Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, May 20, 2011

Reassessing Tying Arrangements at the End of At&T's iPhone Exclusivity

Posted by D. Daniel Sokol

Jeffrey Paul Jarosch, Searle Center on Law, Regulation, and Economic Growth, Northwestern University School of Law is Reassessing Tying Arrangements at the End of At&T's iPhone Exclusivity.

ABSTRACT: Tying arrangements are common in the wireless telecommunications industry. Wireless networks compete for exclusive contracts to offer popular mobile devices. In January 2011, one of the most notorious exclusivity contracts ended when Apple announced that the iPhone would be available on the Verizon network, ending four years of iPhone exclusivity on AT&T. This long-anticipated move has been hailed as progress for consumer choice and competition in the industry. Such enthusiasm is rooted in the Supreme Court’s enduring stance against tying arrangements - a position that is based on unreasonable goals and illusory harms. This Article examines the Supreme Court’s tying jurisprudence in order to understand the harms that the Court seeks to combat. It then applies that understanding to a context-specific analysis of tying arrangements in the wireless telecommunications industry. In finding that AT&T’s iPhone exclusivity has had significant pro-competitive effects and has fostered innovation in the industry, the Article exposes the misguided basis of the Court’s tying doctrine and argues that it is time to reform the Court’s stance against tying.

May 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Paradise is a Walled Garden? Trust, Antitrust and User Dynamism

Posted by D. Daniel Sokol

Salil K. Mehra, Temple University - James E. Beasley School of Law discusses Paradise is a Walled Garden? Trust, Antitrust and User Dynamism.

ABSTRACT: In the worlds of technology and cyberlaw, the term “walled garden” has become an epithet to epitomize a proprietary, controlled – and likely sterile – platform, community, or standard. This dystopian view of closed, proprietary communities is presented most clearly by Zittrain (2008), who casts the choice facing society as between sterile but safe examples of “information appliances” such as the iPhone and “networks of control” such as Facebook – and on the other hand, vulnerable but malleable personal computers (PCs) and a “generative” Internet, that is, information technology that fosters greater creativity among users.

But can a “walled garden” in fact be a kind of creative paradise? If so, what sort of policy steps would foster such a result? The platforms in question, that is networks, devices and online communities, often find themselves at the intersection of network effects, standard-setting and user-generated content and innovation. Commentators suggest a variety of approaches, including antitrust intervention, direct government regulation, or taking no action based on the perceived strength of market solutions.

This Article makes several claims. First, that we cannot yet appreciate the potential importance of user-created content and innovation. This Article is the first to apply the EVLN (exit-voice-loyalty-neglect) model introduced by Albert Hirschmann (and since extended and broadened) to understand the economic considerations of user choices. Second, the error-cost framework developed in antitrust over the past several decades can help inform policy choices aimed at promoting user dynamism within walled gardens. Perhaps counterintuitively, this Article explains how the error costs argue for action rather than passivity. In fact, the Federal Trade Commission’s recent patent-ambush standard setting cases implicate concerns that are analogous to those surrounding user dynamism in walled gardens. Finally, while neither antitrust nor regulation may offer a perfect solution, this Article proposes consumer protection-style enforcement of hosts’ ex ante commitments to users in order to foster trust and thereby stimulate user creation and innovation.

May 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust Economics of Free

Posted by D. Daniel Sokol

David S. Evans, University of Chicago Law School, University College London has an interesting article on Antitrust Economics of Free.

ABSTRACT: This article examines antitrust analysis when one of the possible subject products of an antitrust or merger is ordinarily offered at a zero price. It shows that businesses often offer a product for free because it increases the overall profits they can earn from selling the free product and a companion product to either the same customer or different customers. The companion product may be a complement, a premium version of the free product, or the product on the other side of a two-sided market. The article then shows how antitrust and merger analysis should proceed when the subject is either the free product or the companion product. A key point is that the existence of a free good signals that there is a companion good, that firms consider both products simultaneously in maximizing profit, and that commonly used methods of antitrust analysis, including market definition, probably need to be adjusted to properly analyze two inextricably linked products. When antitrust or merger analysis involves a free product, the analysis of consumer welfare and injury also needs to account for customers of both the free product and its companion product since any change in market conditions for customers of one product affects the customers of the other product. Much of the analysis of the article is also relevant to other common situations in which price is set less than marginal cost.

May 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 19, 2011

A Framework for Analyzing Market Manipulation

Posted by D. Daniel Sokol

Shaun D. Ledgerwood, The Brattle Group, Georgetown University - Public Policy Institute (GPPI) and Paul Carpenter, The Brattle Group provide A Framework for Analyzing Market Manipulation.

ABSTRACT: Market manipulation is a poorly understood phenomenon, due in part to difficulties in applying conventional antitrust tools to explain loss-based opportunism. Because trading to intentionally incur losses violates assumptions concerning the self-interest hypothesis and the need for market power to move prices, traditional tools need revisions to explain manipulative behavior. In this paper, we assist this process by developing a framework to explain manipulation as the intentional loss of money on price-making transactions to benefit the value of related price-taking positions. This framework could simultaneously improve liquidity and compliance by providing definitional and analytic certainty concerning what behavior constitutes manipulation.

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

The Effects of Non-Assertion of Patents Provisions: R&D Incentives in Vertical Relationships

Posted by D. Daniel Sokol

Noriaki Matsushima, Osaka University - Institute of Social and Economic Research, Koki Arai, JFTC, Ikuo Ishibashi, Ayoba, and Fumio Sensui, Kobe University discuss The Effects of Non-Assertion of Patents Provisions: R&D Incentives in Vertical Relationships.

ABSTRACT: Using a simple downstream duopoly model with vertical relations and downstream R&D, we investigate the effect of non-assertion of patents (NAP) provisions. A monopoly upstream firm decides whether to employ NAP provisions. If it does so, it freely incorporates the R&D outcomes into its inputs. Incorporation improves the efficiency of the downstream firms' production. We have interpreted the introduction of NAP provisions as a source of technology spillover. Using the technologies of two downstream firms is optimal for the upstream firm if and only if the degree of technology spillover is small. In addition, if the ex ante cost difference between the downstream firms is significant, such technology spillovers erode both the profit of the efficient downstream firm and social welfare. We interpret our result in the context of an actual antitrust case related to this model.

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Density Versus Differentiation: The Impact of Wal-Mart on the Grocery Industry

Posted by D. Daniel Sokol

Paul B. Ellickson, University of Rochester - William E. Simon Graduate School of Business Administration and Paul L.E. Grieco, Pennsylvania State University - Department of Economics have posted Density Versus Differentiation: The Impact of Wal-Mart on the Grocery Industry.

ABSTRACT: This paper empirically examines the impact of entry by Wal-Mart on competition in the supermarket industry. Using a detailed panel dataset spanning 1994 to 2006, we estimate the impact of Wal-Mart on three key outcome variables (revenue, employment, and store size), controlling for persistent local trends and systematic differences across markets by exploiting the detailed spatial structure of our store-level census. We find that Wal-Mart's impact is highly localized, affecting firms only within a tight, three-mile radius of its location. Within this radius, the bulk of the impact falls on declining firms - entry and expansion by growing firms are essentially unaffected. Moreover, the stores most damaged by Wal-Mart's entry are the outlets of larger chains. This suggests that Wal-Mart's expansion into groceries is quite distinct from its earlier experience in the discount industry, where the primary casualties were single outlet firms and sole proprietorships. This contrast sheds light on the role density economies play in shaping both equilibrium market structure and economic geography. In the case of grocery competition, high travel costs and the perishable nature of the product itself appear to impart sufficient horizontal differentiation to offset the scale economies that Wal-Mart has exploited to the detriment of far-flung competitors so effectively in the past.

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Recent RPM Enforcement in NewYork and California

Posted by D. Daniel Sokol

Michael A. Lindsay (Dorsey & Whitney) explores Recent RPM Enforcement in NewYork and California.

ABSTRACT: Two recent enforcement actions in California and New York illustrate the continuing uncertainty that businesses face in designing and implementing resale price maintenance (RPM) programs.1 In People v. Bioelements, Inc., the California Attorney General obtained a consent decree against a Colorado company that had RPM agreements with its independent resellers.2 But in People v. Tempur-Pedic, International Inc., the New York Attorney General sought to enjoin an RPM program— and lost a contested trial court proceeding. What can companies learn from these two enforcement actions?

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 18, 2011

A Two-Country Game of Competition Policies

Posted by D. Daniel Sokol

Makoto Yano, Keio University - Department of Economics and Takakazu Honryo, Columbia University - Columbia Business School - Economics Department theorize about A Two-Country Game of Competition Policies.

ABSTRACT: Recently a number of studies have recognized that trade policy can be substituted for by competition policy. This study demonstrates, however, that there is a fundamental difference in the working of terms-of-trade effects between competition policy and tariff policy and that if countries optimally set their respective competition policies, it is unlikely to result in a tariff-war-like state in which all countries adopt distortionary policies. Instead, in a Nash equilibrium, one country maintains perfect competition in its domestic service sector while the other country tolerates imperfect competition.

May 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Extradition: The New Sword or the Mouse that Roared?

Posted by D. Daniel Sokol

Jim Wilson discusses Extradition: The New Sword or the Mouse that Roared?

ABSTRACT: Has the Norris extradition changed the landscape for foreign executives facing antitrust charges in the United States? This article asserts that it has not: extradition is likely still to be the exception to the rule, and in most jurisdictions, the executive who chooses not to come to the United States to face charges is not likely to be forced to do so.

May 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Energy Liberalization in Antitrust Straitjacket: A Plant Too Far?

Posted by D. Daniel Sokol

Malgorzata M. Sadowska, University of Bologna asks Energy Liberalization in Antitrust Straitjacket: A Plant Too Far?

ABSTRACT: The European Commission has launched a number of antitrust investigations against the major energy incumbents in the aftermath of the energy sector inquiry. Most of them have already been settled under Article 9 of the EC Regulation 1/2003 and the undertakings offered far-reaching, sometimes structural, commitments. This article studies the 2008 investigation into price manipulation in the German electricity wholesale market. In spite of no convincing evidence and flaws in the assessment, the Commission was able to negotiate from E.ON substantial capacity divestments. The Commission is straightforward about using antitrust rules to open up energy markets. Sector inquiries, commitment procedure and structural remedies allow for a quick intervention, flexible problem-solving and bring about decisive changes in the energy market setting. However, harnessing antitrust for the purpose of energy liberalization policy has an adverse impact on competition enforcement itself. First, it leads to a number of ‘weak’ cases, based on far-fetched arguments. Second, it results in remedies which are not tailored to the abuse at issue, but are in line with a wider objective of energy market liberalization, and as an outcome of negotiations, further swayed by the firm’s own interest in the ultimate shape of the commitment package.

May 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption

Posted by D. Daniel Sokol

Kristina Steffenson McElheran, Harvard University - Technology & Operations Management Unit asks Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption.

ABSTRACT: This paper investigates the relationship between market position and the adoption of IT-enabled process innovations. Prior research has focused overwhelmingly on product innovation and garnered mixed empirical support. I extend the literature into the understudied area of business process innovation, developing a framework for classifying innovations based on the complexity, interdependence, and customer impact of the underlying business process. I test the framework’s predictions in the context of e-buying and e-selling adoption. Leveraging detailed U.S. Census data, I find robust evidence that market leaders were significantly more likely to adopt the incremental innovation of e-buying but commensurately less likely to adopt the more radical practice of e-selling. The findings highlight the strategic significance of adjustment costs and co-invention capabilities in technology adoption, particularly as businesses grow more dependent on new technologies for their operational and competitive performance.

May 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 17, 2011

ICN 2011 Conference

Posted by D. Daniel Sokol

The conference schedule is below:

Tuesday 17 May 2011 – Registration and reception

Daytime IDRC Pre-ICN Forum on Competition and Development
Alliance building for a culture of compliance

Documents:

Competition and Development

17.00 – 22.00 Registration at the World Forum

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18.00 – 20.30 Welcome Reception at the Gemeentemuseum The Hague
Hosted by the Burgomaster and Aldermen of the Municipality of The Hague
( ICN attendees and companions welcome )

Speech Jozias van Aartsen – Mayor of The Hague

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Wednesday 18 May 2011 – First conference day

07.30 – 09.00 Registration at the World Forum

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08.00 – 08.45 Optional break out session for new comers to the ICN (agencies and NGA’s)
An ICN-troduction: learn about the ICN and its work
Speaker: Sophie Mitchell - ICN Counsel, Office of Fair Trading
Speaker: Paul O'Brien - Attorney, Foreign Commerce Section, US Department of Justice
Speaker: Toshiko Igarashi - International Affairs Division, Japan Fair Trade Commission

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08.00 – 08.45 ICN meeting for Working Group Chairs

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09.00 – 09.05 Official opening of the 10th ICN Annual Conference 2011

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09.05 – 09:15 Speech Henk Don - Acting Chairman of the Board, Netherlands Competition Authority

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09.15 – 09.30 Speech Maxime Verhagen - Deputy Prime Minister of the Netherlands and Minister of Economic Affairs, Agriculture and Innovation

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09.30 – 09.45 Speech Joaquín Almunia - European Commissioner for Competition

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09.45 – 10.15 Speech John Fingleton - Chief Executive, Office of Fair Trading
The ICN's vision for its second decade

Documents:

ICN second decade vision paper
10.15 – 10.30 The ICN Curriculum Project
Presentation: William Kovacic – Commissioner, Federal Trade Commission and David Lewis - Professor, Gordon Institute of Business Science

Documents:

ICN Curriculum Project
10.30 – 11.00 Coffee break

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11.00 – 13.00 Advocacy Working Group

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11.00 – 11.45 Advocacy Working Group – Plenary
Promoting competition principles in government

Moderator: Vladimir Kachalin - Assistant to the Head, Russian Federal Antimonopoly Service
Speaker: Kazuhiko Takeshima – Chairman, Japan Fair Trade Commission
Speaker: Bruno Lasserre – President, French Autorité de la Concurrence
Speaker: Eduardo Perez Motta – Chairman, Mexican Federal Competition Commission
Speaker: John Fingleton - Chief Executive, Office of Fair Trading

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11.45 – 13.00 Advocacy Working Group – Breakout sessions

1: Promoting competition principles in government
Moderator: Rachel Brandenburger - Special Advisor, International, US DoJ
Panelist: Patricia Cordovilla González - Head of International Affairs, Spanish Comisión Nacional de la Competencia
Panelist: Carles Esteva Mosso - Director Policy and Strategy, Directorate General Competition, European Commission
Panelist: Jaeho Moon - Director, Competition Policy Bureau, International Cooperation Division, Korea Fair Trade Commission

2: Promoting competition principles in government
Moderator: Sophie Mitchell , ICN Counsel, Office of Fair Trading
Panelist: Chilufya Sampa - Director Mergers and Monopolies, Zambia Competition Commission
Panelist: Marta Skrobisz - Head of Unit, International
Relations and Communication Department, Polish Office of Competition and Consumer Protection
Panelist: Javier Tapia - Head, Research and Advocacy Division, Fiscalía Nacional Económica Chile

3: Promoting competition principles to business and consumers
Moderator: Paolo Benedetti - Director General, International Affairs, Mexican Federal Competition Commission
Panelist: Albert Foer - President, American Antitrust Institute
Panelist: John Oxenham - Director, Nortons Incorporated

4: Promoting competition principles to business and consumers
Moderator: Markus Lange - Head, International Unit, Bundeskartellamt
Panelis: Annetje Ottow - Professor Public Economic Law, Europa Instituut, Utrecht University
Panelist: John Holmes - Principal Economist

5: Evaluation of competition interventions
Speaker: Andrey Yunak - Deputy Head, Department for International Economic Relations, Russian Federal Antimonopoly Service
Speaker: Tetsuya Kanda - Deputy Director, Coordination Division, Economic Affairs, Japan Fair Trade Commission
Moderator: Ron Kemp - Senior Economist, Office of the Chief Economist, Netherlands Competition Authority

6: Evaluation of competition interventions
Speaker: Liberty Mncube - Senior Analyst, Policy and Research Division, Competition Commission of South Africa
Moderator: Carmen Suarez - Assistant Director, Services, Infrastructure and Public Markets Group, Office of Fair Trading
Speaker: João Gata - Head, Bureau of Economic Studies and Market Monitoring, Portugese Competition Authority

Documents:

Road testing report
Draft Market Studie TRAD
ICN Advocacy Toolkit
13.00 – 14.30 Lunch

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14.30 – 15.15 Cartel Working Group – Plenary
Public outreach and awareness

Moderator: Alexander Italianer – Director General, Directorate for Competition in the European Commission
Panelist: Belinda Barnett – Criminal Deputy General Counsel, Antitrust Division, US DoJ
Panelist: Sean Ennis – Executive Director, Competition Commission of Mauritius
Panelist: Yena Lim - Chief Executive, Competition Commission of Singapore

Documents:

ICN Compilation of Good Practices
15.15 – 15.45 Coffee break

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15.45– 17.00 Cartel Working Group - Breakout session

1: Business and public perceptions of cartel laws
Moderator: Marcus Bezzi - Executive General Manager, Enforcement and Compliance Division, ACCC
Panelist: Alvin Koh – Director, Legal and Enforcement Division, Competition Commission of Singapore
Panelist: Tembinkosi Bonakele – Deputy Commissioner of the Competition Commission South Africa
Panelist: Peter Armitage – Partner, Blake Dawson
Panelist: Andrew McBride – Senior Manager, Antitrust, BHP Billiton

2: Outreach strategies to promote awareness and use of leniency programs
Moderator: Ana Maria Melo Netto – Head of Legal Matters, Brazil SDE
Panelist: Kjell Sunnevåg – Norwegian Competition Authority
Panelist: Bogdan Chiritoiu – President of Romanian Competition Council
Panelist: David Anderson - Partner, Berwin Leighton Paisner

3: Enhancing compliance with cartel laws
Moderator: Pablo Amador Sanchez – Leniency Officer, Netherlands Competition Authority
Panelist: Steven Preece – Deputy Director of Competition Policy, Office of Fair Trading
Panelist: Katsunori Inaguma – Director of the Information Analysis Office, Japan Fair Trade Commission
Panelist: Christof Swaak – Partner, Stibbe
Panelist: Chul Ho JI – Director General, Competition Policy Bureau, Korean Fair Trade Commission

4: Outreach initiatives with government procurement officials
Moderator: Paul O'Brien – Attorney, Foreign Commerce Section, US DoJ
Panelist: Marlene Tobar – Public Tender Unit Coordinator, El Salvador Competition Authority
Panelist: Hillary Jennings - Head of Competition Outreach, OECD
Panelist: Dan Sjöblom – Director General, Swedish Competition Authority
Panelist: Eduardo Perez Motta – Commissioner, Mexican Federal Competition Commission

5: Regional cooperation
Moderator: Eric Van Ginderachter – Director of Cartels, Directorate for Competition, European Commission
Panelist: Jozsef Sarai – Head of International Unit, Hungarian Competition Authority
Panelist: Agnete Gersing – Director General, Danish Competition and Consumer Authority
Panelist: Manuel Sebastião – President, Portuguese Competition Authority

6: Leniency for cooperating parties (second-in and subsequent applicants) Moderator: Konrad Ost – Head, General Policy Division, Bundeskartellamt
Panelist: John Pecman – Senior Deputy Commissioner of Competition, Competition Bureau Canada
Panelist: Sonia Jozwiak – Expert, Polish Office of Competition and Consumer Protection
Panelist: Randal Hughes – Partner, McCarthy Tétrault LLP
Panelist: Gary Spratling – Partner, Gibson, Dunn & Crutcher

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18.00 – 18.30 Travelling to Madurodam

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18.30 – 21.00 Network dinner at Madurodam, the Netherlands in miniature
( ICN attendees and companions welcome )

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Thursday 19 May 2011 – Second conference day

08.00 – 08.45 Optional: Breakout session AISUP
Implementation of ICN Work Products: How can we do?

Moderator: Yukinari Sugiyama - Director, International Affairs Division, Japan Fair Trade Commission
Speaker: Mazhit Yesenbayev - Chairman, Agency for the Competition Protection of the Republic of Kazakhstan
Speaker: Vu Ba Phu - Deputy Director General, Vietnam Competition Authority
Speaker: Chilufya Sampa - Director of mergers and monopolies, Zambia Competition and Consumer Protection Commission
Speaker: Dorjpalam Tsedensamba - Vice Chairman, Authority for Fair Competition and Consumer Protection of Mongolia
Resource person: Vladimir Kachalin - Assistant to the Head, Russian Federal Antimonopoly Service
Resource person: Maria Coppola - International Antitrust, US Federal Trade Commission

Documents:

AISUP Activity Report
AISUP flyer
ICN Work Product Catalogue
08.00 – 08.45 Optional: Breakout session NGA
NGA Engagement: Discussion of the Draft NGA Toolkit

Moderator: Bruno Lasserre - President, French Autorité de la Concurrence
Speaker: John Holmes - Principal Economist
Speaker: John Taladay - Partner, Baker Botts LLP
Speaker: Kei Amemiya - Partner, Morrison & Forester / Ito & Mitomi

Documents:

Draft NGA Toolkit
09.00 – 10.15 Agency Effectiveness Working group – Breakout sessions

1: Knowledge management - Sharing agencies' experiences on different stages of KM implementation
Moderator: Lerzan Kayihan Ünal - Competition Expert, Acting Director of International Relations, Turkish Competition Authority
Resource person: Stephanie Yon - Consultant, Former Advisor for International Affairs, Staff of the President, French Autorité de la concurrence
Panelist: Teo Wee Guan - Director Strategic Planning, Competition Commission Singapore
Panelist: Jaeho Moon - Director, Competition Policy Bureau, International Cooperation Division, Korea Fair Trade Commission
Panelist: Shan Ramburuth - Commissioner, Competition Commission South Afrcia
Panelist: Tony Penny - Team leader, Know-How Team, Office of Fair Trading
Panelist: Isabelle Krauss - Deputy Head, Communication and Institutional Relations Unit, Directorate General Competition, European Commission

2: Knowledge management - networking as a tacit knowledge
Moderator: Margaret Bloom - Consultant, Freshfields, LINK Consumer Committee and visiting professor in the School of Law, King's Colloge London
Panelist: Thomas Barnett - Partner, Covington & Burling LLP
Panelist: Allan Fels - Dean, The Australia and New Zealand School of Government
Panelist: Sheridan Scott - Head of Competition Practice, Bennett Jones LLP
Resource person: Heba Shahein - Director International Relations Department, Egyptian Competition Authority
Resource person: Javier Tapia - Head, Research and Advocacy Division, Fiscalía Nacional Económica Chile

3: Tools and techniques to plan, select and implement projects more effectively
Moderator: Paolo Benedetti - Director General for Institutional Relations and International Affairs, Mexico Federal Competition Commission
Resource person: Maria Coppola - Visiting Fellow, Harvard School of Law
Resource person: Beth Farmer - Professor, Penn State Law Faculty

4: Tools and techniques to monitor and evaluate projects more effectively
Moderator: William Kovacic - Commissioner at the Federal Trade Commission
Moderator: Bart Broers - Deputy Director Legal Department, Netherlands Competition Authority
Resource person: Vladimir Kachalin – Assistant to the Head, Russian Federal Antimonopoly Service

5: Challenges and issues for young agencies
Moderator: John Davies - Head of Competition Division, OECD
Speaker: Decourcey Eversley - Director, Barbados Fair Trading Commission
Speaker: Rajeev Hasnah - Deputy Executive Director and Chief Economist, Competition Commission of Mauritius
Speaker: Sarunas Keserauskas - Chairman, Competition Council of Lithuania
Speaker: Manoj Pandey - Director, Competition Commission of India
Speaker: Pablo Marquez - Deputy Superintendent, Superintendencia de Indstria y Comercio of Colombia

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10.15 – 10.45 Coffee break

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10.45 – 11.30 Agency Effectiveness Working group – Plenary
Managing effectiveness: Issues from the Agency Manual

Moderator: Olavo Chingalia - Commissioner, CADE
Panelist: Jon Leibowitz - Chairman, US Fedaral Trade Commission
Panelist: Paolo Benedetti - Director General, Federal Commission on Competition Mexico
Panelist: Felipe Irarrázabal , National Economic Prosecutor at the FNE, the Chilean Competition Authority
Panelist: Shan Ramburuth - Commissioner, South Africa Competition Commission

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11.30 – 13.00 Special Project "Competition Enforcement and Consumer Welfare: Setting the Agenda" – Breakout sessions

1: Importance of referring to consumer welfare in mission and legislation Moderator: Toshiko Igarashi - International Affairs Division, Japan Fair Trade Commission
Moderator: Carmen Suarez - Assistant Director, Services, Infrastructure and Public Markets Group, Office of Fair Trading

2: Economic, definitions of consumer welfare
Moderator: Jan Kees Winters - Deputy Director, Office of the Chief Economist, NMa
Moderator: Christian Ewald - Chief Economist, German Bundeskartelamt

3: Legal, quantification of consumer welfare
Moderator: Ewoud Sakkers - Head of ECN Unit, Directorate General Competition
Moderator: Monique van Oers - Director, Legal Department NMa

4: Practicalities, outcome analysis and advocacy efforts
Moderator: René Smits - Legal Advisor, NMa
Moderator: Francis Karuiki - Acting Commissioner/CEO, Monopolies and Prices Commission of Kenya

5: Consumer Welfare from a Consumer perspective
Moderator: Jacques Steenbergen - Director General, Belgian Competition Authority
Moderator: Kati Cseres - Associate Professor, University of Amsterdam

6: Consumer Welfare from a Business perspective
Moderator: Anne Perrot - Vice President, Autorité de la Concurrence
Moderator: Olavo Chinaglia - Commissioner Administrativo de Defesa Econômica

Documents:

Discussion Document Special Project
13.00 – 14.30 Lunch

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14.30 – 15.00 Special Project – Plenary Competition Enforcement and Consumer Welfare: Setting the Agenda

Moderator: Henk Don - Acting Chairman of the Board, Netherlands Competition Authority(br)
Speaker: Jarig van Sinderen - Chief Economist, Netherlands Competition Authority
Speaker: Barbara Baarsma - CEO, SEO Economic Research

Documents:

Discussion Document Special Project
15.00 – 15.15 Proposal of new Steering Group members and Working Group co-chairs
Presenter: John Fingleton - Chief Executive, Office of Fair Trading

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15.15 – 16.00 Mergers Working Group – Plenary
Current trends and developments in merger enforcement

Moderator: Christine Varney - Assistant Attorney General, U.S. Department of Justice, Antitrust Division
Panelist: Melanie Aitken - Commissioner of Competition, Competition Bureau of Canada
Panelist: Cecilio Madero Villarejo - Acting Deputy Director for Mergers and Antitrust, Directorate-General for Competition, European Commission
Panelist: Andreas Mundt - President Bundeskartelamt
Panelist: Graeme Samuel - Chairman, Australian Competition & Consumer Commission
Panelist: Kazuhiko Takeshima - Chairman, Japan Fair Trade Commission

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16.00 – 16.30 Coffee break

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16.30 – 17.45 Mergers Working Group – Breakout sessions

1: Trends and developments in merger policy and analysis
Moderator: Chris Walters - Deputy Director of Mergers, Office of Fair Trading
Moderator: Vladimir Kachalin - Assistant to the Head of the Federal Antimonopoly Service of the Russian Federation.
Resource person: Mariana Vital Morgado - Liaison Officer, International Relations Bureau, Portuguese Competition Authority
Resource person: Edward Henneberry - Partner, Orrick, Herrington & Sutcliffe LLP
Resource person: Kyung Taek Jung - Attorney, Kim & Chang

2: Trends and developments in merger policy and analysis
Moderator: Paul Collins - Senior Deputy Commissioner of Competition, Mergers, Competition Bureau of Canada
Moderator: Sharis Pozen - Deputy Assistant Attorney General for Civil Enforcement, U.S. Department of Justice, Antitrust Division
Resource person: Alessandra Tonazzi - Counsel for International Affairs, Italian Competition Authority
Resource person: John Handoll - Lawyer, William Fry Solicitors
Resource person: Chih-Min Chen - Professor, Department of Financial and Economic Law, Chuan Yuan Christian University

3: Trends and developments in merger policy and analysis
Moderator: Seonghoon Jeon - Commissioner, Korean Fair Trade Commission
Moderator: Gerald FitzGerald - Member and Director, Mergers Division and Cartels Division, Irish Competition Authority
Moderator: Miguel de la Mano - Deputy Chief Economist, Directorate General for Competition, European Commission
Resource person: Kei Amemiya - Partner, Ito & Mitomi
Resource person: Carole Begent - Deputy Chief Legal Advisor and Head of International, U.K. Competition Commission

4: Making the Case: Effective Investigative Techniques and Current Practical Issues in Merger Enforcement
Moderator: Aad Kleijweg - Deputy Director, Competition Department, Netherlands Competition Authority.
Moderator: William Stallings - Acting Chief, Transportation, Energy & Agriculture Section, U.S. Department of Justice, Antitrust Division.
Resource person: Eric Tu - International Affairs Officer, Taiwan Fair Trade Commission
Resource person: Gönenç Gürkaynak - Competition Law and Regulatory Department, ELIG

5: Making the case: Effective Investigative Techniques and Current Practical Issues in Merger Enforcement
Moderator: Shlomi Parizat - Chief Economist, Israel Antitrust Authority
Moderator: Simon Genevaz - Deputy Head, Mergers Unit, French Autorité de la Concurrence
Resource person: Nancy Olson - Attorney, Foreign Commerce Section, US Department of Justice, Antitrust Division
Resource person: Göetz Drauz - Partner, Shearman & Sterling LLP

6: Implementation of the notification & procedures recommendations
Moderator: Maria Coppola - Counsel, Office of International Affairs, U.S. Federal Trade Commission
Moderator: Mateusz Blachucki - Chief Expert, Department of Merger Control, Polish Competition Authority

Documents:

For all breakout sessions
Session 6
Recommended Practices
18.00 – 18.30 Travelling to Kurhaus

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18.30 – 23.00 Festive sit down dinner at the Kurhaus Hotel
( ICN attendees and companions welcome )

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Friday 20 May 2011 – Closing 10th Annual ICN conference & Social event

08.00 – 08.45 Optional: The ICN Curriculum Project – feedback and next steps

Moderator: Randolf Tritell - Director, Office of International Affairs, U.S. Federal Trade Commission
Moderator: David Lewis - Gordon Institute of Business Science
Resource person: Terry Calvani - Partner, Freschfields Bruckhaus Deringer
Resource person: Elizabeth Farina - Professor, University of São Paulo
Resource person: Margaret Bloom - Visiting Professor, School of Law, King's College London

Documents:

ICN Curriculum Project
08.00 – 08.45 Optional: Regional Platforms / Regional Issues

Possible synergies between Regional Platforms and ICN Work
Introduction: Eduardo Perez Motta - President, Mexican Federal Competition Commission

OECD Regional Centers
Speaker: Laszlo Bak – Chief of Staff, Hungarian Competition Authority
Speaker: Jaeho Moon - OECD Regional Centre Korea, Director, Competition Policy Bureau, International Cooperation Division, Korea Fair Trade Commission
Speaker: Hillary Jennings - Head of Competition Outreach, OECD

African Competition Forum
Speaker: Francis Wang'ombe Kariuki - Acting Commissioner/CEO, Monopolies and Prices Commission of Kenya
Speaker: Miguel Laric - DFID's Investment Climate Team

Latina America Regional Center for Competition
Speaker: Eduardo Perez Motta - President, Mexican Federal Competition Commission
Speaker: Martha Martinez Licetti - Economist, Investment Climate Advisory Services, World Bank Group

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09.00 – 10.15 Unilateral Conduct Working Group – Breakout sessions

1: Determining dominance: beyond defining markets and measuring shares
Moderator: Anne Perrot - Vice President, French Autorité de la Concurrence
Moderator: Jan Lohrberg - Counsel for International Competition Matters, German Bundeskartellamt
Resource person: Eleanor Fox - Professor, New York Univerity School of Law
Resource person: Sai Ree Yun - Partner, Yulchon

2: Determining dominance: beyond defining markets and measuring shares
Moderator: Andreas Fuchs - Professor, University of Osnabrück
Moderator: Joseph Wilson - Policy Planning, Research, Exemptions & International Affairs, Competition Commission of Pakistan
Resource person: Donald Baker - Partner, Baker & Miller
Resource person: Trudi Makhala, Senior Analyst, Policy & Research Division Competition Commission of South Africa

3: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: Ed Smith - Director of International, Office of Fair Trading
Resource person: Sean Gates - Partner, Morrison & Foerster
Resource person: Russell Miller - Partner, Minter Ellison
Resource person: Ali Demiroz - Department Head, Turkish Competition Authority

4: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: Jan-Kees Winters - Deputy Director, Office of the Chief Economist, NMa
Resource person: Charles Webb - Partner, Baker Botts
Resource person: Kimitoshi Yabuki - Yabuki Law Offices
Resource person: Adrian Majumdar - Consultant, RBB Economics
Resource person: Staffan Martinsson - Senior Case Officer, Swedish Competition Authority

5: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: Assimakis Komninos - Commissioner, Hellenic Competition Commission
Resource person: Renata Hesse - Partner, Wilson, Sonsini, Goodrich & Rosati
Resource person: Wolfgang Deselaers - Partner, Linklaters
Resource person: Ernst Ferdinandusse - Principal Administratior, European Commission

6: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: James Rill - Partner, Baker Botts
Resource person: Damien Neven - Professor, Graduate Institute Geneva
Resource person: Wojciech Dorabialski - Head of Unit, Market Analysis Department, Polish Competition Authority
Resource person: David Anderson - Partner, Berwin Leighton Paisner

7: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: Simon Roberts - Chief Economist, and Manager, Policy and Research Division, Competition Commission South Africa
Resource person: Paul Lugard - Assistant Professor at Tilburg Intitute of Law and Economics
Resource person: Alden Abbott - Attorney, United States of America
Resource person: Vicente Bagnoli - Professor, Mackenzie Law School

8: Investigating a loyalty discounts & rebates (LD&R) program
Moderator: Jacques Steenbergen - Director General, Belgian Competition Authority
Resource person: James O'Connell - Partner, Covington & Burling
Resource person: Anne Wachsmann - Partner, Linklaters

Documents:

Sessions 1 & 2
Workbook – Chapter 3
Dominance Substantial Market Power Analysis

Sessions 3 – 8
Loyalty Discount Hypothetical
Loyalty Discount Hypo Data
10.15 – 10.35 Coffee break

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10.35 – 11.20 Unilateral Conduct Working Group – Plenary
Arguing the case: Scrutinizing an Loyalty Discount & Rebate Case from all sides

Open remarks: Randolph Tritell – Director Office of International Affairs, U.S. Federal Trade Commission
Moderator: Markus Lange – Head of Unit, International Competition Matters, Bundeskartellamt
Speakers: Radoslav Depolo – Judge, Tribunal for the Defense of Free Competition; Fernando de Magalhães Furlan – President council for Economic Defense; David Lewis – Professor Gordon Institute of Business Science; Lucas Peeperkorn – Principal Expert in Antitrust Policy DG competition, European Commission; Salvatore Rebecchini – Commissioner Italian Autorità Garante della Concorrenza e del Merceto; Thomas Barnett - Partner, Covington & Burling LLP

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11.20 – 12.30 Official closing session of the 10th ICN Annual Conference 2011

11.20 – 12.00: Report back and future work
(10 min per Working Group)

Advocacy Working Group: Sophie Mitchell - ICN Counsel, Office of Fair Trading
Cartel Working Group: Kris Dekeyser - Head of Unit Cartels Directorate, European Commission
Agency Effectiveness Working Group: Lerzan Kayihan Ünal - Competition Expert, Acting Director of International Relations, Turkish Competition Authority
Mergers Working Group: Gerald FitzGerald - Member and Director, Mergers Division and Cartels Division, Irish Competition Authority
Unilateral Conduct Working Group: Cynthia Lewis Lagdameo – Counsel for International Antitrust, U.S. Federal Trade Commission

12.00 – 12.05: Closing remarks Henk Don - Acting Chairman of the Board, The Netherlands Competition Authority

12.05 – 12.15: 10th Anniversary ICN

12.15 – 12.20: Closing remarks: John Fingleton - Chief Executive, Office of Fair Trading
Closing remarks: Henk Don - Acting Chairman of the Board, The Netherlands Competition Authority

12.20 – 12.30: Introduction organising authority ICN 2012, Administrative Council for Economic Defense, Brazil
Speech Fernando Furlan - President, Administrative Council for Economic Defense

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12.45 – 13.45 ICN Steering Group meeting

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13.00 – 18.00 Social Event: Amsterdam
( ICN attendees and companions welcome )

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Coming Monday May 23, 2011 - Blog Symposium on AT&T/T-Mobile Merger - What Are the Competition Concerns?

Posted by D. Daniel Sokol

I am happy to report that we will have a mini-blog symposium on Monday May 23, 2011 called that AT&T/T-Mobile Merger - What Are the Competition Concerns?. As the title will suggest, the blog symposium will highlight the competition concerns of the AT&T/T-Mobile merger.

I have a number of invitations out but already signed up to participate are:

Roger Noll (Stanford - Economics)
Harry First (NYU - Law)
Maurice Stucke (U. Tennessee Law)

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Search Engine Competition with Network Externalities

Posted by D. Daniel Sokol

Cédric Argenton, Tilburg Law and Economics Center (TILEC), Tilburg University - Center and Faculty of Economics and Business Administration and Jens Prufer, TILEC and CentER, Department of Economics, Tilburg University discuss Search Engine Competition with Network Externalities.

ABSTRACT: The market for Internet search is not only economically and socially important, it is also highly concentrated. Is this a problem? We study the question whether "competition is only a free click away". We argue that the market for Internet search is characterized by indirect network externalities and construct a simple model of search engine competition, which produces a market share development that fits the empirically observed development since 2003 well. We find that there is a strong tendency towards market tipping and, subsequently, monopolization, with negative consequences on economic welfare. Therefore, we propose to require search engines to share their data on previous searches. We compare the resulting "competitive oligopoly" market structure with the less competitive current situation and show that our proposal would spur innovation, search quality, consumer surplus, and total welfare. We also discuss the practical feasibility of our policy proposal and sketch the legal issues involved.

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Angus MacCulloch Blog Symposium Comments on Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by Angus MacCulloch

Reading through the material in Caron and Ariel's excellent collection of essays has given me a great deal or food for thought. As it would be impossible to do justice to the wealth of content in all twenty chapters I want to try and focus on a number of themes that seem to feature across a number of the contributions - I also make no apology for focussing on issues that have been troubling me of late. The three themes I want to address are 'Complexity', 'Culture', and 'Consensus'.

Complexity

It is clear from a study which takes an explicitly critical approach to cartel regulation that the few comfortable legal assumptions which have grown up and shaped much contemporary competition, or antitrust, law dealing with cartels are on shakier foundations than many of us, who have plied our trade in the field, are happy to admit. Ever increasing enforcement activity, greater resources, and improved tools do not appear to be deterring the formation of cartels or even hastening their demise (notwithstanding the inherent difficult in measuring the 'dark figure', as characterised by Harding, of undetected activity). I would not describe the last decade's activity as a failure; in many ways it has been successful in its own terms by catching and punishing more cartelists than ever before. What is clearly in question is whether a punitive approach, with criminalisation being the punitive standard bearer, is ever likely to be *the* solution to the cartel problem? Several contributions to the book, particularly but not exclusively those in Part E, indicate the complexity of the issues that face us as we move away from the traditional enforcement orthodoxy. As we strive to better understand cartels it may mean that the regulatory response will have to become more sophisticated and nuanced.

Culture

Turning more specifically to the move toward criminalisation itself the essays in Parts B, C and D of the book highlight for me one of the key impacts of the turn to the criminal law to further competition policy goals. That is the very different national legal 'cultures' of criminal law that exists in different jurisdictions. Comparative law has long warned about the difficulty of legal transplants and cartel criminalisation is another good example. It may be possible to argue that there is a consensus (more on that in a moment) that cartels are bad, and something should be done about them; however, it is clearly more difficult to conclude that the actions of a cartelist are clearly criminal and deserving of harsh (in comparison to 'real' crimes) punishment. It appears to be the case that jurisdictions which have successful criminalisation of cartel-type activity, for example the US and Germany, do so because their domestic legal and social 'cultures' already see that activity as wrongful and morally deserving of punishment.

This creates a difficult 'chicken or egg' dilemma for other jurisdictions, like the UK, where there is an engaged political and legal 'elite' who wish to criminalise cartel behaviour, but there is little apparent appetite or understanding for such course in the business community or amongst the wider public.

Consensus

Can the apparent enforcement consensus which appears to have developed in recent years survive these challenges - and the challenge of moving beyond its Anglo-American/Commonwealth heartland? As Stephen Wilks contribution discusses there may be a form of post-Chicago orthodoxy/hegemony at the forefront of contemporary debate, but the move towards criminalisation is a challenge even to that. As I have already noted the differing legal 'cultures' approach to cartel criminalisation means that different jurisdictions which do decide to criminalise are likely to have varying responses to the technical process of criminalisation. That variation may appear to be a breakdown of whatever consensus there is, but it may also be seen as steps towards the building of a new consensus (as Ezrachi and Kindl indicate is through various 'soft law' processes). It may also make it easier for jurisdictions with vigorous criminal enforcement to play a clear global role by making extraterritorial enforcement of their domestic law easier (through improved cooperation and extradition arrangements).

Conclusions

From work such as this it is increasingly clear that while there may be a trend toward increased use of criminal sanctions against cartel behaviour there are still a great many unanswered and troubling questions that lie behind it. The advocates of cartel criminalisation should take care to ensure that if they are seeking to encourage a jurisdiction to move towards the introduction of a cartel offence they pay heed to the specific legal and social conditions of that jurisdiction and make sure that the offence properly 'fits' in that enforcement landscape. The troubled UK cartel offence stands as a useful example of what can happen when political and technical desire runs ahead of wider public and business acceptance, and enforcement capacity. I would not like to be seen as being too negative in these comments, as I do see the process towards the greater use of criminal sanctions as being generally positive. But I do feel that it is important that we do not find ourselves in a position whereby a rush towards criminalisation damages the important steps towards the effective regulation of cartels that have been taken through other, less contentious, means.

 

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

District Court Rejects the Google Books Settlement: A Missed Opportunity?

Posted by D. Daniel Sokol

Greg Leonard (NERA) asks District Court Rejects the Google Books Settlement: A Missed Opportunity?

ABSTRACT: This paper offers an economic perspective on the antitrust and intellectual property issues involved in the Google books case and suggests that the district court's rejection of the proposed settlement represents a missed opportunity for consumers.

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

The Role and Regulation of Interchange Fees in European Payments

Posted by D. Daniel Sokol

The Role and Regulation of Interchange Fees in European Payments

The Role and Regulation of Interchange Fees in European Payments

15 June 2011 

Hotel Silken Berlaymont, Brussels 

If you’re interested in attending, please contact Abigail Adams at abigail.adams@pymnts.com. This conference is free of charge. Seats are limited and not all RSVPs will be accepted.

Interchange fees remain a subject of controversy in the European Union as well as other jurisdictions around the world.  Competition authorities and bank regulators have questioned the legality, or propriety, of setting these fees as well as whether merchants are being asked to pay too much. Merchants have also complained about these fees. The card schemes, and the banks that ultimately receive these interchange fees, say they are necessary for operating systems that maximize the value to consumers and merchants and for encouraging investment and innovation.

Against this backdrop the pioneering work on the economics of two-sided markets has delved deeply into the role these fees play in card schemes. A vibrant debate has resulted in that literature over whether there is a problem at all and, if the government is going to regulate interchange fees, how they should go about doing it.  New research is coming out frequently on this topic. 

Interchange fees are now a critical issue in the debate over the integration of payments and banking in the European Union as well as rising concerns that Europe is lagging in innovation in payments.  With the hoped-for success of the Single European Payments Area (SEPA) initiative worries have been raised over the future of the European domestic schemes and the prospects for a European-based scheme to become a leading player in Europe and elsewhere in the world. Regulation of interchange fees alters the business model for payments by eliminating a source of revenue from the merchant side of the business.   Whether and to what extent interchange fee regulation could alter incentives for the entry of new payment systems, of the pace and direction of innovation, is an important subject.

The purpose of this conference is to bring economists, policymakers, and innovators together to discuss and debate these important issues.  The conference will focus on four key questions:

  1. What's the role for interchange fees, are they needed, and how should regulation address these fees?

  2.  

    How does the interchange fee affect the pace and direction of innovation and investment in payments card systems? 
  3. How would the participants in the payments card systems respond to changes in interchange fees and how would those changes affect European consumers and merchants?
  4. What's the relationship between interchange fees and SEPA and what is the role of the interchange fee in the viability of new payment systems in Europe?

The Agenda

9:00 to 9:15|          Welcome Remarks

9:15 to 9:45 |         Keynote Speech, The Monnet Project and the Future of Payments in Europe

9:45 to 11:00 |      Role and Regulation of Interchange Fees

11:00 to 11:15 |    Coffee Break

11:15a to 12:30 | Innovation, Investment and Interchange Fees

12:30 to 14:00 |    Lunch: European Payments and Monetary Integration

14:00 to 15:30 |    Impact of Changes in Interchange Fees on Consumers and Merchants

15:30 to 16:30 |    Interchange Fees, SEPA, and Payment System Entry

Download the agenda, speakers, and complete information.

If you’re interested in attending, please contact Abigail Adams at abigail.adams@pymnts.com.  This conference is free of charge. Seats are limited and not all RSVPs will be accepted.

 

The Role and Regulation of Interchange Fees in European Payments

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Buyer Power and Merger Policy

Posted by D. Daniel Sokol

John B. Kirkwood, Seattle University School of Law has an interesting article on Buyer Power and Merger Policy.

ABSTRACT: Large buyers now occupy prominent positions in many sectors of the economy, from the packing of meat to the retailing of groceries and books. Antitrust law, however, has remained much more concerned with seller power than buyer power. In the merger area, antitrust enforcement has been riveted on a single anticompetitive possibility – that a merger of buyers would create monopsony power (the mirror image of monopoly power). Mergers that would harm competition through the exercise of buy-side countervailing power (the ability to reduce the market power of suppliers) are not addressed by the government’s guidelines, the leading treatises, or the case law. This article provides a comprehensive reexamination of buy-side merger policy. It defines the two types of buyer power, describes their procompetitive and anticompetitive effects, and reviews an array of evidence on the impact of countervailing power. It analyzes the traditional approach to mergers that create monopsony power and suggests modifications that reflect the dynamics of buyer power. It contains the most detailed discussion to date of buy-side countervailing power and the policy issues it presents, including a description of ten different scenarios in which a merger that augmented such power would reduce competition and diminish the welfare of suppliers, consumers, or society.

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Julie Clarke Comments on Blog Symposium - Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by Julie Clarke

Selling the case for criminalisation of cartels

As an advocate for the introduction of criminal penalties in Australia I read this new collection with great interest and was not disappointed.  It addressed a wide range of themes, first providing historical and cultural perspectives on criminal cartel enforcement in a number of jurisdictions and then pursing identifying themes relating to cartel criminalisation.  For regulators, policy makers and anyone else interested in this field it will prove an invaluable resource. 

I have chosen to highlight two themes: deterrence and enforcement.

Deterrence

One of the collection’s key themes was whether criminalisation of cartels could be justified on the basis that it improved deterrence.  Competition authorities, in particular, frequently claim that the availability of criminal remedies can overcome the problem of under-deterrence.  Civil penalties alone, it is said, cannot achieve optimal deterrence because of the height of the potential gains and the (estimated) small risk of detection.  By contrast, the potential for imprisonment changes the equation because of the inability for any rational cost-benefit analysis to attribute a price to the loss of freedom and to the stigma attached to incarceration.

A number of chapters challenged these assumptions, including most notably the chapters by Christine Parker and Maurice Stucke.  Although the possibility of imprisonment acting as an increased deterrence in some cases was not seriously challenged, attention was drawn to the lack of empirical evidence to demonstrate the effect of criminal penalties on deterrence more generally. The suggestion that business people always engage in a cost-benefit analysis was also disputed (in this respect Stucke usefully identifies as range of relevant dispositional and situational factors) and, even in cases of rational self-interested cartelists, their ability to conduct an accurate analysis was questioned (for example, the likelihood of detection may be easily under or over-estimated). 

Anyone who started reading the collection convinced that criminal penalties would achieve optimal deterrence should prepare to have their conviction shaken.  That is not to say the deterrence argument lacks merit; simply that the extent of criminalisation’s deterrent effects should be viewed with healthy scepticism.

Enforcement: selling the case for cartels

Despite the foregoing, I remain of the view that effective criminal enforcement of cartel conduct is likely to enhance general deterrence and that it is appropriate to criminalise cartels because of the nature of the harm they cause.  Consequently, I was particularly interested in discussion regarding the effective enforcement of criminal cartel laws.

The likelihood of deterrence through criminal prohibition is clearly dependent on effective enforcement which in turn requires broad community support.  The level of public support for the ‘criminality’ of the conduct is likely to influence politicians, sentencing judges, prosecutors and, of course, jurors deciding the fate of the accused. 

A number of chapters address this to some degree.  However, it is addressed most directly by Andreas Stephan, who focuses on the role of media in garnishing public support (ch 17).  While emphasising the need for public support, Stephan observes that, at least outside North America, there is no great ‘tradition of pursuing corporate crime’ (381) and so normative attitudes to corporate misconduct must change for any new corporate criminal regime to prove effective.

It is acknowledged that merely criminalising cartel conduct will not change normative attitudes (at least not quickly). In this respect Stephan observes that cartel laws ‘have been criminalised explicitly to signal the damaging nature of cartel practices, to corporations and members of the public’ (at 381). However, he (and others) recognise that the increase in regulatory crimes and over-criminalisation generally have diminished the power of the criminal law to stigmatise and change societal norms in the way it once might have done (p 384).  Thus, for example, while legislators (at least in Australia) invoke the criminal law to penalise motorists for parking violations, few would regard such motorists as criminals.  Rebecca Williams (ch 13) also addresses this issue, critiquing the ‘top down’ (rather than ‘bottom up’) approach to cartel criminalisation – that is, hoping criminalisation will change societal norms rather than criminalising cartel conduct as a result of public perceptions about its moral delinquency.

Attempts to stigmatise conduct through the level of penalty are also unlikely to be successful given the lack of parity among many offences.  It may also, as Stucke claims, have the reverse consequence because ‘judges and juries will likely reject optimal deterrence theory when jail sentences appear excessive relative to the crime’s moral nature’ (p 288).  As Low and Halladay observe (ch 4), by imposing a maximum jail term of 14 years for cartel conduct in Canada, Parliament has now effectively equated that conduct with that of aggravated assault and torture.  It is unlikely the public – even educated as to the economic harm of cartel conduct – would view it as on par with crimes that inflict high levels of physical and mental harm.

Rather than hope that the mere act of criminalisation will affect normative change, Stephan observes that the media, properly utilised, can play an important role in securing public support for criminalisation of cartel conduct though ‘education and information dissemination’.  The key problem he identifies with this approach is that the media lacks the inclination to report on cartel conduct because it is not ‘naturally newsworthy’ (p 394) - it ‘lacks the “brimstone smell” of muggings and burglaries’ (p 386).

Other problems include lack of public understanding (including media understanding) of the wrongfulness of cartel conduct, the indirect nature of harm caused (as Stucke observes, people generally view indirect harm as less problematic than direct harm, even where the indirect harm is far greater) and the difficulty and delay in identifying the extent of loss and identity of victims.  Perhaps even more significantly, the perpetrators do not ‘look like criminals’ and are often of high social standing.  Although this can assist with the newsworthiness of an enforcement action, it can also distort media coverage and public perception of the conduct.  This was spectacularly demonstrated in Australia when, following an admission of cartel conduct in what was described by the (civil) sentencing judge, Justice Heerey, as the ‘most serious cartel case to come before the Court in the 30 plus years in which price fixing has been prohibited by statute’, Richard Pratt received significant public support and even praise from Australia’s Prime Minister and the Premier of his home state for, among other things, his extensive philanthropic activities. 

Stephan is not, however, a defeatist and suggests there remains scope for the media to positively influence public norms about cartel conduct.  His advice to authorities with new cartel laws is salient and simple (in theory): they have ‘a responsibility to choose [their] early criminal prosecutions carefully so as to maximise their impact, instilling acceptance of enforcement and ultimately encouraging a culture of compliance’ (p 394).  He points to UK examples as an example of how not to approach early criminal enforcement. In Australia we are still waiting for our first criminal prosecution of cartel conduct; we can only open that our enforcers heed this advice.

 

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Imperfect Competition between Milk Manufacturers and Retailers in a Midwestern State in the U.S.

Posted by D. Daniel Sokol

Vardges Hovhannisyan and Kyle W. Stiegert (both Wisconsin Ag Economics) explore Imperfect Competition between Milk Manufacturers and Retailers in a Midwestern State in the U.S.

ABSTRACT: This manuscript studies the market conduct of the milk manufacturers and retail chains in a Midwestern state in the U.S. Following the menu approach we employ a random coefficient logit demand model to investigate several possible scenarios on the supply side. Demand estimates are obtained using both cross-sectional and time series variation in data. We also allow annual variation in consumer demographics which helps identify the coefficients of interaction between consumer demographics and product characteristics. To further enhance identification power we allow choice set of milk to vary across markets. The results are most supportive of the conjecture that manufacturers behave competitively letting the retailers be the residual claimants. Later they may collect a part or full rents from the retailers through two-part tariffs.

May 17, 2011 | Permalink | Comments (0) | TrackBack (0)