Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, November 8, 2011

PROMOTING COMPLIANCE WITH COMPETITION LAW: DO COMPLIANCE AND ETHICS PROGRAMS HAVE A ROLE TO PLAY?

Posted by D. Daniel Sokol

The OECD has posted its report from June's Competition Committee meeting on Corporate Governance and Antitrust the paper by Joe Murphy entitled PROMOTING COMPLIANCE WITH COMPETITION LAW: DO COMPLIANCE AND ETHICS PROGRAMS HAVE A ROLE TO PLAY?

 

November 8, 2011 | Permalink | Comments (1) | TrackBack (0)

AT&T/T-Mobile: Does Efficiency Really Count?

Posted by D. Daniel Sokol

Howard Chang, David S. Evans, & Richard Schmalensee (Global Economics Group) ask AT&T/T-Mobile: Does Efficiency Really Count?

ABSTRACT: AT&T's proposed $39 billion acquisition of T-Mobile faces two major court challenges: the Justice Department's suit to block the deal and Sprint's private suit. The Federal Communications Commission ("FCC"), which has overlapping jurisdiction in reviewing the transaction, has also expressed concerns. Addressing the Justice Department's concerns, either via a settlement or in court, will likely be the biggest hurdle for AT&T. In its suit, filed at the end of August, the Justice Department argues the deal would harm consumers by eliminating T-Mobile as a competitor in the mobile wireless business, particularly given high concentration levels and T-Mobile's importance as an aggressive competitor. AT&T's core counter argument is that output will go up (to the benefit of consumers) as a result of substantial and demonstrable efficiencies from the transaction. Therefore, this will be a deal in which the assessment of efficiencies is likely to be front and center, and the outcome will provide a test of the power of efficiency arguments in merger cases.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Advance Selling in the Presence of Experienced Consumers

Posted by D. Daniel Sokol

Oksana Loginova (Department of Economics, University of Missouri-Columbia), X. Henry Wang (Department of Economics, University of Missouri-Columbia) and Chenhang Zeng discuss Advance Selling in the Presence of Experienced Consumers.

ABSTRACT: The advance selling strategy is implemented when a firm offers consumers the opportunity to order its product in advance of the regular selling season. Advance selling reduces uncertainty for both the firm and the buyer and enables the firm to update its forecast of future demand. The distinctive feature of the present theoretical study of advance selling is that we divide consumers into two groups, experienced and inexperienced. Experienced consumers know their valuations of the product in advance. The presence of experienced consumers yields new insights. Specifically, pre-orders from experienced consumers lead to a more precise forecast of future demand by the firm. We show that the firm will always adopt advance selling and that the optimal pre-order price may or may not be at a discount to the regular selling price.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Dual Distribution and Differentiated Products

Posted by D. Daniel Sokol

Philippe Cyrenne, Department of Economics The University of Winnipeg has written on Dual Distribution and Differentiated Products.

ABSTRACT: This paper develops an approach to analyzing the equilibrium in markets where firms selling differentiated products can choose dual distribution to sell their products. Dual distribution involves a firm selling its product both through company owned stores and through independently operated franchises. In choosing the proportion of company owned versus franchise stores, in equilibrium, the firms have no incentive to alter this ratio given the proportions chosen by rival firms. The approach taken here in analyzing dual distribution is quite general and can be applied in a variety of settings.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Firm/Market Equivalency: Determinants and Effects on Industry Dynamics

Posted by D. Daniel Sokol

Denis Lescop, TELECOM Business School and Elena De Vogeleer, Telecom Business School discuss Firm/Market Equivalency: Determinants and Effects on Industry Dynamics.

ABSTRACT: Today's firm is a complex nexus of interactions, which it facilitates and regulates; it supports market activity by providing the participants with basic resources. Market failures form the foundation of this phenomenon; they create business opportunities that firms address through market support strategy. The concept of firm/market equivalency introduced here integrates an economics and a management strand of literature: multi-sided markets and business ecosystems & platforms. We address firm/market equivalency through concepts of interactions and gravity, i.e. density of firm's external interactions. We then apply these concepts to a case study and discuss implications of firm/market equivalency for antitrust policy.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Private Antitrust Enforcement in the United States and the European Union: Standing and Antitrust Injury

Posted by D. Daniel Sokol

My colleague Jeffrey Lynch Harrison, University of Florida - Fredric G. Levin College of Law has a paper on Private Antitrust Enforcement in the United States and the European Union: Standing and Antitrust Injury.

ABSTRACT: This paper discusses and compares the implications of U.S. and E.U. standards for antitrust standing and antitrust injury with respect to private enforcement. In the U.S. these concepts are relatively well defined. In the E.U. they are still subject to a period of interpretation. The comparison is complicated by the difference in emphasis in the two systems. In the U.S. private actions are designed principally to have a deterrent effect. In the E.U. the goal is more compensation oriented. The article concludes that as a result of treble damages, the U.S. system is more consistent with both goals and that more liberal standards in the E.U. are unlikely to overcome the absence of a punitive element in antitrust recoveries.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

American Antitrust Institute's 5th Annual Conference on the Future of Private Antitrust Enforcement at the National Press Club in Washington D.C. on December 7, 2011

Posted by D. Daniel Sokol

Haven't yet registered for the American Antitrust Institute's 5th Annual Conference on the Future of Private Antitrust Enforcement at the National Press Club in Washington D.C.  on December 7, 2011?   To learn more and to register: http://www.antitrustinstitute.org/content/5th-annual-future-private-antitrust-enforcement-conference

Since 2007, this event has served as a vehicle for the antitrust  community to come together to network and obtain an updated and  comprehensive profile of private enforcement as a business.

This year's program will cover some of the most current and relevant  issues in antitrust, including generic entry cases, damage awards, and  the ongoing challenges to class certification. There will be a two-hour  afternoon panel focusing on settling class action litigation.  Speakers include:

  • Howard Bashman, Law Offices of Howard J. Bashman
  • Richard Brunell, Director of Legal Advocacy, American Antitrust Institute
  • John M. Connor, Professor of Industrial Economics, Purdue University
  • James L. Cooper, Partner, Arnold & Porter LLP
  • Eric L. Cramer, Shareholder, Berger & Montague, P.C.
  • Joshua P. Davis, Associate Dean for Faculty Scholarship, Professor, and Director of the Center for Law and Ethics, University of San Francisco School of Law
  • Kenneth G. Elzinga, Robert C. Taylor Professor of Economics, University of Virginia
  • Bert Foer, President, American Antitrust Institute
  • Eric D. Green, Principal, Resolutions, LLC
  • Dan Gustafson, Gustafson Gluek PLLC
  • Louis Kaplow, Finn M. W. Caspersen and Household International Professor of Law and Economics, Harvard Law School
  • Robert Lande, Venable Professor of Law, University of Baltimore; AAI Director
  • Jeffrey Leitzinger, Managing Director, Econ One
  • Roberta D. Liebenberg, Senior Partner, Fine Kaplan and Black
  • Scott Martin, Shareholder, Greenberg Traurig  
  • Linda P. Nussbaum, Director, Grant & Eisenhofer
  • William H. Page, Marshall M. Criser Eminent Scholar and Associate Dean for Faculty Development, University of Florida Levin College of Law
  • J. Douglas Richards, Partner, Cohen Milstein Sellers & Toll PLLC
  • The Honorable James M. Rosenbaum (Ret.), JAMS; Former Sr. U. S. District Judge, District of Minnesota
  • Maurice Schweitzer, Professor of Operations and Information Management, Cecilia Yen Koo Professor, the Wharton School at the University of Pennsylvania
  • Daniel A. Small, Partner, Cohen Milstein Sellers & Toll PLLC
  • Joe Tabacco, Managing Partner, Berman DeValerio  
  • John W. Treece, Partner, Sidley Austin LLP  

We hope you can join us.  To sponsor this event, please contact Bert Foer <mailto:bfoer@antitrustinstitute.org> or Sarah Frey <mailto:sfrey@antitrustinstitute.org> .

Download Dec 7 Agenda 9 21 11

Download Speaker Bios 2011

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Leniency and Individual Liability: Opening the Black Box of the Cartel

Posted by D. Daniel Sokol F

lorence Thepot, University College London has a new article on Leniency and Individual Liability: Opening the Black Box of the Cartel.

ABSTRACT: The purpose of this article is to examine the interplay between two competition policy enforcement instruments - leniency policy and individual liability, by opening the ‘black box’ of the cartel, with the analysis of interactions both among the cartel members and within each company. The interplay of these instruments translates into a two-dimensional system: the horizontal dimension is formed by the cartel members; the vertical one by the interactions within each cartel member. We base our analysis on the theory of the firm, advocating the separation of ownership and control, and on the theory of agency that states the principles of inherent moral hazard problems between the principal (owner) and the agent (manager). The reasoning is carried out along economic and legal literature on collusive agreements, leniency programmes and individual liability. The economic literature also gives key insights on corporate governance issues that are relevant in cartels, through game theoretical approaches. Theoretical insights will help us to understand why cartel activity is a matter of agency and governance issues. The subsequent section will be dedicated to the examination of individual liability and corporate leniency policy, in the light of agency issues. Individual leniency policy will be assessed in the last section. Individual leniency programmes are in practice never used by individuals of companies of a cartel. Nonetheless, such programmes are efficient in the way they undermine both the relations between cartel members and those inside the companies. We show how opening the ‘black box’ of the cartel is of primary importance when assessing the efficiency of leniency and individual liability. Agency issues shape the interactions between actors operating in both dimensions of the system under consideration, which are the principals and the agents of the firms of the cartel.

November 8, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, November 7, 2011

DOJ's Attempt to Block the AT&T/T-Mobile Merger Places the Horizontal Merger Guidelines on Trial

Posted by D. Daniel Sokol Benjamin D. Brown (Cohen Milstein) discusses how DOJ's Attempt to Block the AT&T/T-Mobile Merger Places the Horizontal Merger Guidelines on Trial. ABSTRACT: In the U.S. antitrust merger enforcement community, many believed that the Department of Justice ("DOJ") would sue to enjoin any attempt to further consolidate among the Big Four, especially any combination that would involve either of the biggest two networks, Verizon and AT&T, eliminating one of their smaller competitors. It therefore was not unforeseen when DOJ announced, on August 31, 2011, that it would indeed seek an injunction to prevent consummation of the deal. Few gave credence to AT&T's public statements that they had been somehow blindsided by the Antitrust Division. What many in the competition policy world did not realize at the time the Division announced the suit was that this case will likely result in a trial of the Division's litigation mettle and the Horizontal Merger Guidelines themselves.

November 7, 2011 | Permalink | Comments (0) | TrackBack (0)

PATTERNS OF ESTABLISHMENT ENTRY AND STATE-LEVEL ANTITRUST

Posted by D. Daniel Sokol

Robert M. Feinberg (American University - Econ) and Thomas A. Husted explore PATTERNS OF ESTABLISHMENT ENTRY AND STATE-LEVEL ANTITRUST.

ABSTRACT: A large literature examines patterns of firm entry and relocation in response to local demand and cost parameters. Economists have studied tax incentives and local business conditions as drivers of business location decisions as well. In this article, we extend this analysis to consider the extent to which firms view state-level antitrust activity in the United States as an indicator of an adverse business environment, which in turn reduces that state's rate of establishment entry. We find some evidence of this effect, especially for larger firms and for more controversial types of antitrust enforcement.

November 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Anti-Competitive Exclusion and Market Division Through Loyalty Discounts

Posted by D. Daniel Sokol

Einer R. Elhauge, Harvard Law School and Abraham L. Wickelgren, University of Texas at Austin - School of Law discuss Anti-Competitive Exclusion and Market Division Through Loyalty Discounts.

ABSTRACT: We show that loyalty discounts create an externality among buyers even without economies of scale or downstream competition, and whether or not buyers make any commitment. Each buyer who signs a loyalty discount contract softens competition and raises prices for all buyers. We prove that, provided the entrant’s cost advantage is not too large, with enough buyers, this externality implies that in any equilibrium some buyers sign loyalty discount contracts, reducing total welfare. Moreover, if loyalty discounts require buyers to commit to buy only from the incumbent, there exists an equilibrium in which all buyers sign, foreclosing the rival entirely. As a result, the incumbent can use loyalty discounts to increase its profit and decrease both buyer and total welfare.

November 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Innovation and Competition Policy: Cases and Materials

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law has a new case book on Innovation and Competition Policy: Cases and Materials.

ABSTRACT: This casebook differs from other IP/antitrust casebooks in that it considers sources of competition policy other than antitrust, including those that emanate from the intellectual property laws themselves, and also related issues such as the relationship between market structure and innovation, the competitive consequences of regulatory rules governing technology competition such as net neutrality and interconnection, misuse, the first sale doctrine, the Digital Millenium Copyright Act (DMCA). The book is free for all to use and distribute, subject to restrictions contained in an open source license agreement printed in each chapter. Chapters will be updated frequently. The author uses this casebook for a three-unit class in Innovation and Competition Policy taught at the University of Iowa College of Law and available to first year law students as an elective.

November 7, 2011 | Permalink | Comments (0) | TrackBack (0)

A Comment on Choosing Among Tools for Assessing Unilateral Effects Analysis

Posted by D. Daniel Sokol

Joseph J. Simons, Paul, Weiss, Rifkind, Wharton & Garrison LLP and Malcolm B. Coate, U.S. Federal Trade Commission (FTC) provide A Comment on Choosing Among Tools for Assessing Unilateral Effects Analysis.

ABSTRACT: In a recent paper, Gregory Werden and Luke Froeb present a general discussion of unilateral effects analysis with a particular focus on factors that limit the applicability of the Upward Pressure on Price (UPP) model. In one of our earlier papers, we had provided simple simulations showing that the application of UPP in the broad manner suggested by Farrell and Shapiro could be used to dramatically expand the universe of mergers subject to challenge. Werden and Froeb, in contrast to Farrell and Shapiro, see application of UPP screening as constrained by Bertrand competition, an assumption that implies our simulations over-estimate the potential for the UPP model to increase enforcement. Moreover, they posit that merger simulation is well suited for use in either screening or competitive effects’ analysis, a result, which if true, would marginalize the UPP model. We disagree with their observations, noting that the UPP methodology, as described by Farrell and Shapiro, is designed to be agnostic to the underlying competitive process, and potentially applicable in a range of situations in which simulation would be infeasible. As a result, our simulations do not over-estimate the extent to which a broad application of UPP could possibly expand merger enforcement. We also stress the importance of verifying the predictions of any theoretical model (including an UPP analysis generalized to predict actual price effects) with empirical evidence as an important tool to realistically limit the analysis. Successful substantiation would be necessary to allow the analysis to survive a Daubert challenge. Under Daubert, experts must move beyond theory that is generally accepted in their fields and present evidence to the court to show that the theory fits the facts at issue and is reliably predictive.

November 7, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, November 6, 2011

Governing Bad Behavior by Users of Multi-Sided Platforms

Posted by D. Daniel Sokol

David S. Evans, Global Economics Group; University of Chicago Law School; University College London has written on Governing Bad Behavior by Users of Multi-Sided Platforms.

ABSTRACT: Multi-sided platforms such as exchanges, search engines, social networks and software platforms create value by assembling and serving communities of people and businesses. They generally come into being to solve a transaction problem that prevents agents from getting together to exchange value. An essential feature of these platforms is that they promote positive externalities between members of the community. But as with any community, there are numerous opportunities for people and businesses to create negative externalities, or engage in other bad behavior, that can reduce economic efficiency and, in the extreme, lead to the tragedy of the commons. Multi-sided platforms, acting selfishly to maximize their own profits, often develop governance mechanisms to reduce harmful behavior. They also often develop rules to manage many of the same kinds of problems that beset communities subject to public laws and regulations. They enforce these rules through the exercise of property rights and, most importantly, through the bouncer’s right to exclude agents from some quantum of the platform including prohibiting them from the platform entirely. Private control is likely to be more efficient than social control in dealing with negative externalities on platform communities because the platform owner can monitor bad behavior more closely and deal with this behavior more expeditiously than a public regulator. The courts and antitrust authorities should exercise caution in finding anticompetitive exclusion when that exclusion is conducted as part of a governance mechanism for dealing with bad behavior of some platform users that harm other users.

November 6, 2011 | Permalink | Comments (0) | TrackBack (0)