Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, May 10, 2011

Buyer Confusion and Market Prices

Posted by D. Daniel Sokol

Kenan Kalayci and Johannes (Jan) J. M. Potters (both Tilburg University - CentER) identify issues in Buyer Confusion and Market Prices.

ABSTRACT: We employ a price setting duopoly experiment to examine whether buyer confusion increases market prices. Each seller offers a good to buyers who have homogeneous preferences. Sellers decide on the number of attributes of their good and set prices. The number of attributes bears no cost to the sellers and does not affect the value of the good to the buyers but adds complexity to buyers' evaluation of the goods. The experimental results indicate that the buyers make more suboptimal choices and that prices are higher when the number of attributes of the goods is higher. Moreover, prices and profits are higher than those in a benchmark treatment with perfectly rational (robot) buyers.

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

The Institutional Framework for Doing Sports Business: Principles of EU Competition Policy in Sports Markets

Posted by D. Daniel Sokol

Oliver Budzinski (Markets & Competition Group, Department of Environmental and Business Economics, University of Southern Denmark) has posted The Institutional Framework for Doing Sports Business: Principles of EU Competition Policy in Sports Markets.

ABSTRACT: The competition rules and policy framework of the European Union represents an important institutional restriction for doing sports business. Driven by the courts, the 2007 overhaul of the approach and methodology has increased the scope of competition policy towards sports associations and clubs. Nowadays, virtually all activities of sports associations that govern and organize a sports discipline with business elements are subject to antitrust rules. This includes genuine sporting rules that are essential for a league, championship or tournament to come into existence. Of course, „real? business or commercial activities like ticket selling, marketing of broadcasting rights, etc. also have to comply with competition rules. Regulatory activities of sports associations comply with European competition rules if they pursuit a legitimate objective, its restrictive effects are inherent to that objective and proportionate t! o it. This new approach offers important orientation for the strategy choice of sports associations, clubs and related enterprises. Since this assessment is done following a case-by-case approach, however, neither a blacklist of anticompetitive nor a whitelist of procompetitive sporting rules can be derived. Instead, conclusions can be drawn only from the existing case decisions – but, unfortunately, this leaves many aspects open. With respect to business activities, the focus of European competition policy is on centralized marketing arrangements bundling media rights. These constitute cartels and are viewed to be anticompetitive in nature. However, they may be exempted from the cartel prohibition on efficiency and consumer benefits considerations. Here, a detailed list of conditions exists that centralized marketing arrangements must comply with in order to be legal. Although this policy seems to be well-developed at first sight, a closer look at the decision practice r! eveals several open problems. Other areas of the buying and selling be havior of sports associations and related enterprises are considerably less well-developed and do not provide much orientation for business.

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

TV Revenue Sharing as a Coordination Device in Sports Leagues

Posted by D. Daniel Sokol

Thomas Peeters (University of Antwerp) discusses TV Revenue Sharing as a Coordination Device in Sports Leagues.

ABSTRACT: As sports clubs jointly produce contests, they cannot determine contest quality through their private talent investments. Sports leagues therefore try to coordinate talent investments towards the profit-maximizing contest quality. In this paper I analyze how revenue sharing mechanisms may serve this goal when demand comes from hard-core club and neutral sports fans. Performance-based sharing turns out to be an inefficient sharing rule for the cartel, although it is not harmful for social welfare. This inefficient cartel behavior can be rationalized as the result of bargaining with asymmetric outside options. Data from US and European sports leagues illustrate the theoretical findings.

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

SEMINAR PRIVATE ENFORCEMENT OF COMPETITION LAW IN JAPAN & EUROPE , May 17, 2011

Posted by D. Daniel Sokol

SEMINAR PRIVATE ENFORCEMENT OF COMPETITION LAW IN JAPAN & EUROPE
10.00h Welcome & Introduction Dr. Esther van Zimmeren, K.U.Leuven, CIR Prof. dr. Dimitri Vanoverbeke, K.U.Leuven, Japanese Studies
10.15h Private Enforcement of the Antimonopoly Act in Japan Prof. dr. Souichiro Kozuka, Gakushuin University
11.00h Private Enforcement of European Competition Law Mr. Eddy De Smijter, European Commission, DG Competition
11.45h Discussion Chair: Prof. dr. Jules Stuyck, K.U.Leuven, CEEL Referent: Suleyman Parlak, K.U.Leuven, CEEL
12.30h End ORGANIZATION Centre for Intellectual Property Rights (CIR) Japanese Studies Centre for European Economic Law (CEEL)
DATE May 17, 2011
10 – 12.30h
VENUE Huis Bethlehem Wolfspoort Auditorium BETH 00.08 Schapenstraat 34 3000 Leuven Belgium

Participation is free.
Please register before May 11with Ms. Linda Mees linda.mees@law.kuleuven.be or at 016/32.37.32

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

FTC to Host Public Forum on Competition Issues in Standard-Setting

Posted by D. Daniel Sokol

The FTC will hold a forum on one of the most interesting issues in antitrust - standard setting. According to the press release:

The Federal Trade Commission will host a public workshop on June 21, 2011, in Washington, D.C., as part of a project to examine the legal and policy issues surrounding the competition problem of “hold-up” when patented technologies are included in collaborative standards. The workshop will be free and open to the public.

When industry-wide standards incorporate technologies that are protected by intellectual property rights, they raise the potential for “hold-up” by a patent owner – a demand for higher royalties or other more-costly or burdensome licensing terms after the standard is implemented than could have been obtained before the standard was chosen. Hold-up can subvert the competitive process of
choosing among technologies during standard-setting and can undermine the integrity of those activities. Consumers can be harmed if manufacturers are able to pass on higher costs resulting from hold-up.

The FTC workshop will examine three ways to try to prevent hold-up: 1) patent disclosure rules of standard-setting organizations; 2) commitments given by patent holders that they will license users of the standard on reasonable and non-discriminatory (RAND) terms; and 3) disclosure of licensing terms by patent holders before the standard is adopted. The Commission intends to examine these
issues from practical, economic and legal perspectives, and under antitrust,
contract and patent law. The FTC also will consider whether certain conduct by
patent holders is deceptive or unfair.

In a Federal Register notice to be published shortly, the FTC seeks the views of consumers and the legal, academic, and business communities on the issues to be explored in this project

Comments may be filed until July 8, 2011 in electronic form using the following weblink: (https://secure.commentworks.com/ftc-standardsproject) and following the instructions on the web-based form. Comments will be publicly available.

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

The Econometrics of Cartel Overcharges

Posted by D. Daniel Sokol

Rachidi Kotchoni, Laval University - CRÉA and Marcel Boyer, University of Montreal - Department of Economics explain The Econometrics of Cartel Overcharges.

ABSTRACT: Connor and Lande (2006) conducted a survey of cartel overcharge estimates and found an average in the range of 31% to 49%. By examining more sources, Connor (2010b) finds a median of 23.3% for all type of cartels and a mean of 50.4% for successful cartels. However, the data used in these studies are estimates rather than true observations, since the true illegal profits of cartels are rarely observable. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear OLS model to the data without providing a carefull treatment of the problems raised by the publication bias, outliers, asymmetry, and heterogeneity will necessarily produce distorted resul! ts. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006), but providing a sound treatment of the matters raised above. We find a mean bias-corrected overcharge estimate of 13.8% for all cartels, and of 13.6% for cartels with initial estimates lying between 0% and 50%.

May 10, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, May 9, 2011

Is the European Commission's Consultation on Collective Redress Trying to Fix an Antitrust Litigation Landscape That is Not Broken?

Posted by D. Daniel Sokol

Nicholas Heaton & Paul Chaplin (Hogan Lovells) ask Is the European Commission's Consultation on Collective Redress Trying to Fix an Antitrust Litigation Landscape That is Not Broken?

ABSTRACT: In February 2011 the European Commission launched a public consultation on whether new EU-wide forms of collective redress should be introduced in order to strengthen the enforcement of European law. The consultation paper, entitled Towards a Coherent European Approach to Collective Redress (the "Consultation Paper"), is the result of recent collaboration between the Directorate-Generals for Competition ("DG COMP"), Health and Consumer Affairs ("DG SANCO"), and Justice ("DG Justice"). Rather than pushing through an unpopular measure without consultation, the public consultation represents the Commission's latest attempt to gauge and garner support for this type of potentially wide-ranging reform. However, little indication is given as to whether the Commission has a particular model of collective redress in mind and the consultation itself is very open-ended. Given that both DG COMP and DG SANCO have contributed to the Consultation Paper, having previously put forward their own very different plans for a collective redress mechanism, it is likely that any proposals developed by the Commission will have relevance to both consumers and business. The Consultation Paper has raised significant interest with stakeholders including claimant law firms, consumer groups, and businesses that may be subject to competition investigations and possible follow-on competition damages claims before national courts in Europe. This is because EU-wide reform to collective redress could have a big impact on the kind and value of private antitrust damages claims brought in Europe. However, the very different stances advocated by the relevant stakeholders-both supporters and opponents of collective redress-whose interests diverge significantly, make it unclear whether such a consultation will really assist the Commission in coming to a conclusion.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

Overcoming Cournot's dilemma on increasing returns and competition

Posted by D. Daniel Sokol

Mario Morroni, University of Pisa - Economics, explains Overcoming Cournot's dilemma on increasing returns and competition.

ABSTRACT: This paper shows that the Cournot-Marshall dilemma on the incompatibility of increasing returns and competition may be overcome under an integrated theory of the firm that takes into account not only returns to scale but also knowledge and transaction cost considerations. Knowledge and transaction-based considerations help to understand why, contrary to predictions, the tendency towards an increased dimension and monopoly may not operate in spite of the presence of significant economies of scale. It is argued that the boundaries of the firm cannot be attributed solely to one single cause, but are instead the result of the interplay between knowledge-, scale-scope- and transaction-based considerations. This interaction favours the emergence of a variety of organisational structures and the coexistence of different sizes even in the same sector of activity.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

The Simple Diagrammatics of Price Signaling Quality

Posted by D. Daniel Sokol

Leonard J. Mirman and Marc Santugini (IEA, HEC Montreal) describe The Simple Diagrammatics of Price Signaling Quality.

ABSTRACT: We present diagrammatic analysis of price signaling quality. We first study the behavior of the monopoly when price conveys information about quality. We then show the effect of information flows on welfare, i.e., profit and consumer surplus.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

Do profits always decrease with decreasing product differentiation? A reversal result in a unionized duopoly

Posted by D. Daniel Sokol

Luciano Fanti: Department of Economics, Faculty of Economics, University of Pisa and Nicola Meccheri: Department of Economics, Faculty of Economics, University of Pisa ask Do profits always decrease with decreasing product differentiation? A reversal result in a unionized duopoly.

ABSTRACT: This paper aims at investigating if the conventional wisdom, that a decrease in the degree of product differentiation (which implies increasing competition) always reduces firms’ profits, remains true in a differentiated duopoly model with decentralized, or firm-specific, monopoly unions. In this context, when product differentiation decreases, an important effect, termed “endogenous” or “union wage effect”, adds to the standard competition effect in affecting profits. Moreover, the union wage effect operates against the competition effect and, provided that unions are sufficiently wage-oriented, that is, they sufficiently prefer wages to employment, can actually reverse the conventional result under both Cournot and Bertrand competition. However, this is more likely to occur under competition à la Cournot.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust Institutional Design Suggestion by Washington Post Pulitzer Prize winner Steve Pearlstein

Posted by D. Daniel Sokol

See here. In his design, the FTC would handle exclusively all mergers while DOJ would handle all Section 2 cases and all cartel cases. What to do with FTC Section 5 is not addressed.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)

Welfare, Competition, Specialization and Growth

Posted by D. Daniel Sokol

Daria Onori (IRES - Université Catholique de Louvain) has written on Welfare, Competition, Specialization and Growth.

ABSTRACT: In this paper we consider a simple model of horizontal differentiation and derive the closed form solutions for the level of the variables in the decentralized economy and in the social planner case. This enables us to analyze consumers' welfare as a function of the parameter representing market power. We surprisingly find that, when the total labor force is greater than a certain level, the welfare function is an inverted-N shape in the decentralized economy and monotonically decreasing in the centralized economy. This suggests that there is another effect which interacts with market power: the degree of returns to specialization.

May 9, 2011 | Permalink | Comments (0) | TrackBack (0)