Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, February 5, 2011

Great Video on the Dutch Construction Cartel

Posted by D. Daniel Sokol

Everybody should make a documentary on cartels this good.  The Dutch Construction Cartel, produced by the current affairs program Zembla and Voiceover by Marc Chase.

Documentary film "The Dutch Construction Cartel"

This documentary film is a compilation of four 45 minutes episodes of the Dutch current affairs television program Zembla that exposed widespread collusion in the Dutch construction sector. The first documentary, which first aired in 2001, was based on detailed whistleblower information. It instigated a Parliamentary Inquiry (2002-2003) into the building industry. Many companies admitted to the existence of price agreements, but argued that their side-payments were only "monopoly money" and standard business practice. Several leading politicians and high government officials were allegedly involved. Antitrust damages were estimated in the billions of euros. The Netherlands Competition Authority (NMa) sanctioned over 1400 companies, many of them receiving substantial leniency discounts. Many key players in business, public administration and politics escaped unscathed. In contrast, the main whistleblower was prosecuted by the state and was forced to live in a camper. This 1 hour compilation for an international audience, with English subtitles and voice-overs, was edited in a coproduction with the Amsterdam Center for Law and Economics (ACLE). Director: Jos van Dongen.

February 5, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, February 4, 2011

Trade Policy and Antitrust: Do Consumers Matter to Legislators?

Posted by D. Daniel Sokol

Robert M. Feinberg, American University - Department of Economics, Thomas A. Husted, American University - Department of Economics, ask Kara M. Reynolds, American University - Department of Economics ask Trade Policy and Antitrust: Do Consumers Matter to Legislators?

ABSTRACT: We provide one of the first efforts to measure the importance of consumer preferences in legislators’ trade policy decisions by estimating the degree to which the level of antitrust enforcement in the legislator’s state impacts his or her vote on free trade agreements. To the extent that antitrust and trade liberalization are both viewed as pro-consumer in nature, we would expect to see a positive relationship between antitrust enforcement in their legislative district and Congressional votes in support of trade liberalization. We find evidence suggesting that consumer preferences do play a role in legislative decisions on trade policy.

 

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

A Structural Approach to Market Definition With an Application to the Hospital Industry

Posted by D. Daniel Sokol

Martin Gaynor (Carnegie Mellon - Econ), Samuel A. Kleiner (Cornell - Human Ecology), William B. Vogt (University of Georgia - Econ) provide A Structural Approach to Market Definition With an Application to the Hospital Industry.

ABSTRACT: Market definition is essential to merger analysis. Because no standard approach to market definition exists, opposing parties in antitrust cases often disagree about the extent of the market. These differences have been particularly relevant in the hospital industry, where the courts have denied seven of eight merger challenges since 1994, due largely to disagreements over geographic market definition. We compare geographic markets produced using common ad hoc methodologies to a method that directly applies the “SSNIP test” to hospitals in California using a structural model. Our results suggest that previously employed methods overstate hospital demand elasticities by a factor of 2.4 to 3.4 and define larger markets than would be implied by the merger guidelines’s hypothetical monopolist test. The use of these methods in differentiated product industries may lead to mistaken geographic market delineation, and was likely a contributing factor to the permissive legal environment for hospital mergers.

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

Most Downloaded New Antitrust Papers on SSRN - December 6, 2010 to February 4, 2011

Posted by D. Daniel Sokol

TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy eJournal
December 6, 2010 to February 4, 2011

Rank Downloads Paper Title
1 167 Lessons from the Financial Crisis
Maurice E. Stucke,
University of Tennessee College of Law,
Date posted to database: January 22, 2011
Last Revised: January 22, 2011
2 138 Antitrust 2025
Maurice E. Stucke,
University of Tennessee College of Law,
Date posted to database: December 19, 2010
Last Revised: January 22, 2011
3 127 Counting Rivals or Measuring Share: Modeling Unilateral Effects for Merger Analysis
Malcolm B. Coate,
U.S. Federal Trade Commission (FTC),
Date posted to database: December 12, 2010
Last Revised: December 12, 2010
4 101 Monitoring Managers Through Corporate Compliance Programs
Charles Angelucci, Martijn A. Han,
University of Toulouse 1 - Toulouse School of Economics (TSE), University of Amsterdam - Amsterdam Center for Law & Economics (ACLE),
Date posted to database: December 21, 2010
Last Revised: January 21, 2011
5 100 In Defense of Monopoly
Richard B. McKenzie,
University of California, Irvine - Paul Merage School of Business,
Date posted to database: December 5, 2010
Last Revised: December 5, 2010
6 90 Transplanting Antitrust in China: Economic Transition, Market Structure, and State Control
Wentong Zheng,
University at Buffalo Law School, The State University of New York,
Date posted to database: January 11, 2011
Last Revised: January 11, 2011
7 83 Earning Exclusivity: Generic Drug Incentives and the Hatch-Waxman Act
C. Scott Hemphill, Mark A. Lemley,
Columbia University - Law School, Stanford Law School,
Date posted to database: January 10, 2011
Last Revised: January 10, 2011
8 79 Screens for the Detection of Manipulative Intent
Shaun D. Ledgerwood,
The Brattle Group,
Date posted to database: December 20, 2010
Last Revised: January 9, 2011
9 74 The Clucking Theorem: Legal Transitions, Civility Norms, and Social Costs
Barak Y. Orbach, Frances R. Sjoberg,
University of Arizona, University of Arizona - James E. Rogers College of Law,
Date posted to database: January 15, 2011
Last Revised: February 2, 2011
10 71 Antitrust in 2025: Cartels, Agency Effectiveness and a Return to Back to the Future
D. Daniel Sokol,
University of Florida - Levin College of Law,
Date posted to database: January 1, 2011
Last Revised: January 1, 2011

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

Breaking News - European Commission posts its Public consultation: Towards a Coherent European Approach to Collective Redress

Posted by D. Daniel Sokol

The European Commission has released its Public consultation: Towards a Coherent European Approach to Collective Redress.

As the Commission notes:

The purpose of this consultation is, inter alia, to identify common legal principles on collective redress. The consultation should also help to examine how such common principles could fit into the EU legal system and into the legal orders of the 27 EU Member States. The consultation also explores in which fields different forms of collective redress (injunctive and /or compensatory) could have an added value for improving the enforcement of EU legislation or for better protecting the rights of victims. The resulting set of principles should guide any possible initiative for collective redress in EU legislation.

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

Simple Markov-perfect industry dynamics

Posted by D. Daniel Sokol

Jaap H. Abbring (CentER, Department of Econometrics & OR, Tilburg University), Jeffrey R. Campbell (Federal Reserve Bank of Chicago), and Nan Yang (VU University Amsterdam and Tinbergen Institute) analyze Simple Markov-perfect industry dynamics.

ABSTRACT: This paper develops a tractable model for the computational and empirical analysis of infinite-horizon oligopoly dynamics. It features aggregate demand uncertainty, sunk entry costs, stochastic idiosyncratic technological progress, and irreversible exit. We develop an algorithm for computing a symmetric Markov-perfect equilibrium quickly by finding the fixed points to a finite sequence of low-dimensional contraction mappings. If at most two heterogenous firms serve the industry, the result is the unique "natural" equilibrium in which a high profitability firm never exits leaving behind a low profitability competitor. With more than two firms, the algorithm always finds a natural equilibrium. We present a simple rule for checking ex post whether the calculated equilibrium is unique, and we illustrate the model's application by assessing how price collusion impacts consumer and total surplus in a market for a new product t! hat requires costly development. The results confirm Fershtman and Pakes' (2000) finding that collusive pricing can increase consumer surplus by stimulating product development. A distinguishing feature of our analysis is that we are able to assess the results' robustness across hundreds of parameter values in only a few minutes on an off-the-shelf laptop computer.

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

Thursday, February 3, 2011

Getting The Fine Down Cartel Regulation 2011

Posted by D. Daniel Sokol

Global Competition Review is pleased to announce the publication of Getting The Fine Down Cartel Regulation.

This fully revised and updated 11th edition offers the reader coverage of 41 jurisdictions worldwide, including new chapters on Finland, Mexico and Singapore.

Key questions are answered by leading practitioners, providing international analysis in areas of law and policy for corporate counsel, cross-border legal practitioners and business people.

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

Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?

Posted by D. Daniel Sokol

Alex Coad (Max Planck Institute of Economics,) and Mercedes Teruel (Departament d'Economia, Universitat Rovira i Virgili) ask Inter-firm rivalry and firm growth: Is there any evidence of direct competition between firms?

ABSTRACT: Inter-firm competition has received much attention in the theoretical literature, but recent empirical work suggests that the growth rates of rival firms are uncorrelated, and that firm growth can be taken as an essentially independent process. We begin by investigating the correlations of the growth rates of competing firms (i.e. the largest and second-largest firms in the same industry) and observe that, surprisingly, the growth of these firms can be taken as independent. Nevertheless, peer-effect regressions, that take into account the simultaneous interdependence of growth rates of rival firms, are able to identify significant negative effects of rivals' growth on a firm's growth.

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

Price Competition under Limited Comparability

Posted by D. Daniel Sokol

Michele Piccione (LSE) and Ran Spiegler (UCL and Tel Aviv University) address Price Competition under Limited Comparability.

ABSTRACT: This paper studies market competition when firms can influence consumers’ ability to compare market alternatives, through their choice of price “formats”. We introduce random graphs as a tool for modeling limited comparability of formats. Our main results concern the interaction between firms’ equilibrium price and format decisions and its implications for industry profits and consumer switching rates. In particular, firms earn max-min payoffs in symmetric equilibria if and only if the graph that represents the comparability between formats satisfies a generalized regularity property, which we interpret as a form of “frame neutrality”. The same property is necessary for equilibrium behavior to display statistical independence between price and format decisions. We also show that narrow regulatory interventions that aim to facilitate comparisons may have an anti-competitive effect.

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

The application of EU competition law in the energy sector

Posted by D. Daniel Sokol

Ulrich Scholz and Stephan Purps analyze The application of EU competition law in the energy sector.

ABSTRACT: The liberalisation of European energy markets has culminated in the adoption of the third energy package in 2009, which has led to intense implementation action by member states, national authorities, undertakings and European associations. Competition rules have been enforced mostly by ways of commitment decisions at European level while, at a national level, authorities investigated cases of market foreclosure, potential collusive behaviour and manipulations in wholesale markets. On a substantive point, the Commission considers that long term and large scale capacity reservation can amount to an abuse irrespective of the needs of the dominant company. That view is problematic for operators and does not seem compatible with current competition law principles.

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

EU plans for a group claim directive resuscitated

Posted by D. Daniel Sokol

Thomas Lübbig (Freshfields) and Paul Nihoul (Université catholique de Louvain Law) summarize EU plans for a group claim directive resuscitated.

ABSTRACT: It took the then European Economic Community (EEC) from 1968 to 1985 to draft the EEC Product Liability Directive. Even the first genuine draft was only presented in August 1974, still more than ten years before the Directive finally saw the light of day. Admittedly, the EEC of those days was different from the European Union (EU) we know today. Still, discussions on the merits of a Product Liability Directive were similar to those being aired by key lawmakers in Brussels today on the merits of EU-wide group claim legislation. First, the Product Liability Directive brought about a significant change to the until-then largely untouched Member State civil codes and laws of tort, by introducing the concept of strict liability. Secondly, the Directive was considered to bring a dangerous invader species from across the Atlantic, raising fears of a US-style litigation forum that by definition would be prone to abuse.

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

Wednesday, February 2, 2011

Save the Date: Global Competition Law Conference in Hong Kong, March 18-19, 2011

Posted by D. Daniel Sokol

Please save the date for a competition law and policy conference co-organized by Thomas Cheng (Universit of Hong Kong), Ioannis Lianos (UCL) and D. Daniel Sokol (University of Florida).  The  Centre for Law, Economics and Society (competition, public policy and regulation) at UCL and HKU are the co-organizing institutions. The conference will be held at the University of Hong Kong on March 18-19, 2011.

We will have the full schedule and registration information posted soon. Let me mention some of our government speakers who have confirmed:

Yena Lim Hua Yen (Chief Executive, Competition Commission of Singapore)
Dhanendra Kumar (Chairman, Competition Commission of India)
Willard Tom (General Counsel, US Federal Trade Commission)
Simon Milnes (Infrastructure, Competition and Consumer Division, the Australian Treasury)
Gert-Jan.Koopman (Deputy Director General (State Aids) European Commission)
Eduardo Pérez Motta (President, Federal Competition Committee, Mexico)
William Kovacic (Commissioner, US Federal Trade Commission)
Zhu Zhong Liang (Anti-Monopoly Bureau, MOFCOM)
John Fingleton (Chairman, UK Office of Fair Trading)
Frederic Jenny (Cour de Cassation and Chairman, OECD Competition Committee)
Michiyo Hamada (Commissioner, Japanese Federal Trade Commission (JFTC))
Assimakis Komninos (Commissioner, Hellenic Competition Commission)

We welcome all attendees. 

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Prices and Deadweight Loss in Multi-Product Monopoly

Posted by D. Daniel Sokol

Rabah Amir (University of Arizona and University of Luxembourg), Jim Y. Jin (University of St Andrews),
Gerald Pech (American University in Bulgaria), and Michael Tröge (ESCP-Europe) address Prices and Deadweight Loss in Multi-Product Monopoly.

ABSTRACT: This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firm's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on lattice-theoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustra! tive examples with closed-form solutions are also provided.

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Recent EU case law developments: Article 102 TFEU

Posted by D. Daniel Sokol

Romano Subiotto, Farrell Malone, David R. Little, Clémentine de Brosses, and Simina Suciu (Cleary Gottlieb) provide a summary of Recent EU case law developments: Article 102 TFEU.

ABSTRACT: During the period covered, the European Commission and Courts have followed their traditional approach in the application of Article 102 TFEU (abuse of dominant position). For instance, they have continued to apply the ‘margin squeeze theory’ to cases where inputs controlled by dominant firms are essential for downstream competition or must be provided pursuant to regulatory obligations. Some cases may however generate debate. For instance, one judgment reaffirms the appropriateness of a form-based approach, and another raises the difficulty of striking a balance between the interests of IP rightholders and their generic competitors. The increasing use of the commitments procedure, with possible negative consequences for the development of clear precedents and any jurisdictional control, is also to be noted.

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Just Another Brick in the Wall: Communications with In-house Lawyers Remain Unprotected by Legal Privilege at the European Union Level

Posted by D. Daniel Sokol

Luis Pais Antunes (PMLJ) describes Just Another Brick in the Wall: Communications with In-house Lawyers Remain Unprotected by Legal Privilege at the European Union Level.
ABSTRACT: As decided by the ECJ, legal privilege does not extend to in-house lawyers in antitrust investigations carried out by the Commission. The decision creates a discrepancy with national investigations as that extension is accepted in some countries. It further creates unease for companies taking advice from in-house lawyers, which may compromise their role in ensuring compliance. It raises questions as to why ‘enrolled in-house lawyers’ should remain subject to ethical and discipline rules applicable to external lawyers as their communications do not benefit from the same protection.

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Complications in the Antitrust Response to Monopsony

Posted by D. Daniel Sokol

My colleague Jeff Harrison (University of Florida - Law) has written a very good piece on Complications in the Antitrust Response to Monopsony.

ABSTRACT: The general idea of treating monopoly and monopsony similarly under the antitrust laws is supported by economic theory but is somewhat more complicated when one attempts to apply existing legal standards. The focus here is on some of the stickier issues that arise when antitrust is applied to monopsony. This analysis starts with a short review of monopsony theory. The purpose is to provide a context for the specific issues that are addressed in the following sections. The first complication concerns what is called the “all none supply curve.” This amounts to an argument that in some circumstances, monopsony may not be harmful. It then explores questions left open by Weyerhaeuser, issues of antitrust standing (a decision about those eligible to bring a private action based on a monopsony theory), the treatment of cooperative buying, and, finally, the treatment of monopsony in the context of some practices to which the application of United States antitrust law is currently somewhat muddled.

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Work on Competition Law Issues... in Fiji (yes, they are hiring)

Posted by D. Daniel Sokol

The Fiji Commerce Commission is looking for a Senior Research Fellow in Competition Law.

Download Competition Lawyer

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

On the Move: Sean Ennis from OECD to head the Competition Commission of Mauritius

Posted by D. Daniel Sokol

Sean Ennis has finally figured out the secret to good life - interesting work, good staff and a great location.  He has just been appointed the the new Executive Director of the Competition Commission of Mauritius.  John Davies (the first Executive Director of the Competition Commission of Mauritius) has done an excellent job in creating an agency that in many ways is a model to other young agencies around the world.  I am sure Sean will do an great job in building off of John's work.

From the press release:

The Office of the Prime Minister today announced the identity of the new Executive Director of the Competition Commission of Mauritius: Dr Sean Ennis, presently a senior economist at the OECD in Paris.  He will take up his post towards the end of March 2011.

Dr. Ennis earned a BA Hons in economics from King’s College, Cambridge in 1990 and a Ph.D. in economics from the University of California at Berkeley in 1996. He is coming to the CCM from the OECD, where he has been a Senior Economist in the Competition Division of the OECD since 2003. Through this work, he has gained extensive exposure to international best practice in competition law and policy in many sectors. He leads the OECD’s competition assessment project, developing and fostering best practice for identifying and removing anti-competitive effects of regulations. He previously worked at the U.S. Department of Justice’s Antitrust Division in Washington, DC and at the European Commission’s DG Competition in Brussels, providing him with a wide international experience with competition law enforcement.

Dr Ennis said:

“It is an honour to be offered the position of Executive Director and a pleasure to accept it. The coming years will be an exciting time for the CCM, as it consolidates its impressive initial achievements and continues its mission to stop anti-competitive conduct in Mauritius. I look forward to joining the CCM and working with the Commissioners, the staff, other parts of government, the private sector and others. I will aim to ensure the Commission’s work is of high technical quality, consistent with the best international practices and both legally and economically sound. I place high value on maintaining the CCM’s reputation for being fair, unbiased and of the highest integrity.”

Dr. Ennis was appointed by the President of the Republic, on the advice of the Prime Minister, after consultation with the Leader of the Opposition, in accordance with the procedures of the Competition Act 2007.  This appointment followed an international competition.

Welcoming the announcement of Dr Ennis’s appointment, Mr Rajiv Servansingh, Acting Chairman of the Commission, said:

"Dr Ennis was selected from a very strong international field of candidates, following a thorough process of assessment and interviews.  The Commission feels confident that the right man has been found for the job of Chief Executive. It is no secret that the replacement of our CE in the present circumstances of the Commission's working was always going to be a delicate matter. We are relieved and pleased that we have found the rare bird."

Dr Ennis will replace John Davies, the founder Executive Director of the CCM.  Mr Davies said:

“I am delighted with the progress that this new institution has made, and I am very pleased to be able to leave it in Sean’s capable hands.  We have made a good start, but the task over the next few years is to establish solid credibility for this institution, and demonstrate that it makes a real difference to the lives of Mauritians as consumers and business people.  I think that the Commissioners and the staff of the Commission can certainly meet this goal, and Sean’s wide-ranging experience of competition regimes the world over will be a huge help in that.”

 

 

 

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition and Market Structure in Local Real Estate Markets

Posted by D. Daniel Sokol

Jason Beck, Armstrong Atlantic State University, Frank A. Scott, University of Kentucky, and Aaron Yelowitz, University of Kentucky - Department of Economics address Competition and Market Structure in Local Real Estate Markets.

ABSTRACT: The persistence of the standard six percent real estate sales commission across markets and over time calls into question the competitiveness of the residential real estate brokerage industry. While there is anecdotal evidence that some local real estate markets are fairly concentrated, no systematic study of market structures has been conducted. We have collected primary data on the number and market shares of real estate brokers in a variety of small, medium, and large real estate markets across the U.S. for 2007 and 2009. In addition to these cross sectional data, we have also collected longitudinal data on the size distribution of firms for Louisville, KY for a nine-year period. In our cross-sectional analysis of medium and large markets, we find no evidence that market concentration might create problems for competition. We do find that small markets on average have higher HHI’s than medium and large markets. The longitudinal analysis reveals that many small brokers are in and out of the market, selling a house or two one year and selling zero houses the next year.

February 2, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 1, 2011

Google, IBM, SAP, and The Others: Is the European Commission Targeting Technology Firms?

Posted by D. Daniel Sokol

Lorenzo Coppi (LECG) asks Google, IBM, SAP, and The Others: Is the European Commission Targeting Technology Firms?

ABSTRACT: The European Commission has recently opened an antitrust investigation in connection to Google's commercial practices. This is just the last of a number of recent investigations in the high-tech sector, which have involved Microsoft, Intel, IBM, Qualcomm, Rambus, Apple, and SAP. After reviewing the scope of the European Commission's investigation of Google (on the basis of the available public information), this article focuses on the question of whether there are characteristics of the high tech sector which make it particularly prone to monopolization or anticompetitive foreclosure, and which justify the European Commission's apparent focus on the sector. First the article discusses the reasons militating in favor of close scrutiny of the technology sector, namely the tendency of high tech markets to be significantly concentrated, and the fact that high tech products tend to have significant complementarity and interoperability relationships which make exclusion of competitors a tangible possibility. Then the article reviews the argument against close scrutiny of the technology sector, namely the fact that it is characterized by dynamic, fast-changing, platform competition, and that the legitimate by-product of innovative behavior is a transitory monopoly, the curbing of which may chill innovation incentives. The article concludes that, on balance, high tech markets are a reasonable target for antitrust scrutiny because they have a propensity to "tip to monopoly;" exclusion of competitors is fairly easy and often profitable; the effects of market power on incentives to innovate are uncertain; and the sector is very important to the economy. Obviously this does not mean that all the cases the European Commission is investigating have merit-only time will tell if that is the case.

February 1, 2011 | Permalink | Comments (0) | TrackBack (0)