Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, August 27, 2011

Modern food retailers and traditional markets in developing countries: Comparing quality, prices, and competition strategies in Thailand

Posted by D. Daniel Sokol

Christin Schipmann (International Crops Research Institute for the Semi-Arid Tropics) and Matin Qaim (Department of Agricultural Economics and Rural Development, Georg-August-University of Goettingen) discuss Modern food retailers and traditional markets in developing countries: Comparing quality, prices, and competition strategies in Thailand.

ABSTRACT: Supermarkets and hypermarkets are expanding rapidly in many developing countries. While consequences for farmers and consumers were analyzed recently, little is known about the implications for traditional retail formats such as wet markets. Using data from a market survey in Thailand and hedonic regression models, we analyze quality and prices for fresh vegetables from different retail outlets. Compared to wet markets, modern retailers sell higher quality at higher prices, indicating that they are primarily targeting better-off consumers. Hence, they are not directly competing for the same market

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

Friday, August 26, 2011

Sports Business and Multisided Markets: Towards a New Analytical Framework?

Posted by D. Daniel Sokol

Oliver Budzinski (Department of Environmental and Business Economics, University of Southern Denmark) and Janina Satzer (Department of Environmental and Business Economics, University of Southern Denmark) describe Sports Business and Multisided Markets: Towards a New Analytical Framework?

ABSTRACT: Despite still being younger than a decade, the theory of multisided markets has offered numerous valuable insights for the analysis of industries in which a supplier serves two distinct customer groups that are indirectly interrelated through externalities. Examples include payment systems, matching agencies, commercial media, and software platforms. However, professional sports mar-kets have largely been neglected so far in this kind of research although they possess the characteristics of multisided markets. This conceptual paper con-tributes to filling this gap by describing the platform elements of professional suppliers of sports events and conceptually outlining issues where an applica-tion of this theoretical framework is likely to provide valuable insights and to add to the existing knowledge. Among these problems are integrative pricing strategies of sports clubs towards such different customer groups like atten! dees, broadcasters, sponsors, etc., including their welfare and antitrust implications, design decisions of sports associations in order to promote positive feedback loops among the customer groups as well as management strategies to reinforce positive externalities among customer groups and alleviate negative ones.

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

Recent Developments in European Bank Competition

Posted by D. Daniel Sokol

Yu Sun (IMF) writes on Recent Developments in European Bank Competition.

ABSTRACT: This paper investigates the degree of bank competition in the euro area, the U.S. and U.K. before and after the recent financial crisis, and revisits the issue whether the introduction of EMU and the euro have had any impact on bank competition. The results suggest that the level of bank competition converged across euro area countries in the wake of the EMU. The recent global financial crisis led to a fall in competition in several countries and especially where large credit and housing booms had preceded the crisis.

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

Does Europe have an innovation policy? The case of EU economic law

Posted by D. Daniel Sokol

Lauren Battaglia , Pierre Larouche , Matteo Negrinotti ask Does Europe have an innovation policy? The case of EU economic law.

ABSTRACT: This paper is the first of a larger project aimed at exploring, among other things, whether Europe has a consistent innovation policy in the context of EU economic law (competition policy, intellectual property law, sector regulation). As such, its primary aim is to present our approach for answering this question and outline the anticipated contributions of the project. Part I of the paper sets forth the theoretical foundations of the project--namely an integrated approach to economic law that moves beyond apparent conflicts and assumes innovation as the starting point. Taking this as the foundation, the two primary components of the project are described. First, a theoretical component involving the development of an analytical grid to be used to identify ways in which economic law impacts innovation, and second an applied component that explores observable instances where choices, both implicit and explicit, are made regarding innovation in economic law. Part II of the paper builds on this and offers a preliminary illustration of the proposed analysis in the context of pharmaceuticals, specifically drug reformulation regulatory gaming.

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

Thursday, August 25, 2011

Core stable bidding rings in independent private value auctions with externalities

Posted by D. Daniel Sokol

Omer Biran, Paris Dauphine University addresses Core stable bidding rings in independent private value auctions with externalities.

ABSTRACT: We consider a second price auction between bidders with independently and identically distributed valuations, where a losing bidder suffers a negative direct externality. Considering ex-ante commitments to form bidding rings we study the question of core stability of the grand coalition, namely: is there a subset of bidders that prefers forming a small bidding ring rather than participating in the grand cartel? We show that in the presence of direct externalities between bidders the grand coalition is not necessarily core stable, as opposed to the zero externality case, where the stability of the grand coalition is a known result. Finally, we study collusion in auctions as a mechanism design problem, insisting on the difficulty to compare ex-ante and interim commitments. In particular, we show that there are situations in which bidders prefer colluding before privately learning their types.

 

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

National Oligopolies and Economic Geography

Posted by D. Daniel Sokol

Barbara Annicchiarico (Department of Economics - University of Rome “Tor Vergata”)
Federica Orioli (University of Rome "Luiss Guido Carli" - University of Rome "Luiss Guido Carli") and Federico Trionfetti (GREQAM) discuss National Oligopolies and Economic Geography.

ABSTRACT: We replace monopolistic competition with national oligopolies in a model of "new economic geography". There are many possible bifurcation diagrams but, unlike in monopolistic competition, the symmetric equilibrium is always stable for low trade costs. The antitrust policy, though identical in both countries, affects the geographical distribution of firms. In turn, migration attenuates the effectiveness of the antitrust policy in eliminating collusive behavior. For high trade costs a toughening of the antitrust policy is likely to result in more agglomeration and may reduce world welfare. The antitrust policy is more likely to be welfare improving when market integration progresses.

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

Endogenous Timing in a Mixed Duopoly with Endogenous Vertical Differentiation

Posted by D. Daniel Sokol

Lin Liu (School of Business Administration, China University of Petroleum, Beijing Campus) and Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics) address Endogenous Timing in a Mixed Duopoly with Endogenous Vertical Differentiation.

ABSTRACT: We consider a game of endogenous timing with observable delay in a mixed duopoly with endogenous vertical differentiation in the context of sequential quality and price choice. We find that a simultaneous play in the first opportunity at each stage turns out to be the unique subgame perfect Nash equilibrium, which contrasts with the endogenous timing in a purely private duopoly.

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

Merger Efficiency and Welfare Implications of Buyer Power

Posted by D. Daniel Sokol

Ozlem Bedre-Defolie, European School of Management and Technology
Stephane Caprice, have posted Merger Efficiency and Welfare Implications of Buyer Power.

ABSTRACT:This paper analyzes the welfare implications of buyer mergers, which are mergers between downstream firms from different markets. We focus on the interaction between the merger's effects on downstream efficiency and on buyer power in a setup where one manufacturer with a non-linear cost function sells to two locally competitive retail markets. We show that size discounts for the merged entity has no impact on consumer prices or on smaller retailers, unless the merger affects the downstream efficiency of the merging parties. When the upstream cost function is convex, we find that there are “waterbed effects,” that is, each small retailer pays a higher average tariff if a buyer merger improves downstream efficiency. We obtain the opposite results, “anti-waterbed effects,” if the merger is inefficient. When the cost function is concave, there are only anti-waterbed effects. In each retail market, the merger decreases the final price if and only if it improves the efficiency of the merging parties, regardless of its impact on the average tariff of small retailers.

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

Wednesday, August 24, 2011

Payments Innovation and Interchange Fees Regulation: How Inverting the Merchant-Pays Business Model Would Affect the Extent and Direction of Innovation

Posted by D. Daniel Sokol

David S. Evans, University of Chicago Law School, University College London has written on Payments Innovation and Interchange Fees Regulation: How Inverting the Merchant-Pays Business Model Would Affect the Extent and Direction of Innovation.

ABSTRACT: This paper examines the possible impact on innovation involving payment cards as a result of price caps that lead to the drastic reduction in interchange fees. Such reductions invert the traditional business model for the payments card industry from a merchant-pays model to a consumer-pays model. The paper argues that this inversion is likely to reduce the overall level of innovation in the industry, divert innovation away from the role of payments in transactions and towards improvements for which consumers can be charged non-transaction related fees, and discourage the entry of new payment systems.

August 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Capture, Politics and Antitrust Effectiveness

Posted by D. Daniel Sokol

Rocco Ciciretti, University of Rome II - Department of Financial and Quantitative Economics, Simone Meraglia, University of Toulouse 1 - Toulouse School of Economics (TSE) and Gustavo Piga, University of Rome have an interesting paper on Capture, Politics and Antitrust Effectiveness.

ABSTRACT: We study a three-tier hierarchy Political Principal - Competition Authority - Firms in which the Principal chooses the Authority's (i) exante budget, (ii) state-contingent transfer, and (iii) preferences in presence of moral hazard. Collusion between the Authority and firms may arise so as to avoid fines. For high efficiency levels of side-contracting, collusion proofness induces high-powered incentives for the Authority. The Principal trades-off the benefits from allowing the Authority to exert its desired level of effort with the cost of leaving it an increasing expected rent. This results in the budget being non-monotone in the side-contracting efficiency level. When firms bribe the Principal for a reduced budget, both the budget and the state-contingent transfer are non-increasing in the side-contracting efficiency level. Instances in which the Authority is optimally allocated a zero budget are characterized. Finally we show that the Principal prefers a consumers' surplus maximizing Competition Authority.

August 24, 2011 | Permalink | Comments (0) | TrackBack (0)

The Hearing Officer in EU Competition Law Proceedings: Ensuring Full Respect for the Right to Be Heard?

Posted by D. Daniel Sokol

Nicolo Zingales, Bocconi University describes The Hearing Officer in EU Competition Law Proceedings: Ensuring Full Respect for the Right to Be Heard?

ABSTRACT: This article will discuss, in light of the expected accession of the European Union (EU) to the European Convention of Human Rights (ECHR), whether the current enforcement structure of competition law in the EU is consistent with the right to fair trial enshrined in Art 6 ECHR. After a brief introduction summarizing the terms of the debate on the ‘fair trial’ in EU competition law, the focus will shift to the role of the Hearing Officer and its evolution to illustrate the combination in its role of two different functions: on the one hand, ensuring respect of the right to be heard; on the other, improving the quality of the decision and minimizing the risk of annulment through judicial review. To emphasize the fundamental importance of giving priority to the former if EU competition law proceedings are to avoid potential condemnations for breach of Article 6 ECHR, a paragraph will describe the intensity of the judicial control operated by the EU adjudicature over violations of due process. Following a critical analysis of procedural guarantees available in competition proceedings and the associated powers and responsibilities of the Hearing Officer, the article will conclude with two suggestions for a potentially improved respect of the right to be heard under the current mandate, and a word of optimism for a revision of the mandate and an indication of what should be the main priority of such reform.

August 24, 2011 | Permalink | Comments (0) | TrackBack (0)

The Judgment of the European Court of Justice in VEBIC: Filling a Gap in Regulation 1/2003

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege addresses The Judgment of the European Court of Justice in VEBIC: Filling a Gap in Regulation 1/2003.

ABSTRACT: With its ruling in VEBIC, the Court of Justice of the EU clarifies the prerogatives of National Competition Authorities under Regulation 1/2003 and paves the way towards regulatory reform in Belgium, and possibly in other EU Member States.

August 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 23, 2011

Implausible Wrongs and Dissimilarities: The Supreme Court Continues Its Anti-Litigation Trend, This Time With a Class Action Focus in Wal-Mart v. Dukes

Posted by D. Daniel Sokol

Marcia McCormick (St. Louis Univ. Law School) argues Implausible Wrongs and Dissimilarities: The Supreme Court Continues Its Anti-Litigation Trend, This Time With a Class Action Focus in Wal-Mart v. Dukes.

ABSTRACT: The Supreme Court's decision this term in Wal-Mart v. Dukes, has broad implications for the future of class actions, particularly where the defendant's state of mind matters to the claim or where the case involves potentially complicated questions of causation. And when the decision is combined with the Court's recent decisions about pleadings in Twombly and Iqbal and judges' views on how people are motivated, the future of class actions seems very uncertain. The Court has invited lower court judges to consider what kinds of legal wrongs they think people are likely to engage in and to focus on what makes members of a putative class different rather than what makes them alike. That invitation will inevitably result in fewer class actions.

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Price Pass-Through in US Gasoline Markets

Posted by D. Daniel Sokol

Benjamin F. Blair, Mississippi State University - College of Business and Phillip A. Mixon, Troy University discuss Price Pass-Through in US Gasoline Markets.

ABSTRACT:Using an error-correction model in a seemingly unrelated regression framework, we examine regional differences in the price pass-through from crude oil spot prices to retail gasoline pump prices. We show that regional differences do exist both in the short run and long run adjustment process. Depending on the region, a $1 per barrel change in crude oil prices results in a change in retail gasoline pump prices somewhere between 2.52¢ and 2.65¢. We examine the presence of the rockets and feathers phenomenon using both a single period coefficient tests and multiple period impulse response functions.

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition Law Competition Issues Affecting the Energy Sector in India

Posted by D. Daniel Sokol

Aurobinda Panda, KIIT University - KIIT School of Law and Atul Patel, KIIT University - KIIT School of Law address Competition Law Competition Issues Affecting the Energy Sector in India.

ABSTRACT: India faces endemic electrical energy and peaking shortages. The Power Sector is plagued with mounting commercial losses due to various inefficiencies, colossal commercial and technical losses and increasing subsidy burden on the states. These shortages have had a very detrimental effect on the overall economic growth of the country. In order to revitalise the sector and improve the techno-economic performance, the Government of India initiated the reform process in 1991. This paper analyses the pre-reform era and identifies the key concerns which led to the initiation of the reforms. It also analyses the likely impact of the major policy and regulatory initiatives that have been undertaken since 1991 including the provisions of the new enactments which have come into force eventually in the form of The Electricity Act, 2003. This paper details out the key features of the Act and its likely impact on the Indian electricity industry in the emerging scenario. The paper also discusses major issues like role of Regulator in the new regime, issue of open access, power trading, introduction of power markets and role of Appellate Tribunal for Electricity in harmonizing the orders of the various regulators.

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Amicus for Norris Supreme Court Brief from NACDL

Posted by D. Daniel Sokol

The NACDL's brief is scholarly and powerful. 

Download Norris v United States (11-91) Brief of NACDL as Amicus Curiae in Support of Petitioner_FINAL

It makes two broad points:

a.  The Norris case, if left unchallenged, would "turn[] the attorney-client privilege on its head, and authorize[] the invasion of one co-client's (the individual's) privilege . . ."   NACDL Amicus Brief at 12. 

The result will be that corporate antitrust investigations will be hampered -- a result decidedly at odds with the Antitrust Division's mission and enforcement goals (oddly enough):  "the [lower court decisions in Norris] renders it impossible, as a practical matter, for outside counsel to competently and ethically represent a corporate faced with a government investigation.  . . . . Ethical counsel will of course advise the individual corporate officers of this new rule of law.  The officers, in turn, will be reluctant to speak to corporate counsel."  NACDL Amicus Brief at 13.

b.  The NACDL brief also forcefully takes on the lower court's ruling that defense counsel could somehow become a "conduit" for lies to reach the grand jury (simply in the ordinary course of conducting corporate counsel interviews in antitrust investigations), a ruling that destroys the adversarial system.

"It is impossible to harmonize the Third Circuit's 'conduit' theory with our adversarial system."  NACDL Amicus Brief at 20.  This has the result of greatly raising the stakes in the circuit split.  Id.  "From the perspective of outside counsel, the Third Circuit's new rule will inevitably chill the zealous advocacy that it is their duty to provide."  NACDL Amicus Brief at 21.

 

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Local Monopoly, Network Effects and Technical Efficiency – Evidence from Taiwan’s Natural Gas Industry

Posted by D. Daniel Sokol

Ting-Kun Liu, Chaoyang University of Technology has written on Local Monopoly, Network Effects and Technical Efficiency – Evidence from Taiwan’s Natural Gas Industry.

ABSTRACT: This paper examines the optimal number of natural gas firms in each region of Taiwan. In order to separate large local monopoly companies from the small ones, this paper constructs a firm-level panel data analysis for the industry covering the period 1995-1999. The optimal number of firms in each region is estimated by using the minimum efficient scale theory. In addition, a non-neutral stochastic frontier production function is used to detect the impact of the local monopoly, the network effects and cost structure on the natural gas firms’ technical efficiency.

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

A Critical Assessment of the Legal and Economic Framework of IP-Competition Interface in Singapore

Posted by D. Daniel Sokol

Ashish Lall, National University Singapore and Daryl Lim, The John Marshall Law School have A Critical Assessment of the Legal and Economic Framework of IP-Competition Interface in Singapore.

ABSTRACT: This chapter argues that the key to navigating the Interface in Singapore includes understanding the nature of IP markets in Singapore and fostering synergies between the key institutions responsible for the IP and competition regimes. As Singapore adopts a regulatory self-assessment system, firms with substantial IPRs in Singapore need to fully understand the Interface to avoid what may be costly mistakes. The discussion of the economic framework first provides background on the economic structure of Singapore, illustrating the role of location and legacy in sectors that continue to be important today. The second part discusses Singapore’s innovation performance based on international innovation rankings, as well as on standard measures such as patents, R&D expenditures and personnel. It suggests that Singapore is not yet an innovation-based economy despite the recent increase in innovation inputs. The discussion of the legal framework first surveys IP issues arising from anti-competitive agreements, abuse of dominance, as well as mergers and acquisitions. The second part highlights the challenges and opportunities relevant to Singapore as a small open economy trying to move up the technology value chain and concludes by suggesting a number of ways Singapore can better navigate the Interface.

August 23, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, August 22, 2011

Wisconsin’s Antitrust Law: Outsourcing the Legal Standard

Posted by D. Daniel Sokol

Michael P. Waxman, Marquette University Law School discusses Wisconsin’s Antitrust Law: Outsourcing the Legal Standard.

ABSTRACT: Since its first commentary about the Wisconsin Antitrust Act (Pulp Wood Co. v. Green Bay Paper & Fiber Co., 157 Wis. 604, 147 N.W. 1058 ((1914)) the Supreme Court of Wisconsin has regularly reiterated its policy that interpretations of the Act must follow absolutely, “federal [antitrust] decisions.” This policy is driven neither by federal preemption nor by state legislative enactment or pronouncement. The Supreme Court of Wisconsin’s commentaries on this policy for almost a century since the Pulp Wood decision have provided very little counsel to state courts much less businesspersons and their legal advisors. Indeed, one may still reasonably ask whether, “federal decisions,” includes judicial decisions by all federal courts wherever situated and all federal agencies deciding cases, administering rules and providing, “guidelines,” applying, “federal [antitrust] law.” Moreover, the Court has not even provided guidance as to how to resolve conflicts in the application of, “federal decisions.”

In an age of, “activist,” federal courts and administrative agencies that have upended traditional concepts and decisions of federal antitrust law, it is very important that generalized policies applying lockstep application of, “federal decisions,” be jettisoned and replaced by reasoned judicial decisions applying Wisconsin antitrust law. Of course, where appropriate, Wisconsin courts may choose to follow federal decisions (whatever that term means) and thereby assure that Wisconsin antitrust law comports with an overall federal antitrust design. Yet, by replacing the current inflexible policy with legal analysis that best suits the interests and needs of Wisconsin’s citizenry Wisconsin courts may effectively steer a course that avoids the antitrust activism that roils the federal courts and federal administrative agencies and thereby provide security in long term judicial interpretations.

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

A Clear Vision for the ICN's Second Decade

Posted by D. Daniel Sokol

Sophie Mitchell (OFT) offers A Clear Vision for the ICN's Second Decade.

ABSTRACT: The tenth annual conference of the International Competition Network ("ICN") held in The Hague, The Netherlands, in May 2011, marked an important milestone in the ICN's development. It provided an opportunity to celebrate the ICN's success in its first decade and to consider the network's goals and future priorities. It also ushered in an era of greater inclusiveness and diversity in the ICN's working methods and a shift to a longer-term strategic approach to the network's work planning.

This contribution looks at why the ICN matters to competition agencies, businesses, consumers, and other participants in the international competition community. It looks ahead to the ICN's second decade, with a revised mission and set of high-level goals to guide the ICN's future work. It also focuses on the ICN's work in the area of competition advocacy and market studies, while other contributions in this issue of the CPI Antitrust Chronicle focus on the ICN's work in the areas of cartels, mergers, and unilateral conduct.

 

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