Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, May 28, 2011

Practical Aspects of Aftermarkets in European Competition Law

Posted by D. Daniel Sokol

John Temple Lang (Cleary Gottlieb, Trinity College) explores Practical Aspects of Aftermarkets in European Competition Law.

ABSTRACT: An "aftermarket" is a market for the supply of products or services needed for or in connection with the use of a relatively long-lasting piece of equipment that has already been acquired. Aftermarkets give rise to several kinds of questions under competition law. Does a relevant market for competitive analysis consist of separate markets for primary and secondary products, or is it a market for "systems" consisting of both primary and secondary products? When, if at all, is the supplier of the primary product dominant in the aftermarket for products or services needed for use with its equipment? If it is dominant, what conduct may be an abuse prohibited by Article 102 (ex-82) of what is now the Treaty on the Functioning of the European Union? This article applies well-known general principles of competition law, along with case law, to answer these questions.

May 28, 2011 | Permalink | Comments (0) | TrackBack (0)

Stability and Competition in Banking after the Financial Crisis

Posted by D. Daniel Sokol

 

 

The UCL Jevons Institute for Competition Law and Economics is pleased to announce that Sir John Vickers will be opening its 2011 Colloquium Debate on


Stability and Competition in Banking after the Financial Crisis
A debate over structural and behavioural remedies in banking in the light of the Independent Banking Commission's Interim Report 


on 8 June 2011 from 4 - 7.30pm at UCL's Faculty of Laws


Speaker include Sir John Vickers (ICB),  John Fingleton (OFT), Gert-Jan Koopman (European Commission), Clive Maxwell (OFT), Abel Mateus (New University of Lisbon), Charles Goodhard CBE FBA (LSE), and Vicky Pryce (FTI) 


This event is accredited with 2 .5 CPD hours by the SRA and BSB


Sign up online for your place by clicking on the links below or go to: 
http://jevons-ibc-report.eventbrite.com/  


Standard Ticket £40 (discounts for UCL alumni)
Academics, Government Departments, NGO and Students are free of charge.  

 

About this event:
The recent deep financial crisis has resulted in the search for measures that could reduce the risk of a recurrence. Many have looked at whether banks tend to take on risks that the general public ends up bearing and whether regulations should reduce these negative externalities. Some have called for breaking banks up, raising capital standards, charging them for the risks they create, or impose various rules that prevent banks from creating too much systemic risk. Others have questioned whether the extent to which banking practices were really responsible for the crisis or whether the proposed constraints on banks impose more costs on banks than they are worth such as perhaps reducing bank lending that stimulates economic group. While financial regulators have been most focused on reform competition authorities are also increasingly focused on banking and, among other things, are considering the relati! onship between market structure, business practices, and system risk.

 

The recently released interim report by the Independent Commission on Banking, chaired by Sir John Vickers, is one of the latest attempts to consider these difficult issues. It proposed significantly increased capital requirements on banks and some fencing off of retail banking from riskier operations.

 

This conference brings together antitrust and financial regulation experts, including key current or former regulators from the UK and EU, to discuss these issues. 

 


You are invited to the following event:
Debate on the Stability and Competition in Banking after the Financial Crisis

Date:
Wednesday, June 08, 2011 from 4:00 PM - 7:00 PM (GMT)

Location:
UCL Faculty of Laws - Graduate Wing
1 - 2 Endsleigh Gardens
WC1 London
United Kingdom

 

 

Can you attend this event? Respond Here

 

May 28, 2011 | Permalink | Comments (0) | TrackBack (0)

Allocating Cartel Fines Among Companies of a Group

Posted by D. Daniel Sokol

Laura Atlee & Yves Botteman (Steptoe & Johnson) provide thoughts on Allocating Cartel Fines Among Companies of a Group.

ABSTRACT: We have previously discussed the Akzo Nobel Chemicals case, in which the Court of Justice of the European Union (formerly European Court of Justice) continued to attribute joint and several liability to parent companies for cartel infringements committed by their wholly owned subsidiaries. The attribution of liability has major implications for the amount-up to 10 percent of global turnover-and payment of any fines imposed by the European Commission (the "Commission") for such infringements.

In this article, we explore how the resulting fine ought to be allocated among a parent and its subsidiaries. In Siemens AG Österreich, the General Court (the "Court") clarified that when the Commission attributes joint and several liability to a parent it must consider: (i) the periods during which the parent effectively exercised control over the subsidiaries; and (ii) allocate, if need be, the amount covered by joint and several liability among those entities in order to reflect their liability for the infringement.

May 28, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, May 27, 2011

Beaton-Wells and Ezrachi Respond to the Blog Symposium on Criminalising Cartels

Posted by Caron Beaton-Wells and Ariel Ezrachi

We are grateful to the reviewers for their reflections on Criminalising Cartels: Critical Studies of an International Regulatory Movement (Hart, 2011) and to Danny for convening the symposium on the book.

One of the objectives of the book was to challenge some of the key assumptions or assertions commonly made in advocacy for criminal cartel enforcement. As confessed supporters for criminalisation, two of the book reviewers reported that the book indeed had succeeded in challenging their assumptions – particularly as to the acclaimed deterrence impact of criminal sanctions. For an author or editor, first-hand feedback of this nature is highly gratifying. Each of the reviewers also reflected in their comments important themes from the book, such as the challenges involved in criminal enforcement, the cultural specificity of a criminal regime and the significance of criminalisation’s moral dimensions.

If there was one particular insight from the reviews on which we would like to comment, it was the suggestion by Anestis Papadopoulos that, for developing countries new to competition law, criminalisation should be deferred until other foundational conditions for an effective antitrust system have been bedded down (political support and incorporation into academic curricula are two such conditions mentioned). No doubt this would resonate with many who have witnessed or studied the challenges associated with legislating and building capacity for competition law and enforcement in developing countries. However, there is an alternative perspective. It might alternatively be argued that there is greater scope to provide for criminal sanctions when a competition law regime is first introduced than subsequently, once that regime is well-established. Provision for criminal sanctions from the start might offer a effective mechanism for communicating the importance attached by political leaders and policy-makers to competition as a path to economic progress, productivity and prosperity. In this way, criminalisation may be used to transmit an ideological message, should such transmission be seen as necessary or desirable. We appreciate, of course, that there are additional practical factors to be considered in relation to any such proposal. However, it is useful to recognise that criminalisation may be employed as much a tool of ideology as a weapon of enforcement.”

May 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Congratulations to Rui Li for His Paper "Antitrust, Intellectual Property Rights, and the Online Music Industry: An Antitrust Analysis of Apple’s Combination of Services and Products"

Posted by D. Daniel Sokol

From the University of Iowa Press Release:

Rui Li, a third year law student at the University of Iowa College of Law, is the winner of the National Law Review’s Spring 2011 Legal Writing Contest.

Li’s winning paper is titled “Antitrust, Intellectual Property Rights, and the Online Music Industry: An Antitrust Analysis of Apple’s Combination of Services and Products.”

The NLR’s award is presented to articles that are straightforward and practical, containing useful information of potential interest to legal and business professionals. Li’s paper can be found online at http://www.natlawreview.com/article/antitrust-intellectual-property-rights-and-online-music-industry-antitrust-analysis-apple-s-.

HT (Jim Fishkin)

May 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Information Exchange in Competition Law - 22 June 2011

Posted by D. Daniel Sokol

The Brussels School of Competition Law has an interesting conference coming up on Information Exchange in Competition Law.

May 27, 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 (Department of Environmental and Business Economics, University of Southern Denmark) discusses 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 tourna-ment 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 proportionat! e to 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 practic! e reveals several open problems. Other areas of the buying and selling behavior of sports associations and related enterprises are considerably less well-developed and do not provide much orientation for business. The author would like to thank Arne Feddersen and the participants of the 2nd European Conference on Sports Economics (German Sports University Cologne, 2010) for valuable comments on earlier versions of this paper.

May 27, 2011 | Permalink | Comments (1) | TrackBack (0)

Efficiency or Competition? A Structural Analysis of Canada's AWS Auction and the Set-Aside Provision

Posted by D. Daniel Sokol K

yle Hyndman (Southern Methodist University) and Christopher F. Parmeter (University of Miami) explain Efficiency or Competition? A Structural Analysis of Canada's AWS Auction and the Set-Aside Provision.

ABSTRACT: In 2008 Industry Canada auctioned 105MHz of spectrum to a group of bidders that included incumbents and potential new entrants into the Canadian mobile phone market, raising $4.25 billion. In an effort to promote new entry, 40MHz of spectrum was set-aside for new entrants. We adapt the methodology of Bajari and Fox (2009) to the Canadian auction setting in an effort to estimate the implicit cost (in terms of lower auction efficiency) of this policy. Our results indicate that revenue would have been approximately 10% higher without the set-aside.

May 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?

Posted by D. Daniel Sokol

David Granlund, Department of Economics, Umea University) and Miyase Yesim Koksal (Department of Economics, School of Business, Economics and Law) ask Parallel Imports and Mandatory Substitution Reform - A Kick or A Muff for Price Competition in Pharmaceuticals?

ABSTRACT: What has been the effect of competition from parallel imports on prices of locally-sourced on-patent drugs? Did the 2002 Swedish mandatory substitution reform increase this competition? To answer these questions, we carried out difference-in-differences estimation on monthly data for a panel of all on-patent prescription drugs sold in Sweden during the 40 months from January 2001 through April 2004. On average, facing competition from parallel imports caused a 15-17% fall in price. While the reform increased the effect of competition from parallel imports, it was only by 0.9%. The reform, however, did increase the effect of therapeutic competition by 1.6%.

May 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 26, 2011

ACOs And Antitrust Enforcement: Familiar Rules Raise New Concerns

Posted by D. Daniel Sokol

Jane Willis, Mark Popofsky, & Daniel Bachner (Ropes & Gray) address ACOs And Antitrust Enforcement: Familiar Rules Raise New Concerns.

ABSTRACT: On March 31, 2011, the Federal Trade Commission ("FTC") and the U.S. Department of Justice ("DOJ") released a joint Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (the "ACO Statement" or "Statement"). The ACO Statement incorporates a market-share based "safety zone," a feature common to both the Antitrust Guidelines for Collaborations Among Competitors (2000) and the Statements of Antitrust Enforcement Policy in Health Care (1996). Unlike these prior guidelines, however, the ACO Statement requires mandatory agency review if a certain threshold is met. Because CMS (the U.S. federal agency that administers health insurance programs such as Medicare) will not approve ACOs that the antitrust enforcement agencies determine are subject to challenge, careful up-front attention to antitrust risk will be of vital importance to providers in navigating successfully the requirements for establishing ACOs.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition and Stability in Banking

Posted by D. Daniel Sokol

Xavier Vives, IESE Business School has an article on Competition and Stability in Banking.

ABSTRACT: I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on the intensity of competition.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Revising Merger Guidelines: Lessons from the Irish Experience

Posted by D. Daniel Sokol

Paul Gorecki (Economic and Social Research Institute, Dublin and Department of Economics, Trinity College, Dublin) describes Revising Merger Guidelines: Lessons from the Irish Experience.

ABSTRACT: Competition authorities typically issue Merger Guidelines setting out the framework within which merger assessment is conducted. Ireland is no exception. The Competition Authority is currently in the process of revising its 2002 Guidelines. In this paper we not only comment on the procedure that is being used to revise these Guidelines as well as the substance of the proposed revisions to the Guidelines, but also draw some wider lessons that might be of assistance to other competition authorities, particularly smaller competition authorities, in revising their Guidelines. The lessons include: carefully distinguishing between proposals for revising the Guidelines that incorporate existing merger assessment custom and proposals that mark a significant departure from current Guidelines as well as existing custom and practice. Proposals for revising the Guidelines, particularly when referring to existing custom and practice,! should be specific rather than general; and, if multijurisdictional mergers are important particular attention should be paid to the Guidelines in jurisdictions that are commonly included in such multijurisdictional mergers.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

How Effective is European Merger Control?

Posted by D. Daniel Sokol

Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)), Klaus Gugler (Vienna University of Economics and Business), and Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management) ask How Effective is European Merger Control?

ABSTRACT: This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement.! On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

UK: How to Escape Phase II Investigations in the Context of Mergers

Posted by D. Daniel Sokol

Stephen Kon and Amanda Butler (SJ Berwin) describe UK: How to Escape Phase II Investigations in the Context of Mergers.

ABSTRACT: The OFT has issued new substantive guidance on the three statutory exceptions to its duty to refer a merger to the CC for detailed phase II review; Much of the focus of the guidance is on the so called ‘de minimis’ exception where the markets are not regarded as sufficiently important to justify making a reference and where the OFT has developed a very detailed assessment process; The new guidance also updates and amends the OFT's earlier guidance on the situations in which it will consider accepting undertakings in lieu to the CC (particularly in relation to approval of purchasers and up-front buyer obligations). This article reviews the new guidance and its practical implications for parties.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 25, 2011

A Not So Modest Proposal? The FTC/DOJ Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program

Posted by D. Daniel Sokol

Toby Singer & David Pearl (Jones Day) analyze A Not So Modest Proposal? The FTC/DOJ Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.

ABSTRACT: On March 31, 2011, the Federal Trade Commission and the Antitrust Division of the Department of Justice (the "FTC and "DOJ" or the "Agencies") issued a Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. ("Proposed Statement). The Proposed Statement offers guidance concerning how the Agencies will review for antitrust compliance combinations of physicians, hospitals, and other providers into Accountable Care Organizations ("ACOs") created pursuant to the Medicare Shared Savings Program of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act"). The thrust of the Medicare Shared Savings Program is that providers who form ACOs that lead to reduced costs for Medicare will share in any savings they helped create.

At a glance, it may not be apparent how a program to incentivize health care providers to lower Medicare costs could implicate the antitrust laws. Indeed, if an ACO chooses to contract only with the Medicare program, one would anticipate very little interest on the part of the Agencies. However, providers have made clear that they are unlikely to form ACOs unless they might also use them for their commercially-insured patients; because ACOs by their very nature involve competitors acting in concert, extending their reach to the commercial setting raises antitrust concerns and inevitably attracts the attention of the FTC and DOJ.

The Proposed Statement arises out of tight coordination between the Agencies and the Center for Medicare and Medicaid Service ("CMS"). One of the Proposed Statement's major accomplishments is to confer automatic Rule of Reason treatment on any ACO that has met certain eligibility criteria for the Medicare Shared Savings Program laid out in the CMS Notice of Proposed Rulemaking, Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations ("CMS Proposed Rule"). This represents a remarkable development, both because it pegs the Agencies' antitrust analysis to standards created by a different agency and because so much of the Agencies' prior evaluation of clinically integrated networks involved assessing whether or not the Rule of Reason was appropriate under a given set of circumstances. The removal of doubt regarding whether to apply the Rule of Reason seems to have shifted the emphasis forward such that the bulk of the Proposed Statement focuses on which ACOs need to undergo antitrust analysis in the first instance.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Canada: Still Open for Business? PotashCorp and the Investment Canada Act

Posted by D. Daniel Sokol

D. Jeffrey Brown and Michael Kilby (Strikeman Elliot) ask Canada: Still Open for Business? PotashCorp and the Investment Canada Act.

ABSTRACT: In three recent foreign investment review decisions, the Canadian Minister of Industry has either blocked or sought to impose post-closing sanctions on mergers and acquisitions of Canadian target companies. These decisions remind antitrust practitioners that, in some countries, foreign investment may be submitted to scrutiny beyond traditional merger control. This article analyses the situation in Canada, critically assessing the approach used by authorities in their review of foreign investment transactions. Notwithstanding recent events, the article concludes that Canada remains open for business, with increasingly open policies and ongoing recognition of the importance of encouraging foreign investment.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Acquisitions, Entry and Innovation in Network Industries

Posted by D. Daniel Sokol

Pehr-Johan Norback, Research Institute of Industrial Economics (IFN), Lars Persson, Research Institute of Industrial Economics (IFN), Centre for Economic Policy Research (CEPR), and Joacim Tag, Research Institute of Industrial Economics (IFN) analyze Acquisitions, Entry and Innovation in Network Industries.

ABSTRACT: Why do so many high-priced acquisitions of entrepreneurial firms take place in network industries? We develop a theory of commercialization (entry or sale) in network industries showing that high equilibrium acquisition prices are driven by the incumbents' desire to prevent rivals from acquiring innovative entrepreneurial firms. This preemptive motive becomes more important when there is an increase in network effects. A consequence is higher innovation incentives under an acquisition relative to entry. A policy enforcing strict compatibility leads to more entry, but can be counterproductive by reducing bidding competition, thereby also reducing acquisition prices and innovation incentives.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Louis Kaplow to Receive Jerry S. Cohen Award for Antitrust Scholarship

Posted by D. Daniel Sokol

AAI has announced:

Louis Kaplow, the Finn M.W. Caspersen and Household International Professor of Law and Economics at Harvard Law School, will be awarded the ninth annual Jerry S. Cohen Award for Antitrust Scholarship on June 23 in Washington, DC during a luncheon at the 12th Annual Conference of the American Antitrust Institute.

Kaplow is being recognized for his article "Why (Ever) Define Markets?" (124 Harv. L. Rev. 437) which "advances the immodest claim that the market definition process is incoherent as a matter of basic economic principles and hence should be abandoned entirely."

In addition to teaching at Harvard, Kaplow is the Associate Director of the John M. Olin Center for Law, Economics, and Business, a Research Associate at the National Bureau of Economic Research, and a Fellow of the American Academy of Arts and Sciences. He has a J.D. and a Ph.D. in economics from Harvard University.

This prize is well deserved.  Kaplow's article is worth reading.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Drawing the Line—the application of State Aid Provisions to Internet Activities of Public Broadcasters

Posted by D. Daniel Sokol

Christian Lewke (Broadcasting Council, Hessische Rundfunk hr (ARD)) discusses Drawing the Line—the application of State Aid Provisions to Internet Activities of Public Broadcasters.

ABSTRACT: In a number of recent cases, the EU Commission has raised objections concerning the internet activities of public service broadcasters. These objections dwelt on the extent to which such broadcasters can use public funds to subsidise their internet activities that are carried out in competition with private actors. In order to establish a clear test, inspiration can be drawn from practices in several Member States, particularly Germany.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Just Google it! - The Google Book Search Settlement: A Law and Economics Analysis

Posted by D. Daniel Sokol

Frank Müller-Langer, Max Planck Institute for Intellectual Property and Competition Law and Marc Scheufen, University of Hamburg - Institute of Law and Economics have written Just Google it! - The Google Book Search Settlement: A Law and Economics Analysis.

ABSTRACT: Beginning in December 2004 Google has pursued a new project to create a book search engine (Google Book Search). The project has released a storm of controversy around the globe. While the supporters of Google Book Search conceive the project as a first reasonable step towards unlimited access to knowledge in the information age, its opponents fear profound negative effects due to an erosion of copyright law. Our law and economics analysis of the Book Search Project suggests that – from a copyright perspective – the proposed settlement may be beneficial to right holders, consumers, and Google. For instance, it may provide a solution to the still unsolved dilemma of orphan works. From a competition policy perspective, we stress the important aspect that Google’s pricing algorithm for orphan and unclaimed works effectively replicates a competitive Nash-Bertrand market outcome under post-settlement, third-party oversight.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)