Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, March 10, 2012

Evidence Rules in Private Antitrust Litigation in China

Posted by D. Daniel Sokol

Dr. Hao Zhan explores Evidence Rules in Private Antitrust Litigation in China.

ABSTRACT: Since the enactment of China's Antimonopoly Law ("AML"), more private antitrust actions have been brought before Chinese courts. The majority of these cases concern monopoly agreements and abuse of market dominance. Plaintiffs include competitors in the relevant market, consumers, and the parties who transact with the business operators; defendants include business operators and trade associations. Actions include contractual and tortious disputes. In April 2011, the Supreme Court of China published a consultation draft of the provision on the application of the laws on the trial of civil antitrust disputes (the draft judicial interpretation). It remains to be seen as to how many articles in this draft will become the juridical interpretation to be issued formally. The draft, containing only 20 articles, covers a broad spectrum of matters relevant to private antitrust litigation such as jurisdiction of courts, limitation of acting period, burden of proof, and evidence.

One of the most striking issues covered by the draft judicial interpretation is the evidence rules. This article expands upon the critical aspects of evidence rules in private antitrust litigation in China that would be affected by the proposed draft.

March 10, 2012 | Permalink | Comments (0) | TrackBack (0)

The Federal Trade Commission’s Evolving IP Marketplace Report’s Challenge to Inventiveness, Innovation, and Competitiveness

Posted by D. Daniel Sokol

Richard Taffet (Bingham McCutchen) has written on The Federal Trade Commission’s Evolving IP Marketplace Report’s Challenge to Inventiveness, Innovation, and Competitiveness.

ABSTRACT: This article questions the definition of and assumptions about “patent hold-up” underlying the FTC’s March 2011 report on patent notice and remedies, and argues why the report’s proposed reforms, if adopted, would end up discouraging innovation instead of promoting it.

March 10, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, March 9, 2012

No Longer Presumed Guilty: The Impact of Fundamental Rights on Certain Dogmas of EU Competition Law

Posted by D. Daniel Sokol

Marco Bronckers, Leiden University - Leiden Law School and Anne Vallery describe No Longer Presumed Guilty: The Impact of Fundamental Rights on Certain Dogmas of EU Competition Law.

ABSTRACT: That the penalties imposed under EU competition law amount to criminal sanctions within the meaning of Article 6 of the European Convention on Human Rights has been settled for some time. Yet whether the entry into force in December 2009 of the Charter on Fundamental Rights (as part of the Lisbon Treaty), and the EU’s intended accession to the European Convention on Human Rights, should bring about changes in the operation of EU competition law is a question frequently debated now. Most of that debate has focused on the institutional make-up of competition law enforcement in the EU, notably on whether the European Commission ought to adapt its multiple roles of being simultaneously investigator, prosecutor, adjudicator and policy maker; its practices relating to dawn raids, etc. This article takes a different tack and calls attention to the potential impact of fundamental rights on certain procedural or even substantive concepts in EU competition law. For many years now, the Commission has used presumptions to ease its administrative burden in bringing competition law cases. These presumptions have weighed heavily on defendant companies. This article submits that such administrative presumptions need to be curtailed in order to avoid conflicts with the fundamental presumption of innocence and the attendant rights of the defense. We will illustrate this thesis by reference to the presumptions inherent in the parental liability for anti-competitive conduct of subsidiaries, and in the infringement attributed to the exchange of future price information between competitors.

March 9, 2012 | Permalink | Comments (0) | TrackBack (0)

Why and How to Use Screens in Antitrust Compliance

Posted by D. Daniel Sokol

Rosa Abrantes-Metz (Global Econ. Group, NYU) describes Why and How to Use Screens in Antitrust Compliance.

ABSTRACT: Despite their success in many respects, antitrust compliance programs seem to play a minor role in detecting and possibly deterring antitrust violations. Why may that be the case? There are a variety of reasons. At the top of the list is the fact that key jurisdictions (e.g., the United States and the European Union) do not offer credit to corporations for their compliance programs in case antitrust violations are found. Were such credit offered, it would increase the incentive for corporations to enhance their compliance programs.

In this article I argue that, despite this lack of formal recognition by regulatory bodies, corporations need to enhance their compliance programs for their own benefit and, furthermore, they need to do so through the use of empirical techniques capable of detecting antitrust violations, commonly known as screens. The current environment of increased regulation, higher penalties, increased leniency programs, and the expanded use of screening methods by competition authorities worldwide offers more than enough incentive for corporations to prevent any internal illegal behavior. Better to be the first to detect, the first to report, and the first to benefit from leniency rather than risk losing such benefits to somebody else who detects and reports the violations first.

March 9, 2012 | Permalink | Comments (0) | TrackBack (0)

Favorite Purim Videos - Antitrust Edition

Posted by D. Daniel Sokol

Once again (see Chanukah and here for Rosh Hashana), the Sokol girls (the 6 year old and the 4 year old but not the 8 week old who is not even crying to the beat of these tunes) have chosen their favorite holiday music videos for Purim.

First Place The Maccabeats - Purim Song Second Place The Shlomones - Good Groggin' Purim

March 9, 2012 | Permalink | Comments (1) | TrackBack (0)

Innovation, Resource Constraints, and Mergers in Network Industries

Posted by D. Daniel Sokol

Mark A. Jamison, University of Florida - Warrington College of Business Administration, Public Utility Research Center and Janice Alane Hauge, University of North Texas describe Innovation, Resource Constraints, and Mergers in Network Industries.

ABSTRACT: We analyze how resource constraints and market structure interact in network industries to impact innovation. This issue has arisen recently in the United States where AT&T proposed to acquire T-Mobile’s U.S. assets at least in part to obtain T-Mobile’s radio spectrum, which AT&T says it needs to effectively deploy fourth generation (4G) wireless communications services in the country. However, our analysis has implications for other potential mergers and competition issues in network industries. For example, there is growing concern in the United States and Europe about Google’s growing market share in many Internet markets. We find that innovation is more likely with larger firms in part because of their scale economies and also because of their incentives to respond to network effects. We also find that while smaller firms may feel discriminated against in terms of the quality of connectivity, they are actually better off with the larger firms in their markets.

March 9, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 8, 2012

The Australian Approach to Competition Law Compliance Programs

Posted by D. Daniel Sokol

Bill Dee (Compliance and Complaints Advisory Service) explains The Australian Approach to Competition Law Compliance Programs. ABSTRACT: Competition law in Australia is set out in the Competition and Consumer Act 2010 which essentially picked up the competition law provisions of its precursor legislation, the Trade Practice Act 1974.

The enforcement agency in Australia is the Australian Competition and Consumer Commission ("ACCC"), which argues the case for a breach of the competition law in the Australian Federal Court. The Court determines whether a breach has been established and, when it has, determines the appropriate penalty. These are the two players, then, when it comes to compliance law and the role of compliance programs.

March 8, 2012 | Permalink | Comments (0) | TrackBack (0)

“A Test to Ban Rebates”: Which Test is Applicable to Rebates under TFEU article 102?

Posted by D. Daniel Sokol

Iliana Nunez Osorio (ICAM) asks “A Test to Ban Rebates”: Which Test is Applicable to Rebates under TFEU article 102?

ABSTRACT: This article analyses the pro and anti-competitive effects of fidelity rebates and questions if the as efficient competitor test used to condemn them, as part of the Guidance on the Commission’s Enforcement Priorities in Applying TFEU art 102.

March 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Coffee Differentiation: Demand Analysis at Retail Level in the US Market

Posted by D. Daniel Sokol Carmen I. Alamo (Texas Tech) and Jaime Malaga (Texas Tech) describe Coffee Differentiation: Demand Analysis at Retail Level in the US Market. ABSTRACT: Scanned data was used to estimate US coffee demand using an AIDS model. The estimated elasticities have the expected signs and magnitude. Differentiated coffees are complements for regular and unclassified while regular and unclassified coffees are substitutes. These results could be useful in designing marketing strategies by coffee suppliers.

March 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Does self-regulation of advertisement length improve consumer welfare?

Posted by D. Daniel Sokol

Taisuke Matsubae (Competition Policy Research Center, Japan Fair Trade Commission) and Noriaki Matsushima (Institute of Social and Economic Research, Osaka University) ask Does self-regulation of advertisement length improve consumer welfare?

ABSTRACT: In Japan, TV platforms regulate themselves as to the length of the advertisements they air. Using modified Hotelling models, we investigate whether such self-regulation improves consumer and social welfare or not. When all consumers choose a single TV program (the utility functions of consumers satisfy the standard "full-coverage" condition), self-regulation always reduces consumer welfare. It improves social welfare only if the advertisement revenue of each platform is not small and the cost parameter of investments in improving the quality of TV programs is small. When some consumers have outside options (the standard "full-coverage" condition is not satisfied), self-regulation can benefit consumers because it increases the number of consumers who watch TV programs.

March 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Reputation, Competition, and Entry in Procurement

Posted by D. Daniel Sokol

Giancarlo Spagnolo (Stockholm Institute of Transition Economics) has posted Reputation, Competition, and Entry in Procurement.

ABSTRACT: Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

March 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 7, 2012

A Balanced Approach to Enforcement and Outreach

Posted by D. Daniel Sokol

The Competition Commission of Singapore takes A Balanced Approach to Enforcement and Outreach.

ABSTRACT: Competition policy is somewhat analogous to healthcare policy. The underlying policy objective is to foster public health (competitive markets). As an essential part of its execution, the policy maker establishes healthcare institutions (a competition authority) to treat patients when they fall sick (enforce competition law against anticompetitive practices that adversely affect markets). However, remedial care alone is not enough. If the general population lives unhealthy lifestyles (the market players lack a culture of competition), more people will develop diseases. This will not only put resource strains on the healthcare system, but also lead to poor outcomes of public health. Therefore, an increasing emphasis is being put on preventive care, recognizing that the most effective way of staying healthy is to have a strong immune system.

Similarly, the Competition Commission of Singapore ("CCS") does not limit our role to the enforcement of the Competition Act. It is equally important, if not more, to prevent anticompetitive practices from taking place in the first instance. Accordingly, we have been devoting substantial resources to advocacy and outreach to our stakeholders. For clarity, the term "advocacy" in this article refers to the engagement of government agencies to advocate pro-competitive policy making and regulation, while "outreach" refers to the engagement of the business community and general public to increase awareness and acceptance of the benefits of competition. Both are integral parts of CCS' strategy in preventive care. From experience, we have identified three key factors leading to a successful execution of our advocacy and outreach plans-strategic direction, mobilization of resources, and innovative communication.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Interview with FTC Commissioner Julie Brill

Posted by D. Daniel Sokol

The Antitrust Source Interview with FTC Commissioner Julie Brill is now available.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

What If Marketers Put Their Customers ahead of Profits?

Posted by D. Daniel Sokol

Scott K. Shriver (Stanford University) V. Seenu Srinivasan (Stanford University) ask What If Marketers Put Their Customers ahead of Profits?

ABSTRACT: We examine a duopoly where one of the firms does not maximize profit, but instead maximizes customer surplus subject to a profit constraint. (Customer surplus for a firm is the sum of its customers' individual consumer surpluses, i.e., the dollar value the customer attaches to the product minus its price.) For the surplus-maximizing firm, profit is constrained to be at least X percent (where X% might be, say 80-90%) of the profit it would have obtained under a profit maximization objective. The model assumes customer willingness to pay for quality is uniformly distributed and that customers follow a simple decision rule: when presented with two products of known quality and price, purchase one unit of the product which maximizes surplus, or if surplus is negative for both products, elect not to purchase any product. We further assume that firms' marginal cost of production is convex (quadratic) in quality. Competition be! tween firms is modeled as a two-stage game, which is solvable by backward induction. In the first stage, one of the firms, whose identity is exogenously specified, moves first and decides its quality level, fully anticipating the quality response of the second firm and the subsequent price competition. The second firm observes the first firm's quality level and then decides its own quality level, anticipating the subsequent price competition. In the second stage, firms take qualities as given and choose prices simultaneously in accordance with a Nash equilibrium. Two possibilities are considered: (a) the first mover is the profit-maximizing firm, and (b) the first mover is the customer surplus-maximizing firm. We compare the results to the corresponding base case of Moorthy (1988) where both firms are profit-maximizing. We find that firms can deliver significant additional value to their customers by forgoing small amounts of profit. However, the effectiveness of this strat! egy depends upon which firm is the first mover. When the surplus-maxim izing firm moves first, a 1% increase in its customers' surplus "costs" the firm approximately 2% of its potential profits. By contrast, when the profit-maximizing firm chooses quality first, we find that sacrificing 20% of profits is sufficient for the surplus-maximizing firm to more than quadruple the customer surplus it would have provided under a profit-maximizing objective. This outcome results from the surplus-maximizing firm leap-frogging its competitor to become the high quality producer.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

ASCOLA 7th Annual Conference (in Rio no less!) Program

Posted by D. Daniel Sokol

ASCOLA 7th Annual Conference Profram in Rio

Day 1: Thursday, April 12

7.00 p.m. Opening Ceremony

Benedito Guimarães Aguiar Neto, Rector of Mackenzie University Josef Drexl, Chair of ASCOLA

Nuncio Theophilo Neto, Director of the Law Faculty

Jose Francisco Siqueira Neto, Coordinator of Post-Graduate Studies

Opening Speech

Olavo Zago Chinaglia, President of CADE

Day 2: Friday, April 13 8.45 a.m.

Welcome and Opening

Vicente Bagnoli, Universidade Presbiteriana Mackenzie

9.00 a.m. PART I: State-owned Enterprises

Chair: Vicente Bagnoli, Universidade Presbiteriana Mackenzie

 Petrobras: State Monopoly and Competition Policy Gilberto Bercovici, Mackenzie and University of São Paulo

 Competition Regulation of State-owned Enterprises in China Thomas K. Cheng, University of Hong Kong

 The Competition Dimension of the European Regulation of Public Sector Information Josef Drexl, Max Planck Institute Munich

10:30 – 10:50 a.m.: Coffee Break

 Comments José Maria Arruda Andrade, Universidade de São Paulo

Marc Williams, Hong Kong Polytechnic University

Marcos Paulo Veríssimo, CADE and Universidade de São Paulo

Discussion 12:00 p.m. Lunch 1:30 p.m.

PART II: Pro-competitive Regulation Chair: Daniel Zimmer, University of Bonn

 Preaching with a Stick: Assessment of Competition Advocacy in Spain Francisco Marcos, IE University Madrid

 The Competition Dimension of the Brazilian Regulation of Water Infrastructure Gesner José de Oliveira Filho, GO Associados

 The Concept of Universal Service: Across Economic Sectors, Across Disciplines, Across Borders Paul Nihoul, University of Louvain-la-Neuve, Belgium

 Comments Simonetta Vezzoso, University of Trento, Italy Maria Manuel Leitão Marques, University of Coimbra, Portugal Tania Zuniga, Catholic University of Peru

Discussion 4:00 – 4:30 p.m.: Coffee Break 4:30 p.m.

PART III: Anti-competitive State Action Chair: Fabiano Dolenc Del Masso, Universidade Presb. Mackenzie

 Intellectual Property Rights as State-Initiated Restraints of Competition Rudolph J.R. Peritz, New York Law School

 Benefits of Competition Policy in Public Procurement with Special Reference to India S. Chakravarthy, Competition Policy and Law Consultant, India Discussion

6:00 p.m. General Assembly (ASCOLA Members Only)

8:00 p.m. Dinner

Day 3: Saturday, April 14 9:00 a.m.

PART IV: Industrial Policy v. Competition Policy Chair: Felipe Chiarello, Universidade Presbiteriana Mackenzie

 The Supression of the Competition Policy Agenda in the Context of an Over-regulated Economy: the Case of Venezuela Claudia Curiel Leidenz; Universidad Católica Andrés Bello

 Investments Targets and Competition in Brazilian Telecomunications Arthur Barrionuevo Filho, Fundação Getúlio Vargas; Escolas de Administração de Empresas de São Paulo Discussion 10:30-11:00: Coffee break 11:00 a.m.

PART V: Control of State Aid Chair: Eduardo Caminati Anders, Brazilian Bar Association of São Paulo, Bureau of Competition and Regulation Studies

 Distinguishing State and Private Measures under EU State Aid Law: A Closer Look at the State Character Test Thomas Jaeger, Max Planck Institute Munich

 Comments Alessandro Serafin Octaviani Luis, CADE and Mackenzie and University of São Paulo Discussion 12:45 p.m.

Farewell Vicente Bagnoli, Universidade Presbiteriana Mackenzie Josef Drexl, Chair of ASCOLA

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Technical progress and product reliability under competition and monopoly

Posted by D. Daniel Sokol

Donald A. R. George (University of Edinburgh) discusses Technical progress and product reliability under competition and monopoly.

ABSTRACT: Technical progress lowers costs and prices but appears to have an ambiguous effect on product reliabilty. This paper presents a simple model which explains this observation.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Creation Without Restraint - Wrap Up

Posted by D. Daniel Sokol

We had a great symposium on Creation without Restraint: Promoting Liberty and Rivalry in Innovation by Christina Bohannan and Herbert Hovenkamp. See the links below for each of the posts.

Michael Carrier (Rutgers Camden)
Kevin Collins (Washington University)
Tom Cotter (Minnesota)
Dan Crane (Michigan)
Paul Gugliuzza (Florida)
Keith Hylton (Boston University)
Ariel Katz (Toronto)
Joe Miller (Georgia)
Mark Patterson (Fordham)

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Keith Hylton on Creation Without Restraints

Posted by Keith Hylton

Bohannan and Hovenkamp have written an impressive and eye-opening book. It is not an easy ready, it requires study. There are too many good points and interesting suggestions in this book to do justice to them all in a brief review.

I should confess that I am a competitor of the authors, in the sense that I have a book on pretty much the same topic that is scheduled to hit the stands before the end of this year (Cass and Hylton, Laws of Creation, Harvard University Press, 2012). I found reading Bohannon and Hovenkamp to be a humbling experience, because there are so many topics in their book that I wish I had addressed, and a few suggestions from them that I wish I had proposed in my book. But it is too late to go back and rewrite my manuscript; it is in the publisher’s hands and I am limited at this stage to minor revisions.

The core argument of Bohannan and Hovenkamp is that intellectual property law could be improved by importing concepts and methods of judicial decision-making from antitrust law. The most important concept that should be imported is a focus on the type of injury that merits redress under the statute. Antitrust law has developed the notion of “antitrust injury”, which permits courts to narrow the scope of the antitrust laws to practices that harm the competitive process as well as the plaintiff.

The core method of judicial decision-making that should be imported to intellectual property law, according to Bohannan and Hovenkamp, is a general reliance on the common law process rather than the statutory process. Bohannan and Hovenkamp refer to methods of statutory interpretation, but I think the bigger idea – one that I’ve promoted independently, though in different terms, in my forthcoming book – is greater reliance on, and trust in, the common law process rather than the statutory process.

I find it hard to quibble with these arguments, since both are very good suggestions. Bohannan and Hovenkamp do not envision these suggestions being taken up by any legislature. Their hope is that judges will read the book and use it as a guide in deciding cases.

If there is any basis on which to criticize the book, I think it begins at their normative aspiration, that judges will read the book and use it in thinking about cases. As the authors are well aware, it is unlikely that a large number of judges will read the book, and even less likely that they will actually use it in making decisions.

Relatively few judges are sufficiently familiar with antitrust law and policy to use it in thinking about intellectual property law. Yes, they are familiar with the basic ideas of antitrust, but probably not the details. If you tell them to develop a concept of “intellectual property injury” similar to the concept of “antitrust injury”, that will still leave them with a fair amount of work to do.

If the book is going to have an impact on judicial decision making, I think it will do so by encouraging judges to think about the big picture – specifically, what the intellectual property laws are all about. Here, Bohannan and Hovenkamp perform a useful service to judges by reminding them to think about this question in every case, and to keep it in mind when determining whether a plaintiff should get damages, or should get a large damage award, or should get an injunction. If judges can be persuaded to think about the purpose of the intellectual property laws, then many of the improvements that Bohannan and Hovenkamp would like to see probably will develop on their own through the common law process.

The big difference between antitrust law and intellectual property is not that courts have not imported thinking from antitrust law over to intellectual property. The biggest difference is that antitrust law has developed through the common law process on the basis of a skimpy statute. Intellectual property law, in contrast, and as the authors note, is constantly receiving visits for the purpose of “improvement” from the legislature. The result is that growth in statutory scope and density has choked off the freedom of judges to examine the purposes of the intellectual property laws, and to use those purposes in crafting solutions to the problems that fall before them. If Bohannan and Hovenkamp’s book can do something about this problem, they will have accomplished quite a lot.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

A New Look at Oligopoly: Implicit Collusion Through Portfolio Diversification

Posted by D. Daniel Sokol

Jose Azar, Princeton University - Department of Economics offers A New Look at Oligopoly: Implicit Collusion Through Portfolio Diversification.

ABSTRACT: In this paper, I develop a model of oligopoly with shareholder voting. Instead of assuming that firms maximize profits, the objective of the firms is decided by majority voting. This implies that portfolio diversification generates tacit collusion. In the limit, when all shareholders are completely diversified, the firms act as if they were owned by a single monopolist. In a model of general equilibrium oligopoly with shareholder voting, higher levels of wealth inequality and/or foreign ownership lead to higher markups and less efficiency. The empirical section of the paper studies the network of common ownership of publicly traded US corporations generated by institutional investors. I show that the density of the network more than tripled between 2000 and 2010. I explore the empirical relation between markups and networks of common ownership. The evidence is consistent with the hypothesis that common ownership acts as a partial form of integration between firms.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Buying Alliances and Input Price Fixing – In Search of a European Enforcement Standard

Posted by D. Daniel Sokol

Ariel Ezrachi (Oxford Law) explains Buying Alliances and Input Price Fixing – In Search of a European Enforcement Standard.

ABSTRACT: This paper considers the welfare implications of input price fixing and the enforcement standard to be applied to these arrangements. It explores the way in which European competition law approaches input price fixing, the scope of the object-based approach and the instances in which effects-based analysis may be used in the appraisal. In doing so, the paper sets to clarify the legal approach to price fixing of procured input. It outlines a possible benchmark for the assessment of input price fixing, with the aim of sharpening the dividing line between instances which restrict competition by object, and those which necessitate consideration of effects.

March 7, 2012 | Permalink | Comments (0) | TrackBack (0)