

Posted by D. Daniel Sokol

Jeroen Hinloopen, University of Amsterdam, Tinbergen Institute and Sander Onderstal, University of Amsterdam, Tinbergen Institute provide insights on Collusion and the Choice of Auction: An Experimental Study.

ABSTRACT: We experimentally examine the collusive properties of two commonly used auctions: the English auction (EN) and the first-price sealed-bid auction (FPSB). In theory, both tacit and overt collusion are always incentive compatible in EN while both can be incentive compatible in FPSB if the auction is repeated and bidders are patient enough. We find that the auctions do not differ in subjects’ propensity to collude overtly and in the likelihood that subjects defect from a collusive agreement. Moreover, the average winning bid does not differ between the auctions unless subjects can collude overtly. Under overt collusion, stable cartels buy at a lower price in EN than in FPSB resulting in a lower average winning bid in EN.

January 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Call for Papers: Seventeenth CLaSF Workshop Competition Law, Private Enforcement, Access to Justice and Consumer Redress

Posted by D. Daniel Sokol

Seventeenth CLaSF Workshop

Competition Law, Private Enforcement, Access to Justice and Consumer Redress

Glasgow, Thursday 7 April 2011

Strathclyde University, Graham Hills Building, 50 George Street, Glasgow,

Call for Papers

The Competition Law Scholars Forum (CLaSF) will be running a workshop on Thursday April 7th 2011. The subject of the workshop will be the broad theme of:-Competition Law, private enforcement, access to justice and consumer redress.

The historical primacy of administrative enforcement in Europe is in stark contrast with US competition law ('antitrust law') where private enforcement has become the norm and constitutes the vast majority of antitrust enforcement. The availability of a well-developed system of class actions has ensured that private enforcement is extremely effective and can result in end-consumers being compensated for their losses. The US system emphasises the importance of consumer rights, and the greater possibility of substantial damages awards also enhances the potential deterrent impact of the antitrust laws. The EU is trying to facilitate private enforcement and the Commission White Paper of April 2008 made a number of interesting proposals to facilitate and harmonise competition litigation across the EU. Reform of the UK system was also proposed by the OFT in its 2007 Recommendations, which have not as yet been implemented. Both sets of proposals in particular consider ways of facilitating consumer redress. This is a vitally important period for this broad topic to be revisited, as private enforcement is viewed by the competition authorities as a key element of a more competitive UK and European economy and furthermore ties in with current debates about access to justice, particularly for consumers.

 

Papers are invited from scholars, regulators and practitioners on any of these issues or other topics which fall generally within the broad theme of ‘Competition Law, private enforcement, access to justice and consumer redress’

 

Any person interested in presenting a paper at the workshop is asked to contact the Vice-Chair of CLaSF, Professor Barry Rodger at barry.j.rodger@strath.ac.uk. An abstract is required of approximately 500-1000 words, to be submitted by no later than Monday January 31, 2011, and decisions on successful submissions will be taken by Feb 7, 2011. Submission of presentation/draft paper is also required a week prior to the workshop.

Papers presented at the workshop can be submitted to the Competition Law Review editorial board with a view to being published in the Review. Note that the Review is a fully refereed scholarly law journal: Submission does not guarantee publication.

January 7, 2011 | Permalink | Comments (0) | TrackBack (0)

A Treatment Effect Method for Merger Analysis with an Application to Parking Prices in Paris

Posted by D. Daniel Sokol

Philippe Chone, National Institute of Statistics and Economic Studies (INSEE) and Laurent Linnemer, National Institute of Statistics and Economic Studies (INSEE) - Laboratory of Industrial Economics explain A Treatment Effect Method for Merger Analysis with an Application to Parking Prices in Paris.

ABSTRACT: Most retrospective merger studies resort to the treatment effect approach, comparing the price dynamics in a treatment group and in a control group. We propose a systematic method to construct the groups, which applies to any industry with spatial competition. The method is consistent with the fact that mergers alter oligopolistic equilibria in complex ways, and thus that seemingly distant entities may be affected through indirect channels. An illustration based on a merger in the Parisian parking market is provided.

January 7, 2011 | Permalink | Comments (0) | TrackBack (0)

The Economics of Network Neutrality

Posted by D. Daniel Sokol

Nicholas Economides, New York University - Stern School of Business and Benjamin E. Hermalin, University of California, Berkeley desribe The Economics of Network Neutrality.

ABSTRACT: Pricing of Internet access has been characterized by two properties: Parties are directly billed only by the Internet Service Provider (ISP) through which they connect to the Internet and the ISP charges them on the basis of the amount of information transmitted rather than its content. These properties define a regime known as “network neutrality.” In 2005, some large isps proposed that application and content providers directly pay them additional fees for accessing the ISPs’ residential clients, as well as differential fees for prioritizing certain content. We analyze the private and social incentives to introduce such fees when the network is congested and more traffic implies delays. We find that network neutrality is welfare superior to bandwidth subdivision (granting or selling priority service). We also consider the welfare properties of the various regimes that have been proposed as alternatives to network neutrality. In particular, we show that the benefit of a zero-price “slow lane” is a function of the bandwidth the regulator mandates be allocated it. Extending the analysis to consider ISPs’ incentives to invest in more bandwidth, we show that, under general conditions, their incentives are greatest when they can price discriminate; this investment incentive offsets to some degree the allocative distortion created by the introduction of price discrimination. A priori it is ambiguous whether the offset is sufficient to justify departing from network neutrality.

January 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, January 6, 2011

Price Discrimination and Bargaining: Empirical Evidence from Medical Devices

Posted by D. Daniel Sokol

Matthew Grennan, University of Toronto - Joseph L. Rotman School of Management analyze Price Discrimination and Bargaining: Empirical Evidence from Medical Devices.

ABSTRACT: Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict price discrimination are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (1) non-discriminatory pricing actually works against hospitals because competition is more intense under price discrimination; and (2) results depend ultimately on a previously unexplored "bargaining effect".

January 6, 2011 | Permalink | Comments (0) | TrackBack (0)

Market Structure, Countervailing Power and Price Discrimination: The Case of Airports

Posted by D. Daniel Sokol

Jonathan E. Haskel, Imperial College London - Tanaka Business School, Alberto Iozzi, Universita degli Studi di Roma, and Tommaso M. Valletti, University of London - Imperial College of Science, Technology and Medicine, University of Rome II provide some analysis on Market Structure, Countervailing Power and Price Discrimination: The Case of Airports.

ABSTRACT: We study bargained input prices where up and downstream firms can choose alternative vertical partners. We apply our model to bargained airport landing fees where a number of interesting policy questions have arisen. For example, what is the impact of joint ownership of airports? Does airline countervailing power stop airports raising fees? Should airports be prohibited, as an EU directive intends, from charging differential prices to airlines? Our major findings are (a) an increase in upstream concentration or in the substitutability between airports always increases the landing fee; (b) the effect of countervailing power, via an increase in downstream concentration, depends on the competition regime between airlines and whether airports can price discriminate: airline concentration reduces the landing fee when downstream competition is in quantities, but if downstream competition is in prices only where airports cannot discriminate. Furthermore, only in a specific case (Bertrand competition, uniform landing fees and undifferentiated goods) will lower fees pass through to consumers. (c) With Cournot competition, uniform landing fees are always higher than discriminatory fees, while the reverse is true with Bertrand competition. We also look at the incentives for airport expansion which raise quantities of passengers paying a given landing fee, but alters the nature of airline competition, which changes the landing fee.

January 6, 2011 | Permalink | Comments (0) | TrackBack (0)

NOT GOOD ENOUGH FOR GOVERNMENT WORK: GEOGRAPHIC MARKET DEFINITION AND THE FTC'S CASE AGAINST CHICAGOLAND PHYSICIAN ASSOCIATIONS

Posted by D. Daniel Sokol

Gregory D. Adams (CRA) and Fred S. McChesney (Northwestern Law) describe NOT GOOD ENOUGH FOR GOVERNMENT WORK: GEOGRAPHIC MARKET DEFINITION AND THE FTC'S CASE AGAINST CHICAGOLAND PHYSICIAN ASSOCIATIONS.

ABSTRACT: In the past decade, the Federal Trade Commission has brought many cases opposing joint contracting by independent practice associations (IPAs), including a high-profile case against the Evanston Medical Group IPA in suburban Chicago. The FTC frequently claims that such contracting is per se illegal. This article criticizes the FTC's approach to evaluating joint contracting by IPAs. As described herein, joint contracting by IPAs have potential precompetitive benefits, as well as potential anticompetitive costs. Thus, rule of reasons treatment is appropriate. This article also describes issues related to market definition and market power under such a rule of reason analysis.

January 6, 2011 | Permalink | Comments (0) | TrackBack (0)

The Lagardère Judgment of the General Court: Is warehousing back on the scene?

Posted by D. Daniel Sokol

David Tayar (Willkie Farr & Gallagher) asks The Lagardère Judgment of the General Court: Is warehousing back on the scene?

ABSTRACT: This article focuses on the judgment rendered in case T-294/04. It does not comment on the judgment rendered in related case T-452/04 annulling the decision authorising Wendel to buy the assets sold by Lagardère.

January 6, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 5, 2011

Antitrust in 2025: Cartels, Agency Effectiveness and a Return to Back to the Future

Posted by D. Daniel Sokol

D. Daniel Sokol (University of Florida Levin College of Law) has posted Antitrust in 2025: Cartels, Agency Effectiveness and a Return to Back to the Future.

ABSTRACT: Predicting the future is difficult. Advances in economics and antitrust law's ability to incorporate such changes have been tremendous in the past 15 years. In 1985, Robert Zumekis' movie Back to the Future came out. In that movie, Marty McFly (Michael J. Fox) travels back in time from 1985 to 1955. Marty is shocked by the differences he discovers between his world and the past world that he now inhabits. I think that most practitioners in 1985 would have been shocked to discover that antitrust now encompasses over 100 jurisdictions, that the Supreme Court now more or less fully embraces Chicago/Harvard approaches, that the rise of computing has led to massive problems of too much data to go through as part of HSR second requests, and that sophisticated econometric derived data is possible as part of antitrust analysis in mergers, monopolization cases, and in terms of damage calculations. What then can I predict with some degree of certainty so that when Michael J. Fox next makes the jump in his time machine from 2010 to 2025, can he predict with some certainty the antitrust of the future? This essay focuses on two such predictions – (i) cartels will still exist; and (ii) some antitrust agencies will run out of steam.

January 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Article 102 TFEU: exclusive dealing and rebates

Posted by D. Daniel Sokol

Luc Peeperkorn and Ekaterina Rousseva discuss Article 102 TFEU: exclusive dealing and rebates.

ABSTRACT: On 9 September the General Court upheld the Commission decision (COMP/E-1/38.113) finding that Tomra, a Norwegian producer of reverse vending machines (RVMs) had abused its dominant position in several national markets by operating a system of exclusivity agreements, individualised quantity commitments and individualised retroactive rebate schemes.

January 5, 2011 | Permalink | Comments (0) | TrackBack (0)

How Much Lower Are Prices at Discount Stores? An Examination of Retail Food Prices

Posted by D. Daniel Sokol

Ephraim Leibtag Catherine Barker Paula Dutko (all U.S. Department of Agriculture) ask How Much Lower Are Prices at Discount Stores? An Examination of Retail Food Prices.

ABSTRACT: Nontraditional stores, including mass merchandisers, supercenters, club warehouse stores, and dollar stores, have increased their food offerings over the past 15 years and often promote themselves as lower priced alternatives to traditional supermarkets. How much lower are food prices at these stores? In order to better understand nontraditional storesâ impact on the cost of food, ERS analysts evaluate food price differences between nontraditional and traditional stores at the national and market level using 2004-06 Nielsen Homescan data. Findings show that nontraditional retailers offer lower prices than traditional stores even after controlling for brand and package size. Comparisons of identical items, at the Universal Product Code (UPC) level, show an expenditure-weighted average price discount of 7.5 percent, with differences ranging from 3 to 28 percent lower in nontraditional stores than in traditional stores. No! ntraditional stores in metro areas where such stores have a higher-than-average market share have smaller and less frequent price discounts than those in areas where such stores have a lower market share.

January 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Vertical Integration and Efficiency: an application to the Italian Machine Tool Industry

Posted by D. Daniel Sokol

Fabio Pieri and Enrico Zaninotto (DISA, Faculty of Economics, Trento University) analyze Vertical Integration and Efficiency: an application to the Italian Machine Tool Industry.

ABSTRACT: This paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. A theoretical model of entry and competition within an industry has been set up. In this model firms can choose either to be vertically integrated or not: the most efficientfirms self-select in being vertically integrated, while less efficientfirms prefer a disintegrated structure and they both coexist in equilibrium. In the second part of the paper the relationship between efficiency and vertical integration has been tested using a stochastic frontier framework in an novel panel dataset including around 500 MT builders. The theoretical prediction is confirmed: outsourcing seems a rational choice for less efficient firms to make positive operating profits and stay in the market; on the other hand, more efficient firms exploit their efficiency advantage to control a greater part of the production chain, possibly benefiting from greater coordination among different phases and tailored intermediate inputs.

January 5, 2011 | Permalink | Comments (0) | TrackBack (0)

European competition policy and social market economy

Posted by D. Daniel Sokol

Frédéric Marty (CNRS UMR 6227 GREDEG - Université de Nice Sophia-Antipolis) addresses European competition policy and social market economy.

ABSTRACT: The paper deals first with the influence of ordo-liberal school of thought on the German competition policy conception and the model of social market economy. After showing to what extend the Freiburg School influence shaped the German economic policy, we analyze what was its influence on the framing of the European competition policy. We show that this one was in fact achieved thought the Court of Justice case law. In this perspective, we assess to what extend a convergence toward a more economic approach in the implementation of Article 102TFEU, is susceptible to impact EU competition authorities decisional practice.

January 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 4, 2011

OECD Job Opening in the Competition Division – Deadline for applications is 20 January 2011

Posted by D. Daniel Sokol

From the OECD ad:

We are looking for a Senior Expert with substantial experience in competition policy analysis and application of laws. Under the supervision of the Head of the Competition Division, s/he will draft reports for consideration by the OECD Competition Committee, including building on OECD policy complementarities, will review national competition laws and policies and represent the OECD at Competition seminars and conferences.  For further information, please consult our careers website (Ref. 3516) www.oecd.org/hrm/vacancies.

January 4, 2011 | Permalink | Comments (0) | TrackBack (0)

The Crime Victims' Rights Act: Its Impact on Plea Negotiations with the Antitrust Division

Posted by D. Daniel Sokol

John Majoras and Eric Enson (Jones Day) look at how the Crime Victims' Rights Act, which was enacted to give crime victims notice of, access to, and a voice in public criminal proceedings, may be potentially misused by antitrust plaintiffs and their counsel to gain an advantage in pending civil litigation in The Crime Victims' Rights Act: Its Impact on Plea Negotiations with the Antitrust Division.

 

January 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition of E-Commerce Intermediaries

Posted by D. Daniel Sokol

Alexander Matros (University of South Carolina) and Andriy Zapechelnyuk (Queen Mary, University of London) discuss Competition of E-Commerce Intermediaries.

ABSTRACT: In e-commerce, where information collection is essentially costless and geographic location of traders matters very little, fierce competition between providers of similar services is expected. We consider a model where two e-commerce intermediaries (internet shops) compete for sellers. We show that two non-identical shops may coexist in equilibrium if the population of sellers is sufficiently differentiated in their time preferences. In such an equilibrium less patient sellers choose the more popular (with a higher rate of arrival of new buyers) and more expensive shop, while more patient sellers prefer the less popular and cheaper one.

January 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Price Competition in International Mixed Oligopolies

Posted by D. Daniel Sokol

Alessandra Chirco (University of Salento, Lecce, Italy) and Marcella Scrimitore (University of Salento, Lecce, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy) write on Price Competition in International Mixed Oligopolies.

ABSTRACT: In this paper we analyze the effects of international competition in a mixed oligopoly framework, with price competition and differentiated products. The properties of equilibria, and the impact of policy measures such as privatizations and cross-border acquisitions, are studied both in a single-country and in a two-country framework, under the hypothesis that all firms share the same linear technology. Besides showing that the international competition in a mixed market allows for efficiency gains which are consistent with binding budget constraints for the public firm, we identify the market structures and the competitive environment which support welfare enhancing privatization policies, independently of any exogenous or endogenous cost differential between public and private producers. In particular, we suggest that the cross-country distribution of firms, the degree of product substitutability and the overall densit! y of the market are the key elements in the assessment of the desirability of public ownership.

January 4, 2011 | Permalink | Comments (0) | TrackBack (0)

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.

January 4, 2011 | Permalink | Comments (0) | TrackBack (0)