Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, March 22, 2011

Tying: Understanding Leverage, Foreclosure, and Price Discrimination

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law has written a very clear and insightful Tying: Understanding Leverage, Foreclosure, and Price Discrimination.

ABSTRACT: Many tying arrangements are used by firms that do not have substantial market power in either of the two markets linked together by the tie. Their function must be something other than the enlargement or perpetuation of power. A few ties do involve fairly explicit exercises of market power, but they need not be used for a different purpose than the ties imposed by more competitive firms. This paper considers firms’ use of ties to exploit whatever power they already have over the tying product. The "leverage" theory saw ties as exploiting customers as a group via higher prices, whether or not the tie excluded any rival. By contrast, the foreclosure theory of ties focused on exclusion of rivals, mainly in the tied product market, with extension or perpetuation of monopoly as a long term goal.

Clearly the dominant explanation for variable proportion ties is price discrimination, although it explains some fixed proportion ties as well. Like leveraging, price discrimination also results in some customer exploitation, although with much more complex results than the leverage theory assumed. Also like leveraging, a tying firm can profit from price discrimination without foreclosing any rival. Indeed, even firms without relatively small amounts of tying product market power can use price discrimination ties. Although a price-discriminating tie might cover most purchasers of a tied product and thus foreclose a substantial share of the tied market, effective price discrimination neither requires nor typically generates a significant foreclosure or other impairment of the tied market's structure or performance. Indeed, in many litigated cases the tying product was a common commodity such as dry ice, salt, or ordinary printing ink.

The least warrant for antitrust intervention occurs when higher tied product prices fail to result from foreclosure of rivals and are not reflected in higher consumer prices. For example, most franchise and many complementary product ties (1) fail to foreclose any rival from anything because the tied product is a common ingredient or other common expendable input; and also (2) fail to result in higher consumer prices for the tying/tied combination because the firm is in competition with other firms and could not assess a monopoly price increase. The last conclusion is true even though a price discrimination tie typically results in higher prices for the tied product alone.

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition Law and the Enforcement of Article 102

Posted by D. Daniel Sokol

Edited by Federico F. Etro (University of Milan - Econ) and Ioannis I. Kokkoris (University of Reading - Law) are editors of Competition Law and the Enforcement of Article 102.

BOOK ABSTRACT: With incisive and thought-provoking contributions from both leading academics and practitioners, this book addresses in detail the major areas in relation to the Commission Guidance Paper on Applying Article 82 of the EC Treaty (now Article 102). The paper has been at the center of much of the recent debate on antitrust policy in Europe and has generated significant controversy and intense debate. The authors contend that the guidance from the Commission is on the one hand entirely justifiable in its focus on consumer harm in identifying what constitutes an abuse, but that on the other it is not consistent enough in its message, nor indeed does it offer enough structural guidance on the practical application of the approach. The book addresses all of these concerns, considers the reform of article 102, and identifies the challenges inherent in its enforcement, looking for instance at enforcement in certain sectors, such as the high tech sector. The book considers recent seminal antitrust cases such as the Microsoft case to illuminate and better understand abuse of dominance. It brings a line of clarity to often contradictory messages and in so doing provides invaluable practical guidance to enforcers and practitioners alike.

The editors combine the insight of a leading international economist and an experienced antitrust scholar, and the contributions are linked by a common emphasis on a strong economic approach to antitrust enforcement. 

Table of Contents

1. Toward an Economic Approach to Article 102 , Federico Etro & Ioannis Kokkoris 2. Does the Guidance Paper on Article 102 Matter? , Damien Geradin 3. Some outstanding issues from the European Commission's Guidance on Article 102: Not-so-faint echoes of Ordoliberalism , Philip Marsden 4. Optimal Enforcement and Decision Structures for Competition Policy: Economic Considerations , Yannis Katsoulacos & David Ulph 5. IP Rights in the EU-Microsoft Saga , Assimakis Komninos & Katarzyna Czapracka 6. Judicial Review in Article 102 , Jean-Yves Art & Pablo Ibanez Colomo 7. The assessment of efficiencies under Article 102 and the Commission's Guidance Paper , Denis Waelbroeck 8. Will Efficiencies Play an Increasingly Important Role in the Assessment of Conduct Under Article 102? , Jean-Francois Bellis & Tim Kasten 9. Is there a Gap in the Enforcement of Article 102? , Ioannis Kokkoris 10. Is the availability of 'appropriate' remedies a limit to competition law liability under Article 102? , Ioannis Lianos 11. Damages for exclusionary practices: a primer , Chiara Fumagalli, Jorge Padilla & Michele Polo

Table of Contents

1. Toward an Economic Approach to Article 102 , Federico Etro & Ioannis Kokkoris
2. Does the Guidance Paper on Article 102 Matter? , Damien Geradin
3. Some outstanding issues from the European Commission's Guidance on Article 102: Not-so-faint echoes of Ordoliberalism , Philip Marsden
4. Optimal Enforcement and Decision Structures for Competition Policy: Economic Considerations , Yannis Katsoulacos & David Ulph
5. IP Rights in the EU-Microsoft Saga , Assimakis Komninos & Katarzyna Czapracka
6. Judicial Review in Article 102 , Jean-Yves Art & Pablo Ibanez Colomo
7. The assessment of efficiencies under Article 102 and the Commission's Guidance Paper , Denis Waelbroeck
8. Will Efficiencies Play an Increasingly Important Role in the Assessment of Conduct Under Article 102? , Jean-Francois Bellis & Tim Kasten
9. Is there a Gap in the Enforcement of Article 102? , Ioannis Kokkoris
10. Is the availability of 'appropriate' remedies a limit to competition law liability under Article 102? , Ioannis Lianos
11. Damages for exclusionary practices: a primer , Chiara Fumagalli, Jorge Padilla & Michele Polo

March 22, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, March 21, 2011

Chambers Global 2011 Rankings Are Out - And the Top Global Antitrust/Competition Law Practices Are...

Posted by D. Daniel Sokol

The top "global" antitrust/competition law practices as ranked by Chambers for 2011 are:

Band 1

Cleary Gottlieb Steen & Hamilton LLP

Band 2

Arnold & Porter LLP
Freshfields Bruckhaus Deringer LLP

Band 3

Clifford Chance LLP
Jones Day
Linklaters
Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates

Band 4

Allen & Overy LLP
Latham & Watkins LLP
White & Case LLP

Band 5

Gibson, Dunn & Crutcher LLP
Hogan Lovells
O'Melveny & Myers LLP
WilmerHale

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis

Posted by D. Daniel Sokol

Jonathan B. Baker, American University - Washington College of Law has posted Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis.

ABSTRACT: The FCC’s analysis of the Comcast-NBCU transaction fills a gap in the contemporary treatment of vertical mergers by providing a roadmap for courts and litigants addressing the possibility of anticompetitive exclusion. The FCC identified the factors any judicial or administrative tribunal would likely consider today in analyzing whether a vertical merger would lead to anticompetitive input or customer foreclosure, and a range of economic methods potentially relevant to applying that template to the facts of a transaction. Notwithstanding the difference between administrative adjudication under a public interest standard and judicial decision-making under the Clayton Act, the legal framework and economic studies the Commission employed promise to influence the approach that antitrust tribunals will now take in evaluating vertical mergers.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Brown Shoe Versus the Horizontal Merger Guidelines

Posted by D. Daniel Sokol

Keith N. Hylton, Boston University discusses Brown Shoe Versus the Horizontal Merger Guidelines.

ABSTRACT: The new Horizontal Merger Guidelines, if treated by courts as a source of law, would reduce the discretion traditionally exercised by courts in defining relevant markets and market power in merger cases. This is an undesirable shift in the balance of power because courts have used the market power inquiry stage of merger analysis as a general checkpoint or weigh station for evaluating factors relevant to the welfare effects of a merger.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

A Short Note on Methodology: An Eclectic and Heuristic Multi-Disciplinary and Functional Approach to EU Law

Posted by D. Daniel Sokol

Albert Sanchez Graells, Pontifical University Comillas of Madrid provides A Short Note on Methodology: An Eclectic and Heuristic Multi-Disciplinary and Functional Approach to EU Law.

ABSTRACT: This short note on methodology has been extracted from my PhD thesis, which deals with the relationship between public procurement and competition policy at the EU level (a reworked version has been recently published as Public Procurement and the EU Competition Rules, Oxford: Hart Publishing, 2011). Therefore, the following pages will explore the methodology chosen to conduct a study that mainly aimed to answer the following research question: How can and should publicly-generated competitive distortions in the public procurement field be addressed under EU economic law and, particularly, under the general framework of competition and public procurement law? In order to address such a macro-legal question (and the implied micro-legal questions), I opted for an eclectic and heuristic multi-disciplinary and functional approach to EU Law. The following pages develop the reasons behind such an option which, it must be stressed, was strongly conditioned by the aim of my research. Hopefully, however, the justification for such a methodology will serve as a (limited) case study for researchers approaching similar topics related to EU Law.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Announcing Global Economics Group

Posted by D. Daniel Sokol

Worth noting is a new antitrust consulting practice led by David Evans called Global Economics Group. The first thing that I notice is a deep strength on Chinese competition law and economics in addition to a very strong US team.

From the press release:

Three top economic experts today announced the formation of Global Economics Group, an economic consulting firm that will provide independent economic analysis in difficult legal, regulatory and policy matters globally. David S. Evans, one of the world’s leading antitrust economists; Roger Hickey, founder of Chicago Partners; and Chad Coffman, a noted securities expert, will serve as Chairman, CEO, and President, respectively. The firm’s partner roster includes economists Robert Litan, former U.S. Deputy Assistant Attorney General for Antitrust, and Richard Schmalensee, who served on the President’s Council of Economic Advisers from 1989-1991.

GlobalEcon’s practice groups will specialize in antitrust, financial regulation, securities and valuation, labor/employment discrimination, intellectual property, business damages, and tax and transfer pricing. “We’re building a firm squarely focused on helping clients navigate complex litigation and regulatory problems in a global economy,” said Evans. “The mix of experts we have assembled so far is truly world-class; they have demonstrable track records of bringing unique and relevant insights to help clients build compelling fact-based arguments in adversarial situations.” “We bring enormous experience to the table on day one of the firm,” said Hickey. “GlobalEcon’s partners have worked on some of the most complex legal matters of the past 20 years, including the Microsoft antitrust cases, Enron securities fraud, the YouTube copyright infringement case, and the Wal-Mart employment discrimination class action, among other high-profile legal issues.”

In the wake of the 2008 financial crisis, the firm’s experts have been deeply involved in financial regulatory reform, including derivatives regulation, the role of the financial exchanges, consumer financial protection and payments regulation. GlobalEcon’s partners also have been involved in some of the largest securities fraud cases evolving from the crisis. In addition to econometricians, statisticians and financial analysts, the firm includes a number of experts with deep experience in testifying before legal and regulatory bodies worldwide. GlobalEcon experts have worked on a number of multi-jurisdictional matters, including cases in the U.S., EU, Brazil, Mexico, China, Singapore, Korea, and Australia.

GlobalEcon’s team includes: • Richard Schmalensee, Dean Emeritus of the Sloan School at MIT, former member of the President’s Council of Economic Advisers, and currently Howard W. Johnson Professor of Economics and Management at MIT; • Robert Litan, former Deputy Assistant Attorney General for Antitrust, former Associate Director of the Office of Management and Budget, and currently Senior Fellow at Brookings Institution and vice president at the Kaufman Foundation; • Todd Zywicki, former Director of the Office of Policy and Planning at the Federal Trade Commission and currently George Mason University Foundation Professor of Law. • Craig Pirrong, a globally recognized expert on derivatives and exchanges who now leads the Global Energy Management Institute at the University of Houston where he is also a professor; • Robert Ian McEwin, former chief economist of the Competition Commission of Singapore and currently member of the Singapore Copyright Tribunal and Professor of Law and Singapore National University; • Xinzhu Zhang, Professor at the Chinese Academy of Social Sciences and advisor to the Chinese State Council, the Anti-Monopoly Bureau of Ministry of Commerce and the World Bank; and, • Abel Mateus, former chairman of the Portuguese Competition Authority and member of the Monetary Committee and Economic Policy Committee of the European Commission. Evans, GlobalEcon’s Chairman, was a top executive at NERA Economic Consulting before he was recruited by LECG in 2004 to lead its global competition policy practice, one of the world’s largest antitrust economics groups. He has led teams of experts and testified on some of the most prominent antitrust cases on record including U.S. v. AT&T, U.S. v. Microsoft, VisaCheck/MasterMoney Antitrust Litigation, and the European Commission v. Microsoft. Evans holds teaching positions at the University of Chicago and the University College London.

Hickey, GlobalEcon’s CEO,was the founder and CEO of Chicago Partners, a top U.S. economic consulting firm sold to Navigant in 2008. He has led large teams on valuation, securities and intellectual property matters. Coffman, GlobalEcon’s President, has a national securities and valuation practice and has served as an expert in some of the largest securities cases on record, including Tyco, Parmalat, Enron, and WorldCom, among others. He is frequently retained by mediators and arbitrators to serve as the neutral expert. Together with Hickey, he founded Winnemac Consulting, which will be absorbed into Global Economics Group, to be based in Chicago.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China

Posted by D. Daniel Sokol

Terence Tai Leung Chong, Chinese University of Hong Kong (CUHK) - Department of Economics, Liping Lu, Tilburg University - CentER, European Banking Center(EBC), and Steven R. G. Ongena, Tilburg University - CentER, European Banking Center (EBC), ask Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China.

ABSTRACT: Banking competition may enhance or hinder the financing of small and medium enterprises (SMEs). Using a survey on the financing of China’s SMEs combined with detailed bank branch information, we investigate how concentration in the local banking market affects the availability of credit. It is found that lower market concentration alleviates financing constraints. The unconcentrated presence of joint stock banks has a larger effect on alleviating credit constraints, while the presence of state-owned banks has a smaller effect, than the presence of city commercial banks.

March 21, 2011 | Permalink | Comments (0) | TrackBack (0)