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 22, 2011

Evolutionary Model of Non-Durable Markets

Posted by D. Daniel Sokol

Joachim Kaldasch (EBC Hochschule Berlin) provides an Evolutionary Model of Non-Durable Markets.

ABSTRACT: Presented is an evolutionary model of consumer non-durable markets, which is an extension of a previously published paper on consumer durables. The model suggests that the repurchase process is governed by preferential growth. Applying statistical methods it can be shown that in a competitive market the mean price declines according to an exponential law towards a natural price, while the corresponding price distribution is approximately given by a Laplace distribution for independent price decisions of the manufacturers. The sales of individual brands are determined by a replicator dynamics. As a consequence the size distribution of business units is a lognormal distribution, while the growth rates are also given by a Laplace distribution. Moreover products with a higher fitness replace those with a lower fitness according to a logistic law. Most remarkable is the prediction that the price distribution becomes unstable ! at market clearing, which is in striking difference to the Walrasian picture in standard microeconomics. The reason for this statement is that competition between products exists only if there is an excess supply, causing a decreasing mean price. When, for example by significant events, demand increases or is equal to supply, competition breaks down and the price exhibits a jump. When this supply shortage is accompanied with an arbitrage for traders, it may even evolve into a speculative bubble. Neglecting the impact of speculation here, the evolutionary model can be linked to a stochastic jump-diffusion model.

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

Monday, November 21, 2011

Crony Capitalism and Antitrust

Posted by D. Daniel Sokol

Maurice Stucke (U. Tennessee Law) decries Crony Capitalism and Antitrust.

ABSTRACT: This flexibility in legal standards is attractive to testifying experts, lobbyists, and antitrust counsel who "know" and "can work" with the FTC and the DOJ to get the merger through. It is far from desirable for corporate executives who need to know what is legal or illegal, as well as customers and competitors who need to know what is reasonable and unreasonable competitive behavior.

So the recent antitrust activity is refreshing. But what would be especially refreshing is if the courts provided clearer antitrust rules than its current rule of reason. Clearer standards on what is or is not permissible will yield greater predictability, objectivity, and transparency in antitrust enforcement. While companies and customers would benefit, lobbyists might have reason to complain.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

A Tale of Two Panels: The Size of the Chancellor's Foot in Text Messaging and Potash

Posted by D. Daniel Sokol

Chris Sagers (Cleveland State) notes A Tale of Two Panels: The Size of the Chancellor's Foot in Text Messaging and Potash.

ABSTRACT: Pretty strong words have been bandied in the few years since Bell Atlantic Corp. v. Twombly. Two leading procedure scholars recently wrote that Twombly, and the subsequent Ashcroft v. Iqbal, have "destabilized the entire system of civil litigation," creating a "revolutionary" new "civil procedure hitherto foreign to our fundamental procedural principles. . . ." Sitting federal judges, too, have been rather uncommonly open in their criticism, in academic writing and in published opinions, and there have been dozens of legislative and academic proposals for reform or repeal.

A fair bit of the criticism has been essentially political, in stating fears that Twombly-Iqbal will unduly chill private litigation. Even before Twombly there had been fears that the new Roberts majority had "closed the courts," and at least in antitrust there is little doubt that Twombly-Iqbal has impacted the number of new private filings. But the view is also growing that Twombly-Iqbal is just not a workable system of pleading. It is hard to see how the standard is more than the chancellor's foot; though Twombly has been cited more than 100,000 times in cases, treatises, and briefs, no consensus whatsoever has emerged other than that the test remains "unclear."

And so, tellingly, two panels of the Seventh Circuit came to opposite conclusions in massive antitrust cases during the past year, even though they applied nominally the same Twombly-Iqbal standard to very similar fact allegations on the same procedural posture. The cases were In re Text Messaging Antitrust Litigation, which affirmed a denial of dismissal in December 2010, and Minn-Chem, Inc. v. Agrium Inc. ("Potash"), which reversed a denial of dismissal in September 2011.

These two cases show not only how unrestrained the Twombly-Iqbal standard really is, a point about which I will have more to say, but how great the stakes are for our larger society. Both cases involved allegations of many billions of dollars of consumer injury, but whether the alleged conduct could be subjected to the rule of law was made to depend on a legal standard that amounts more or less to poetry. In effect, whether the substantive law will be applied in any major lawsuit now boils down to the subjective and essentially unrestrained personal impulses of the two appellate judges it takes to make a panel majority.

As Adolph Berle once put it, the courts in these cases now apply only words, and not rules.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Durability of consumption goods and market competition: an agent-based modelling

Posted by D. Daniel Sokol

Eric Broullat (GREThA, CNRS) explores Durability of consumption goods and market competition: an agent-based modelling.

ABSTRACT: This paper presents an agent-based simulation model that explores the dynamics of product lifetimes on a competitive market. The main objective of this modelling exercise is to investigate the conditions under which product-life extension strategies can be effective. In this model, change in products’ characteristics is driven by an endogenous stochastic process relying on the interplays between heterogeneous consumers and firms. The main contribution of the paper is to present a detailed modeling of demand which enables to analyze more thoroughly how decisions of bounded rational consumers impact on the dynamics of the system and, more particularly, how purchase process shapes market selection and strategies of firms. While most existing literature on product lifetime investigates durable goods monopolists, our study highlights that competition and diversity matter. The coexistence of competing products with different! lifetimes can encourage firms to market long lifetime products. Our results also stress the critical role played in market dynamics by the processes driving purchase decision. The purchasing behavior of consumers in itself will greatly guide firms’ strategies and in fine shape market structure.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

What if the Episcopal Church were subject to antitrust law?

Posted by D. Daniel Sokol

Luke Froeb (Vanderbilt - Owen School of Management) asks What if the Episcopal Church were subject to antitrust law?

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust Implications of Competition Without Equilibrium in Multisided Markets

Posted by D. Daniel Sokol Justin (Gus) Hurwitz, University of Pennsylvania Law School discusses Antitrust Implications of Competition Without Equilibrium in Multisided Markets. ABSTRACT: A substantial literature on multisided markets – markets with multiple distinct groups of consumers who care about the extent of participation of other groups in the market – has developed over the past decade. This literature has not given substantial consideration to a critical characteristic of these markets: under competitive conditions multisided markets do not have a unique endogenous equilibrium. This is markedly different from most traditional markets, in which competition tends to push the market into a unique equilibrium – an equilibrium that has the fortunate characteristic of maximizing social welfare. This has potentially important ramifications for antitrust law, which is largely predicated on the assumption that competition causes markets to tend towards a welfare maximizing equilibrium. This paper considers circumstances under which traditional antitrust analysis may predictably be led astray by multisidedness, and factors that we may consider to avoid such errors.

Generally, antitrust analysis of multisided markets requires different understandings of market power and competitive effects. Unlike in traditional markets, in some cases multisided market power may actually limit a firm’s ability to engage in anticompetitive conduct; conversely, in other cases reducing a firm’s market power may reduce social welfare. In terms of competitive effects, we need to look at how firms compete in multisided markets and how this process of competition affects social welfare. A central, and unique, element of competition in multisided markets is that firms compete by trying to get each side of the market to identify them with high-value participants of the other sides of the market. In addition, two analytical factors critical to understanding the effects of competition on social welfare are the need to understand the direction (positive or negative) of effects that changed participation on one side of the market has on the other sides, and the need to look at the effect that such changes have on the average (not the marginal) consumer.

Each of these considerations stands out as different from both traditional understandings of competition and traditional approaches to antitrust analysis. By identifying these differences and discussing how to think about them, this paper helps to improve how we think about this important class of markets – and hopefully will help to avoid harmful antitrust and regulatory action in them.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

The EU Competition Law Fining System: A Reassessment

Posted by D. Daniel Sokol

Damien Geradin, Tilburg University - Tilburg Law and Economics Center (TILEC), University of Michigan Law School provides The EU Competition Law Fining System: A Reassessment.

ABSTRACT: The objectives of this paper are to: (i) describe the fining policy of the European Commission for breach of EU competition rules; (ii) assess this policy in light of the criticisms that have been made by academics, practitioners and other stakeholders; and (iii) to the extent these criticisms are justified, make concrete proposals to improve the Commission’s fining policy.

This discussion paper does not suggest that undertakings that have breached EU competition rules should get off the hook lightly. Sanctions should be part of all legal regimes and this is also true for competition law. Because of the severe harm that can be created by competition law infringements, sanctions for such infringements must be sufficiently strict to ensure deterrence. Yet, it is questionable whether the imposition of increasingly high corporate fines is the most effective way to improve compliance with EU competition law. Against this background, the proposals made in this discussion paper seek to improve the efficiency and fairness of the sanctions imposed in case of infringement, and ensure that they are made at the least cost to society. Some of these proposals are easier to implement than others, and it is not suggested that all proposals should be implemented at once.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Antitrust and Judaism Discussion - Great Panel Program - November 28, 2011 12pm-1:30pm EST

Posted by D. Daniel Sokol

The American Bar Association
ABA Section of Antitrust Exemptions & Immunities Committee
Antitrust and Judaism
November 28, 2011
12pm-1:30pm EST

In light of the Supreme Court's pending decision of the scope of religious organizations’ immunity from civil liability, as well as prominent recent scholarship on the antitrust treatment of rabbinical orders and concerns expressed by some over their conduct in employment, kosher certification, and other matters, the top-flight panelists will ask whether antitrust could and should be used to police markets also regulated by rabbinical authorities. This seminar will put the oy back in oy vey!

Link to the program details here.

Speakers:

  • Makan Delrahim, Brownstein Hyatt Farber Schreck, LLP
  • David Dunn, Hogan Lovells
  • Robert Litan, Kauffman Foundation and Brookings Institution
  • Barak Richman, Duke University Law School

 

Moderator:

  • D. Daniel Sokol, University of Florida Levin College of Law

The ABA is not seeking CLE credit for this program. You will not receive CLE credit for attending/viewing/listening.

To register for the conference. You will receive the dial in numbers in your confirmation.

Recordings of this program will be posted on the Section website and downloadable in an MPEG-3 format, provided all releases have been obtained. Please visit our Committee Program Audio page after the program to listen to/download the audio.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Explicit vs. Tacit Collusion - The Impact of Communication in Oligopoly Experiments

Posted by D. Daniel Sokol

Miguel Alexandre Fonseca, University of Exeter Business School and Hans-Theo Normann, Heinrich-Heine Universitaet Duesseldorf - Department of Economics, Max Planck Institute for Research on Collective Goods have an interesting paper on Explicit vs. Tacit Collusion - The Impact of Communication in Oligopoly Experiments.

ABSTRACT: We explore the difference between explicit and tacit collusion by investigating the impact communication has in experimental markets. For Bertrand oligopolies with various numbers of firms, we compare pricing behavior with and without the possibility to communicate among firms. We find strong evidence that talking helps to obtain higher profits for any number of firms, however, the gain from communicating is non-monotonic in the number of firms, with medium-sized industries having the largest additional profit from talking. We also find that industries continue to collude successfully after communication is disabled. Communication supports firms in coordinating on collusive pricing schemes, and it is also used for conflict mediation.

November 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, November 20, 2011

Accountable Care Organizations: What Exactly Are We Getting?

Posted by D. Daniel Sokol

Tom Rosch (FTC) asked at the ABA Antitrust Fall Forum Accountable Care Organizations: What Exactly Are We Getting? in a speech.

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

Minn-Chem Incorporated et al. v. Agrium Incorporated et al.: A Canadian Perspective on the Extraterritorial Application of U.S. Antitrust Law

Posted by D. Daniel Sokol

Mark Katz & Erika Douglas (Davies Ward) provide Minn-Chem Incorporated et al. v. Agrium Incorporated et al.: A Canadian Perspective on the Extraterritorial Application of U.S. Antitrust Law.

ABSTRACT: This article provides a Canadian perspective on the recent decision of the U.S. Seventh Circuit Court of Appeals (the "Seventh Circuit") in Minn-Chem Incorporated et al. v. Agrium Incorporated et. al. ("Minn-Chem"). Minn-Chem considered the application of the Foreign Trade Antitrust Improvements Act ("FTAIA") to a class action by U.S. direct and indirect purchasers of potash against seven major international potash mining companies. The issue raised by the case is of keen concern to Canadian (and other non-U.S. entities), namely when will U.S. antitrust law apply to foreign conduct? In our view, the Seventh Circuit came out on the right side of the issue, adopting a suitably restrained approach to the extraterritorial application of U.S. antitrust law.

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