Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, December 16, 2011

Best and Even Better Practices in the European Commitment Procedure after Alrosa: The Dangers of Abandoning the ‘Struggle for Competition Law’

Posted by D. Daniel Sokol

 Florian Wagner-von Papp, University College London Faculty of Laws has posted Best and Even Better Practices in the European Commitment Procedure after Alrosa: The Dangers of Abandoning the ‘Struggle for Competition Law’.

ABSTRACT: Where the EU Commission has concerns about possibly anticompetitive conduct, Article 9 Regulation 1/2003 empowers the Commission to accept commitments from the undertakings concerned, provided that these commitments meet the concerns; if the Commission accepts the commitments, it makes them binding on the undertakings and concludes that there are ‘no longer grounds for action’ (the ‘commitment procedure’). This commitment procedure is part of a wider trend that promotes what one could call ‘consensual competition law enforcement’. The underlying problem of consensual competition law enforcement is that it departs from the traditional public-law paradigm of an authoritative top-down command in favour of a consensual dispute resolution mechanism. As a result, it is uncertain to what extent the traditional safeguards against such authoritative commands developed in public law – such as the principle of proportionality – continue to apply to this hybrid procedure; the ‘voluntary’ nature of commitments may instead suggest a hands-off approach.

In the Alrosa case, both the General Court and the Court of Justice of the European Union (CJEU) had the opportunity to adjudicate on the degree of protection to be afforded to the undertakings against disproportionate commitments. The General Court implicitly considered the public-law character of commitment decisions to govern the analysis, and as a consequence required the Commission to afford the undertakings procedural protections similar to those available in infringement procedures. In contrast, Advocate General Kokott and the CJEU stressed the consensual (‘voluntary’) aspect of the commitment procedure. The strictures of the rule of law were relaxed with the argument that the parties could sufficiently protect themselves against disproportionate remedies in the course of the negotiations. After all, nobody forces undertakings to offer commitments to the Commission.

The article starts by outlining the underlying problem of the commitment decision as a hybrid measure between unilateral command and contract, and the extent to which commitment negotiations differ from contracting between private parties (Parts 2 and 3). Parts 4 and 5 give a brief overview of the respective advantages and disadvantages of infringement procedures and commitment procedures. Part 6 describes the Alrosa judgments of the General Court and the CJEU. I will then discuss, in Part 7, why the growing reliance on consensual competition law enforcement is problematic, before concluding in Part 8.

The main criticism is that the current lack of external or internal constraints on the Commission in the commitment procedure may result in a vicious circle, leading to ever more commitment decisions and ever fewer infringement decisions. Undertakings start to extrapolate their obligations from commitment decisions and non-binding guidelines that do not authoritatively state the law. This reliance on ‘quasi case law’ increases the Commission’s discretion in future negotiations. The incentives for the Commission to resort to the commitment procedure are especially strong in cases involving novel legal issues, that is in cases in which the benefit of legal certainty provided by an infringement decision would be particularly strong. There is a danger that the struggle for law is abandoned in favor of discretionary case-to-case negotiations.

There are two ways out of this vicious circle. One is to make infringement decisions more attractive for the Commission by increasing the Commission’s discretion in devising proactive remedies. The other way is to impose more constraints on the Commission in the commitment procedure. Since the legislator and the Court have largely abandoned their role in constraining the Commission’s discretion in the commitment procedure, it now falls to the Commission to exercise self-restraint, not only in individual cases, but by issuing self-binding guidelines.

December 16, 2011 | Permalink | Comments (0) | TrackBack (0)

The Clash of Civilizations, Much Ado About Nothing or Something Rotten in the Kingdom of Enforcement! Do IP Rights Merit Special Considerations Under Competition Law?

Posted by D. Daniel Sokol

Christian Bergqvist, University of Copenhagen/Falculty of Law asks The Clash of Civilizations, Much Ado About Nothing or Something Rotten in the Kingdom of Enforcement! Do IP Rights Merit Special Considerations Under Competition Law?

ABSTRACT: It is often claimed, but rarely in further detail, that IP rights create tensions under competition law and thus merit special considerations. While little can be held against the first, the latter is significantly less evidential if it involves a restrictive, or no application, as strong arguments can be held against both suggestions. Further, rather than a conflict between colliding interests the interaction has been haunted by a mix of unsettled questions and enforcement priorities to which the European Commission, as the supreme enforcer in EU, has not always demonstrated a coherent approach.

December 16, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition Policy and the Application of Section 5 of the Federal Trade Commission Act

Posted by D. Daniel Sokol

William E. Kovacic, George Washington University - Law School and Marc Winerman, Federal Trade Commission have an interesting article on Competition Policy and the Application of Section 5 of the Federal Trade Commission Act.

ABSTRACT: Since the 1970’s, U.S. courts generally have narrowed the range of single-firm behavior subject to condemnation as monopolization under the Sherman Act. This article examines the possibility of applying principles from Section 5 of the Federal Trade Commission Act to address apparent instances of anticompetitive conduct that go beyond the reach of other federal antitrust statutes. The FTC, through Section 5, offers a superior platform for elaborating competition policy, has the tools to perform empirical and policy work that can inform the design of legal rules, and is a specialized tribunal whose Section 5 decisions have no collateral effect in private cases. However, FTC’s application of Section 5 has played a fairly insignificant role in shaping competition policy. Its experience with Section 5 has a bleak record of establishing distinctive competition policy jurisprudence both because of federal court reluctance to sustain its decisions due to concerns about the absence of limiting principles and doubts about the depth and quality of FTC’s expertise; and hostile legislative reactions to FTC’s use of Section 5 that object to Section 5’s reach. Before Section 5 enforcement can be expanded, the FTC must develop a strategy that rest upon corrections to Section 5’s past failings. This requires (1) using policy statements or guidelines to state FTC’s views about what constitutes an unfair method, describe how the agency will exercise its enforcement discretion, and establish a high-level framework for analyzing Section 5 cases in adjudication; (2) articulating a framework that accounts for similarities to, as well as differences from, other antitrust laws; and (3) and building institutional competence by using research and policy instruments to signal to courts that the FTC has a sound basis for specific proposed application of Section 5.

December 16, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 15, 2011

Monopoly in Chains: Antitrust and the Great A&P

Posted by D. Daniel Sokol

Award winning author Marc Levinson, whose latest book is The Great A&P and the Struggle for Small Business in America has written Monopoly in Chains: Antitrust and the Great A&P

ABSTRACT: U.S. v New York Great Atlantic & Pacific was the climax of decades of effort to cripple chain stores in order to protect mom-and-pop retailers and the companies that supplied them. The principal target was A&P, which was by far the largest retailer in the world. The struggle had less to do with the economics of the grocery trade than with competing visions of society, one favoring the rationalism of cold corporate efficiency as a way to increase wealth and raise living standards, the other harking back to a society of autonomous farmers, craftsmen, and merchants in which personal independence was the source of opportunity and prosperity.

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

The FTAIA and Claims by Foreign Plaintiffs Under State Law

Posted by D. Daniel Sokol

Ned Cavanaugh (St. John's) has written on The FTAIA and Claims by Foreign Plaintiffs Under State Law.

IN EMPAGRAN, THE SUPREME COURT construed the Foreign Trade Antitrust Improvements Act (FTAIA) to severely limit the extraterritorial reach of the Sherman Act. In the wake of Empagran and the D.C. Circuit’s subsequent ruling on remand in that case, foreign plaintiffs asserting claims under U.S. antitrust laws for injuries based on transactions consummated abroad have been largely shut out of federal courts. Foreign plaintiffs, however, have not abandoned their efforts to obtain relief in American courts for anticompetitive acts committed in the international arena. Rather, they have turned to claims under various state laws, including state antitrust laws, state unfair trade practice laws, and common law relief under theories of unjust enrichment and restitution. This article analyzes the viability of these state law claims and concludes that state law remedies are likely to be unavailable for injuries based on transactions consummated abroad, for the same reasons the FTAIA bars antitrust claims under federal law. Additionally, these state law claims are barred by the Supremacy Clause of the U.S. Constitution, the Foreign Commerce Clause, the Due Process Clause, and the doctrine of prescriptive comity.

Download Fall11-CavanaghC

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Beyond Leniency: Empirical Methods of Cartel Detection

Posted by D. Daniel Sokol

For those of you who want copy of the slides from today's ABA Section of Antitrust Law program in which I participated, you can download the slides here.

 

Beyond Leniency: Empirical Methods of Cartel Detection
Thursday, December 15, 2011
12:00pm - 1:30pm EST

Sponsored by:
Economics Committee
International Cartel Task Force
Compliance and Ethics Committee
Insurance and Financial Services Committee

Antitrust authorities have relied significantly on leniency applications to detect conspiracies, but despite their considerable success some collusion remains undetected. Recognizing the great value of multiple approaches to detection, several authorities have started to search for alternative and complementary approaches including empirical methods commonly known as screens. Screens have flagged unusual patterns in a variety of countries and industries, and in addition to their natural use for detection, they can also be successfully applied on the defense side. This panel will discuss the multiple uses of screens on both sides of antitrust investigations and litigation.

Moderator: Carlos Mena Labarthe
Director, Division for Cartel and Interstate Commerce Restrictions Investigations, Federal Competition Commission of Mexico

Speaker: Rosa M. Abrantes-Metz, PhD
Principal, AFE Consulting
Adjunct Associate Professor, Stern School of Business, NYU

Speaker: Donald Klawiter
Partner, Sheppard Mullin Richter & Hampton LLP
Washington, DC

Speaker: Carlos Emmanuel Joppert Ragazzo
Commissioner, CADE
Brazil

Speaker: D. Daniel Sokol
Associate Professor of Law
University of Florida Levin College of Law

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

The Role of the European Ombudsman in Competition Proceedings: A Second Guardian of Procedural Guarantees?

Posted by D. Daniel Sokol

Andreas Scordamaglia-Tousis (European University Institute) asks The Role of the European Ombudsman in Competition Proceedings: A Second Guardian of Procedural Guarantees?

ABSTRACT:This Journal recently published an article written by the European Ombudsman about the role played by him in the procedure regarding Intel where a complaint for maladministration had been introduced against the European Commission.

To provide a more general perspective, this article analyses the role played by the ombudsman in competition law proceedings—including the 35 complaints dealt with by him so far in that context.

From that analysis, it appears that some recent EO decisions have been influential in improving deficiencies in competition proceedings; that EO findings can have an impact on judicial proceedings; and that, along with the Hearing Officer, the EO operates a control that could strengthen the Commission's legitimacy in light of the general due process debate.

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

DOJ Antitrust is Looking to Hire an Assistant Chief of the Foreign Commerce Section

Posted by D. Daniel Sokol

ASSISTANT CHIEF (GS-905-15)
U.S. DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
FOREIGN COMMERCE SECTION


About the Office: The U.S. Department of Justice, Antitrust Division, is seeking a highly qualified attorney to serve in a two-year term position as Assistant Chief of its Foreign Commerce Section. This term may be extended beyond its initial two years. If not extended, the individual will transition to an attorney position with the Division. The Foreign Commerce Section is responsible for:

  • advising Senior Division officials on the development of Division policy on international enforcement and cooperation issues, its relationships with other antitrust agencies around the world and with multilateral organizations such as Organization for Economic Cooperation and Development and the International Competition Network.

  • assisting the Division's litigating sections in their matters with international aspects and facilitating law enforcement and other cooperation between the Antitrust Division and other antitrust agencies internationally.

Major Duties: As Assistant Chief of the Foreign Commerce Section, the incumbent’s major duties and responsibilities include: assisting in the development and management of the Antitrust Division's policy on international competition enforcement and cooperation issues; assisting in fostering relations between the Antitrust Division and other antitrust enforcement agencies around the world (including the Americas, Europe, Asia and elsewhere); working with senior officials and employees of the Division on the international aspects of their investigations, and helping to develop the Division's international cooperation practices in our globalizing world; as well as supervising a staff of attorneys, paralegals, and support and assisting with hiring decisions and performance evaluation. [Foreign language skills, in particular French, German, Mandarin, or Spanish are desirable but not essential.]

Qualifications: Applicants must:

1) Possess a J.D. degree or equivalent, be an active member of the bar in good standing (any U.S. jurisdiction), have at least four years of post-J.D. experience, and be a U.S. citizen;

2) have demonstrated leadership and supervisory experience;

3) have significant experience with international antitrust enforcement;

4) have experience in overseeing the development of antitrust cases and reviewing the work product of attorneys;

5) have familiarity with domestic and international regulatory and investigative agencies associated with competition issues; and

6) have the ability to help formulate and implement Antitrust Division policies on all matters pertaining to the assigned areas.

Salary Information: Candidates are being solicited at the GS-15 level, ranging in pay from $123,758 - $155,500 per annum, depending on current salary and experience.

Location: Washington, DC

Relocation Expenses: Relocation expenses will not be authorized.

Deadline and Submission Process: Applications must be received no later than January 6, 2012. Prior applicants for this position will remain under consideration and do not need to reapply. For consideration, please list the source of the advertisement to which you are applying, and submit a cover letter (highlighting relevant experience) and a resume (e-mail preferred) to:

atr.personnel@usdoj.gov
Attention: Karen Jung
Department of Justice/Antitrust Division
450 Fifth Street, NW
Room 3104
Washington, D.C. 20530

For additional information about this position, please contact:
Karen Jung
Phone: (202) 514-8885
atr.personnel@usdoj.gov

Internet Sites: Additional information on the Antitrust Division is located on the Internet at http://www.usdoj.gov/atr/. This and selected other legal position announcements can be found at www.usdoj.gov/oarm/attvacancies.html.

 

 

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Entry and Exit of Physicians in a two-tiered public/private Health Care System

Posted by D. Daniel Sokol

Martin Gachter (University of Innsbruck / Institute for Public Economics) and Peter Schwazer (University of Innsbruck / Institute for Management and Economics in the Health Sector) and Engelbert Theurl explore Entry and Exit of Physicians in a two-tiered public/private Health Care System.

ABSTRACT: Firm turnover has recently attracted increased interest in economic research. The entry of new firms increases competition and promises efficiency gains. Moreover, changes in the market structure influence productivity growth, because firm entry usually leads to increased innovation. The health care market exhibits important differences as compared to other markets, including various forms of market failure and, as a consequence, extensive market regulation. Thus, the economic effects of entries and exits in health care markets are less obvious. The following paper studies the determinants of entry and exit decisions of physicians in the private sector of the outpatient part of the Austrian health care system. We apply a Poisson panel estimation to a data set of 2,379 local communities and 121 districts in Austria in the time period 2002 - 2008. We are particularly interested in the question how public physicians (GPs/specialists) and their private counterparts influence the entrance and exit of private physicians. We find a significantly negative effect of existing capacities, measured by both private and public physician density of the same specialty, on the entry of new private physicians. On the contrary, we find a significantly positive effect of private GPs on the entry of private specialists. Interestingly, this cooperation/network effect also works in the other direction, as a higher density of private specialists increases the probability of the market entry of private GPs. Based on the results of previous literature, we thus conclude that private physicians establish networks to cooperate in terms of mutual referrals etc. Our estimations for market exits basically confirm the entry results, as higher competitive forces positively influence the market exit of private physicians.

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition between Exchanges: A research Agenda

Posted by D. Daniel Sokol

Estelle Cantillon and Pai-Ling Yin provide Competition between Exchanges: A research Agenda.

ABSTRACT: This paper describes open research questions related to the competition and market structure of financial exchanges and argues that only a combination of industrial organization and finance can satisfactorily attack these questions. Two examples are discussed to illustrate how the combination of these two approaches can significantly enrich the analysis: the “network externality puzzle”, which refers to the question of why trading for the same security is often split across trading venues, and the impact of the multi-sided character of financial exchanges on pricing and profitability.

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

The Social Cost of a Credit Monopoly

Posted by D. Daniel Sokol

Andreas Madestam (Bocconi) explores The Social Cost of a Credit Monopoly.

ABSTRACT: Banks provide credit and take deposits. Whereas a high price in the credit market increases banks’ retained earnings and attracts more deposits, it reduces lending if borrowers are sufficiently poor to be tempted by diversion. Thus optimal bank market structure trades off the benefits of monopoly banking in attracting deposits against losses due to tighter credit. The model shows that market structure is irrelevant if both banks and borrowers lack resources. Monopoly banking induces tighter credit rationing if borrowers are poor and banks are wealthy, and increases lending if borrowers are wealthy and banks lack resources. The results indicate that improved legal protection of creditors is a more efficient policy choice than legal protection of depositors, and that subsidies to firms lead to better outcomes than subsidies to banks. There are also likely to be sizable gains from promoting bank competition in developing ! countries.

December 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 14, 2011

China's Merger Control Policy: Patterns of New Development

Posted by D. Daniel Sokol

Xinzhu Zhang Chinese Academy of Social Sciences and Global Economics Group & Vanessa Yanhua Zhang Renmin University of China, Global Economics Group have written on China's Merger Control Policy: Patterns of New Development.

ABSTRACT: Antitrust is one of the most important policy instruments used by policymakers to promote competition in modern market economies. It has profound impacts on industrial structure, corporate governance and firm behavior. Indeed, it was with this vision that, after thirteen years of incubation, the Chinese government finally enacted the Anti-Monopoly Law (“AML”). The AML comes at a time when China’s economy is in the transition from a centrally-planned economy to a market economy. In a previous paper published in 20101, we discussed the patterns of China’s merger control policy and analyzed its future implications. There have since been new developments in the policy. With more provision rules and regulations being issued, and more merger cases being reviewed, MOFCOM, China’s merger control agency, is building its capacity to deal with cases more efficiently and effectively.

The released case decisions and the filing processes we have participated in (either as independent economists for MOFCOM, or as economists for filing firms preparing competition analysis reports) seem to suggest that some enforcement patterns are emerging. These patterns provide important implications for understanding MOFCOM’s enforcement policy in the future. In this paper, we seek to explore the patterns that those case decisions have implied, and that we have encountered in our case filing experiences.

December 14, 2011 | Permalink | Comments (0) | TrackBack (0)

Optimal Legal Standards in Antitrust: Traditional v. Innovative Industries

Posted by D. Daniel Sokol Giovanni Immordino (Salerno) and Michele Polo (Bocconi) explore Optimal Legal Standards in Antitrust: Traditional v. Innovative Industries. ABSTRACT: A dominant firm undertakes a given business practice that is regulated by an antitrust enforcer by the choice of a legal standard, fines and accuracy. In traditional industries the incumbent and technology are already established, while in innovative industries the successful innovator becomes dominant. In the former case, marginal deterrence is key to enforcement, and discriminating rules are always dominant when fines are unbounded, or they are replaced with per-se illegality when fines are capped and the practice is likely to be socially harmful. In innovative industries marginal deterrence interacts with average deterrence (the impact of enforcement on innovation effort). Then, per-se legality is preferred when the practice is likely to be welfare beneficial, moving to a discriminating rule when social harm becomes more likely. When fines are capped, per se-legality, discriminating rule and per-se illegality are alternatively chosen when the practice is more and more likely to be socially harmful.

December 14, 2011 | Permalink | Comments (0) | TrackBack (0)

Endogenous Bid Rotation in Repeated Auctions

Posted by D. Daniel Sokol

Shiran Rachmilevitch (Department of Economics, University of Haifa) explores Endogenous Bid Rotation in Repeated Auctions.

ABSTRACT: I study collusion between two bidders in a general symmetric IPV repeated auction, without communication, side transfers, or public randomization. I construct a collusive scheme, endogenous bid rotation, that generates a payoff larger than the bid rotation payoff.

December 14, 2011 | Permalink | Comments (0) | TrackBack (0)

The Social Cost of a Credit Monopoly

Posted by D. Daniel Sokol

Andreas Madestam describes The Social Cost of a Credit Monopoly.

ABSTRACT: Banks provide credit and take deposits. Whereas a high price in the credit market increases banks’ retained earnings and attracts more deposits, it reduces lending if borrowers are sufficiently poor to be tempted by diversion. Thus optimal bank market structure trades off the benefits of monopoly banking in attracting deposits against losses due to tighter credit. The model shows that market structure is irrelevant if both banks and borrowers lack resources. Monopoly banking induces tighter credit rationing if borrowers are poor and banks are wealthy, and increases lending if borrowers are wealthy and banks lack resources. The results indicate that improved legal protection of creditors is a more efficient policy choice than legal protection of depositors, and that subsidies to firms lead to better outcomes than subsidies to banks. There are also likely to be sizable gains from promoting bank competition in developing ! countries.

December 14, 2011 | Permalink | Comments (0) | TrackBack (0)

Optimal Legal Standards in Antitrust: Traditional v. Innovative Industries

Posted by D. Daniel Sokol

Giovanni Immordino (Salerno) and Michele Polo (Bocconi) conceptualize Optimal Legal Standards in Antitrust: Traditional v. Innovative Industries.

ABSTRACT: A dominant firm undertakes a given business practice that is regulated by an antitrust enforcer by the choice of a legal standard, fines and accuracy. In traditional industries the incumbent and technology are already established, while in innovative industries the successful innovator becomes dominant. In the former case, marginal deterrence is key to enforcement, and discriminating rules are always dominant when fines are unbounded, or they are replaced with per-se illegality when fines are capped and the practice is likely to be socially harmful. In innovative industries marginal deterrence interacts with average deterrence (the impact of enforcement on innovation effort). Then, per-se legality is preferred when the practice is likely to be welfare beneficial, moving to a discriminating rule when social harm becomes more likely. When fines are capped, per se-legality, discriminating rule and per-se illegality are alte! rnatively chosen when the practice is more and more likely to be socially harmful.

December 14, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 13, 2011

On Optimizing the Deterrence of Cartels

Posted by D. Daniel Sokol

Ke Li (American Antitrust Institute) has posted On Optimizing the Deterrence of Cartels.

ABSTRACT: While World Competition Day (December 5) went unnoticed this year in the United States, the need to increase the current level of cartel sanctions should not be downplayed. Empirical evidence shows that cartelization raises price and overcharges consumers billions of dollars in the United States alone, but the combined sanctions from both criminal prosecutions and private suits have failed miserably to achieve the optimal deterrence. This paper describes some of the harmful effects caused by cartels and outlines five important recommendations made by Professors John Connor and Robert Lande in raising the existing level of sanctions so that they are more nearly optimal.

December 13, 2011 | Permalink | Comments (0) | TrackBack (0)

EU Competition Policy Revisited: Economic Doctrines Within European Political Work

Posted by D. Daniel Sokol

Matthieu MONTALBAN (GREThA, CNRS, UMR 5113), Sigfrido RAMIREZ-PEREZ (Universita Bocconi) and Andy SMITH (Centre Emile Durkheim - IEP-Bordeaux) address EU Competition Policy Revisited: Economic Doctrines Within European Political Work.

ABSTRACT: European Union competition policy is often described as neoliberal, without this leading to more investigation. This paper highlights how the European Competition policy doctrine has been shaped, how the ordoliberal movement and the Chicago school ideas have been implemented and supported by the political work of some key actors. We show that, contrary to what is sometimes said in literature, ordoliberal actors were neither hegemonic nor leaders between Rome Treaty and the eighties, even if some neoliberal principles were introduced in antitrust law. These laws are much more a compromise between French and German representatives, and between neo-mercantilists and ordoliberals. However, things have dramatically changed since the eighties, when both (1) new political work from members of the Commission introduced in the European competition policy elements of Chicago School doctrine to complete the European market and (2) ! some decisions from the ECJ clarified the doctrine of EU Competition law. Nowadays, European competition policy is a mix between an ordoliberal spirit and some Chicago School doctrinal elements.

December 13, 2011 | Permalink | Comments (0) | TrackBack (0)

Verti-zontal differentiation in monopolistic competition

Posted by D. Daniel Sokol

Francesco Di Comite (Department of Economics (IRES), Universite Catholique de Louvain), Jacques-Francois Thisse (CORE, Universite Catholique de Louvain) and Hylke Vandenbussche (National Bank of Belgium, Research Department) explain Verti-zontal differentiation in monopolistic competition.

ABSTRACT: The recent availability of trade data at a firm-product-country level calls for a new generation of models able to exploit the large variability detected across observations. By developing a model of monopolistic competition in which varieties enter preferences non-symmetrically, we show how consumer taste heterogeneity interacts with quality and cost heterogeneity to generate a new set of predictions. Applying our model to a unique micro-level dataset on Belgian exporters with product and destination market information, we find that heterogeneity in consumer tastes is the missing ingredient of existing monopolistic competition models necessary to account for observed data patterns.

December 13, 2011 | Permalink | Comments (0) | TrackBack (0)

Creation without Restraint Promoting Liberty and Rivalry in Innovation

Posted by D. Daniel Sokol

A great holiday present this year is Christina Bohannan and Herbert Hovenkamp's Creation without Restraint Promoting Liberty and Rivalry in Innovation.

BOOK ABSTRACT: Both antitrust and intellectual property laws are intended to facilitate economic growth. Antitrust is meant to encourage competition of all kinds and intellectual property law should offer inventors and artists the correct incentives to develop new ideas and technologies, but the harsh reality is that antitrust and IP laws have wandered off this course.

In Creation without Restraint: Promoting Liberty and Rivalry in Innovation, Christina Bohannan and Herbert Hovenkamp analyze the current state of competition (antitrust) and intellectual property laws, and propose realistic reforms that will encourage innovation. As with antitrust and a reform process that aligned injury requirements in lawsuits with the incentive to compete, this book proposes similar reforms for patent and copyright law, and considers both the uses and limitations of antitrust as a vehicle for intellectual property law reform. This book considers how antitrust and IP law should engage practices that restrain rather than promote innovation, and covers the troubled topic of IP "misuse," which the authors suggest needs a broader reach but narrower remedies.

Bohannan and Hovenkamp also evaluate the uses and limits of antitrust to address a variety of practices in innovation intensive markets, including interconnection in networks, duties to deal, and internet neutrality. The book constructs a framework and rules for governing the "innovation commons," or the vast area that involves collaborative innovation. Finally, it considers ways to further competition in the licensing and distribution of IP rights, and offers several proposals for specific reforms, most of which can be instituted by the courts without the need for new legislation.

December 13, 2011 | Permalink | Comments (0) | TrackBack (0)