Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, October 4, 2011

Legal Mechanisms Supporting Economic Concentration

Posted by D. Daniel Sokol

Adi Ayal, Bar-Ilan University - Faculty of Law identifies Legal Mechanisms Supporting Economic Concentration.

ABSTRACT: Economic concentration has become a political and social issue, beyond its direct economic implications. Public outrage has been expressed at the concentration of economic power in the hands of few large conglomerates and those wielding power through them. In this paper I explore the legal mechanisms which allow for and facilitate such economic concentration. I explore antitrust and corporate law and their interaction, from the focus on micro-effects of specific markets and firms (rather than macro-effects), to specific rules which allow for conglomerate growth and pyramidial structures. Contrasting the economic benefits of concentration with public outcry, I assess the political factors driving the calls for reducing concentration, and conclude that while economic rhetoric looms large in the debate, the true issues are political and the feeling of 'the common man' that he lacks influence and is taken advantage of. The calls for regulation are thus a cry for the state to step in and wield a larger stick than that held by large conglomerates. In essence, a call for state political power to loom larger than firm economic power.

October 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust, Innovation, and Product Design in Platform Markets: Microsoft and Intel

Posted by D. Daniel Sokol

William Hepburn Page, University of Florida - Fredric G. Levin College of Law and Seldon J. Childers, University of Florida - Levin College of Law discuss Antitrust, Innovation, and Product Design in Platform Markets: Microsoft and Intel.

ABSTRACT: The Antitrust Division’s _Microsoft_ case and the Federal Trade Commission’s _Intel_ case both rested on claims that antitrust intervention was necessary to preserve innovation in technological platforms at the heart of the personal computer. Yet, because those very platforms support markets that are among the most innovative in the American economy, injudicious intervention might well have jeopardized the very innovation that antitrust should promote. In this article, we review the role of platforms in technological innovation and consider how antitrust standards should apply to them. We then examine how Microsoft resolved antitrust issues affecting platform design at various stages of the litigation and show how that experience informed the allegations and the settlement in Intel. We are particularly concerned with the parallel claims in the two cases that Microsoft and Intel each used its control over the design of a dominant platform to hinder innovations that might have made a complementary product a better substitute for the platform. This exercise should help guide future applications of monopolization standards to high technology platforms.

October 4, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, October 3, 2011

Should Regulators Treat Google Like Standard & Poor's?

Posted by D. Daniel Sokol

Daniel Fisher of Forbes asks Should Regulators Treat Google Like Standard & Poor's? He focuses on the interesting work by Mark Patterson (Fordham Law).

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

The Adoption of Screening Tools by Competition Authorities

Posted by D. Daniel Sokol

Ulrich Laitenberger & Kai Huschelrath (ZEW Centre for European Economic Research) advocate The Adoption of Screening Tools by Competition Authorities.

ABSTRACT: These days, the fight against hard-core cartels is ranked high on the agenda of many competition authorities around the world. The recent efforts of, e.g., the European Commission, are not only reflected in policy reforms such as new fining guidelines and the introduction of leniency programs but have already materialized in the form of an improved cartel enforcement record.

From an economic perspective, the fight against hard-core cartels is justified by the clearly negative welfare implications of such "agreements among competitors." In addition to allocative and productive inefficiencies, hard-core cartels typically also cause dynamic inefficiencies thereby harming customers and consumers in several dimensions.

This substantial harm caused by hard-core cartels-together with the absence of any benefit of such agreements-support the classification of hard-core cartels as "per-se violations" in most antitrust laws around the world. As a consequence, competition authorities have two key tasks: first, deter the formation of new cartels; and second, detect, verify, and prosecute existing infringements. Against this background, this article focuses on answers to the following two key questions: (1) What are the general options competition authorities can use to detect cartels? and (2) What specific roles do screening tools that can proactively detect cartels play for competition authorities?

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

Optimal Cartel Deterrence: An Empirical Comparison of Sanctions to Overcharges

Posted by D. Daniel Sokol

Robert H. Lande, University of Baltimore - School of Law and John M. Connor, Purdue University discuss Optimal Cartel Deterrence: An Empirical Comparison of Sanctions to Overcharges.

Abstract: The purpose of this article is to determine empirically whether United States anti-cartel sanctions are, overall, at an optimal level. We employ the standard optimal-deterrence model, which assumes that corporations and individuals are rational actors when contemplating illegal collusion. Crime will be deterred only if expected rewards are less than expected costs divided by the probability the illegal activity will be detected and sanctioned. In other words, a sanction slightly larger than $300 is necessary to deter a cartel that expects to overcharge $100 and believes there is a 1/3 chance its activities will be detected and condemned. To assess optimality we calculate and use the best available data to estimate the expected profits from cartelization, the allocative inefficiency effects of cartel pricing, the probability cartels will be detected, and the probability detected cartels will be sanctioned. These parameters are then compared to all monetary cartel sanctions imposed by U.S. courts during the past two decades. These include corporate fines, restitution payments, individual fines, and the payouts in private damage actions. We also included approximations for the equivalent values (or disvalues) of the imprisonment or house arrest for the individuals involved. Our analysis shows that the combined level of U. S. cartel sanctions has been far below the optimum. If mean average figures are used, the imposed sanctions have only been 16% to 21% as large as they should have been to protect victims of cartelization optimally. If median average figures are used, the imposed sanctions have averaged only 9% to 12% of the optimum. Thus, the overall level of the United States anti-cartel sanctions should be at least five times as high as they are today. A concluding section discussed the implications of these results.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

ICN Cartel Workshop - Bruges 10-13 October - Schedule

Posted by D. Daniel Sokol

ICN Cartel Workshop - Bruges 10-13 October.  The schedule is available here.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

Video on Workshop on China's Anti-Monopoly Law and Enforcement

Posted by D. Daniel Sokol

The ABA Antitrust Section has up something that is a real treat to watch - the special post Spring Break session last March from the heads of the three Chinese competition agencies. 

Speaker 1: Mr. Shang Ming, Director-General of Anti-Monopoly Bureau of Ministry of Commerce
Interpreter: Mr. Zhu Zhongliang, Director of Competition Policy Division of Anti-Monopoly Bureau of Ministry of Commerce

Speaker 2: Ms. Li Qing, Deputy Director-General of Price Supervision and Inspection Department of National Development and Reform Commission
Interpreter; Ms. Zhang Yizhe, Lawyer from Jones Day Law Firm

Speaker 3: Ms. Yang Jie, Director of Anti-Monopoly and Anti-Unfair Competition Enforcement of State Administration of Industry and Commerce
Interpreter; Ms. Zhang Yizhe, Lawyer from Jones Day Law Firm

Note: The video files are in QuickTime format.  To download, right-click on the link below and save file.  Please allow enough time to download, according to their file size.


October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

Will Mexico Harm its Citizens by Departing From Established Antitrust Policy?

Posted by D. Daniel Sokol

George Priest (Yale Law) asks Will Mexico Harm its Citizens by Departing From Established Antitrust Policy? in an op-ed piece in Forbes.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

The ECN - Network Antitrust Enforcement in the European Union

Posted by D. Daniel Sokol

Damien M.B. Gerard, Louvain University addresses The ECN - Network Antitrust Enforcement in the European Union.

ABSTRACT: Drawing both from earlier policy discussions and more recent empirical findings, this paper explores the functioning of the European Competition Network. It is structured in two parts: (i) part one aims first to identify the various driving forces that have prompted the switch towards a network model in the enforcement (and design) of EU antitrust policy (section I.A); (ii) part two then endeavours to shape the institutional contours of the ECN and to provide an account of the rules governing its operation (section I.B). In turn, part two seeks to (re-)examine in depth two major challenges brought about by the decentralization process, which the ECN is deemed to facilitate, namely the parallel enforcement of EU antitrust principles by several NCAs (section II.A) and the management of the cooperation mechanisms relied upon in cross-border investigations (section II.B).

Indeed, beyond a systematic presentation of its purpose and means, this paper aims to confront three lasting phenomena affecting the ECN’s operation, namely: (i) the remaining fuzziness of the rules governing some important ECN processes, which questions the limits of experimentalism in the application of important economic policies; (ii) the scope of the territoriality principle in a system where local authorities participate in the application of “federal” rules by means of their domestic administrative enforcement system; and (iii) the significance of the enduring diversity of national procedural frameworks. Those three aspects, it is submitted, condition the perfection of the ECN’s operation and the sustainability of the decentralized EU antitrust enforcement system. They echo and substantiate in the meantime earlier concerns formulated in terms of effectiveness, legal certainty and due process.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

Is the Patent Ambush Prerequisite Met? Assessing the Extent of Ex Ante IPR Disclosure within Standard Setting

Posted by D. Daniel Sokol

Anne Layne-Farrar, Compass Lexecon asks Is the Patent Ambush Prerequisite Met? Assessing the Extent of Ex Ante IPR Disclosure within Standard Setting.

ABSTRACT: As part of its “policy project to examine the legal and policy issues surrounding the problem of potential patent ‘hold-up’ when patented technologies are included in collaborative standards”, the Federal Trade Commission held an all-day workshop on June 21, 2011. The first panel of the day focused on patent disclosure rules and much of the discussion centered on the conditions required for patent hold up or patent ambush to occur. One of the conditions identified was early – particularly before a standard is set – disclosure of intellectual property rights. When patents are disclosed ex post, after a standard is defined, the patent holder may have enhanced bargaining power that it can exploit to charge excessive royalties (e.g., greater than the value the patented technology contributes to the standard). The theoretical debate over hold up and ambush often assumes that most standards participants disclose their patents ex ante, such that the few disclosing ex post can be considered to be bad actors at least considering hold up. In this paper, I take an empirical look at the timing of IPR disclosures within standard setting organizations. I find, contrary to the implicit assumption underlying the patent ambush debate, that most participants officially disclose their potentially relevant IPRs ex post, not ex ante, and sometimes considerably so. On the other hand, I also find that the delay in declaring IPRs to standards has been shrinking over time, with disclosures occurring closer to (although for the most part still after) the standard publication date for more recent standards as compared to earlier ones. This empirical finding has important policy implications for the treatment of patent hold up.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust market definition using statistical learning techniques and consumer characteristics

Posted by D. Daniel Sokol

Willem H. Boshoff (Department of Economics, Stellenbosch University) describes Antitrust market definition using statistical learning techniques and consumer characteristics.

ABSTRACT: Market definition is the first step in an antitrust case and relies on empirical evidence of substitution patterns. Cross-price elasticity estimates are preferred evidence for studying substitution patterns, due to advances in IO econometric modelling. However, the data and time requirements of these models weigh against their universal adoption for market definition purposes. These practical constraints — and the need for a greater variety of evidence — lead practitioners to rely on a larger set of less sophisticated tools for market definition. The paper proposes an addition to the existing toolkit, namely an analysis of consumer characteristics for market definition purposes. The paper shows how cluster analysis can be used to identify meaningful groups of substitutes on the basis of homogeneity of their consumer profiles. Cluster analysis enforces consistency, while recent bootstrap techniques ensure ro! bust conclusions. To illustrate the tool, the paper relies on data from a recently concluded radio merger in South Africa.

October 3, 2011 | Permalink | Comments (0) | TrackBack (0)