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 17, 2012

Mexican Experience in Screens for Bid-Rigging

Posted by D. Daniel Sokol

Carlos Mena-Labarthe (Mexican Federal Competition Commission) describes the Mexican Experience in Screens for Bid-Rigging.

ABSTRACT: It is a common place nowadays to say that antitrust authorities have relied significantly (or over relied) on leniency applications to detect cartels. Some intend this as a criticism; others intend this as recognition of the strategy. Indeed, evidence shows leniency has been the most useful tool for cartel detection and it has been one of the great success stories in cartel enforcement in various jurisdictions. It is without a doubt one of the most important institutional exports of the United States and it is only beginning to take off.

According to the International Competition Network, an international body devoted to competition law enforcement of which members represent national and multinational competition authorities, during the last two decades leniency programs were adopted in more than 50 jurisdictions. This has transformed the way competition law is enforced in those jurisdictions, but also how competition authorities work and coordinate with each other as they have created a race to disclose illegal conduct by the participants of the cartel, nationally and internationally. Nowadays, companies and their counsel coordinate leniency applications all around the world and competition authorities coordinate their enforcement.

In Mexico, as in other parts of the world, we regard leniency as one of the most important and useful tools for the detection and prosecution of cartels. Leniency programs may have some effects that need to be addressed by the authorities and this is where screens take such an important role. Leniency programs only work when you have severe sanctions including individual accountability, a good track record of enforcement and of course when you discover conspiracies without the use of leniency as well.

So, as various studies have documented in many interesting studies, despite the considerable success of leniency, some collusion remains undetected. And it may be true that this undetected collusion may be the worst, as it is still an on-going cartel that may still harm consumers for many years to come.

I recognize the great value of multiple approaches to detection and how authorities need to work in ex-officio detection as well.

Historically, but nowadays even more so, most competition authorities have started to search for alternative and complementary approaches to detect and investigate cartels; this is very important and should be given priority, especially in agencies and jurisdictions where cartel enforcement has over relied on leniency applications for detection.

There are many routes and efforts being explored. Some jurisdictions are working to promote complaints, extracting information from other cases, working with procurement officials and other enforcement agencies, even some countries are paying whistle-blowers for information.

One interesting method that has been advocated by many economists as well as some officers and legal consultants has been the use of empirical methods commonly known as screens.

As experience has proved, screens have flagged unusual patterns in a variety of countries and industries, and helped in the detection of cartels.

These empirical methods have their pros and cons. There have been great success stories, as well as some important waste of resources and never ending work to find a needle in a haystack where ultimately there is none.

In the Mexican experience, the Mexican Competition Commission has made some efforts to use screening to detect collusion and to prioritize investigation resources. These efforts of course do not mean we have relied less on leniency in Mexico. Since 2006 when the program was introduced, it has been one of the top priorities of the Cartel Investigations Division. Accordingly, we believe advancing both efforts are complimentary and should not be seen as unrelated or contraries.

March 17, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, March 16, 2012

Chambers Global 2012 Rankings Are Out -- And the top global competition practices are...

Posted by D. Daniel Sokol

Chambers Global 2012 Global-wide Antitrust/Competition Practices

Band 1
Cleary Gottlieb Steen & Hamilton LLP

Band 2
Arnold & Porter LLP
Freshfields Bruckhaus Deringer LLP

Band 3
Clifford Chance LLP
Jones Day
Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates

Band 4
Allen & Overy LLP
Hogan Lovells
Latham & Watkins LLP
Linklaters
White & Case LLP

Band 5
Gibson, Dunn & Crutcher LLP
WilmerHale

March 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition Among the Big and the Small

Posted by D. Daniel Sokol

Ken-Ichi Shimomura (Research Institute for Economics and Business Administration, Kobe University) and Jacques-Francois Thisse (CORE-Universite catholique de Louvain) discuss Competition Among the Big and the Small.

ABSTRACT: Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity.

March 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Competition Work at the OECD

Posted by D. Daniel Sokol

Frank P. Maier-Rigaud (OECD) and Nick Taylor (OECD) have written on Competition Work at the OECD.

ABSTRACT: The article provides an overview of the OECD competition work in general with a special emphasis of the work undertaken in 2011 and work planned for 2012.

March 16, 2012 | Permalink | Comments (0) | TrackBack (0)

GCR'S The Asia-Pacific Antitrust Review 2012 is Out

Posted by D. Daniel Sokol

GCR'S The Asia-Pacific Antitrust Review 2012 is Out

 

The Asia-Pacific Antitrust Review 2012

March 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Theories of Harm in European Competition Law: A Progress Report

Posted by D. Daniel Sokol

Hans Zenger, Charles River Associates and Mike Walker, Charles River Associates address Theories of Harm in European Competition Law: A Progress Report.

ABSTRACT: The last ten years have seen an increasing focus from European competition authorities on articulating the theory of harm behind any competition concern. This represents a significant improvement in the enforcement of competition law. The requirement to present a theory of harm imposes a logically consistent approach to the assessment of anti-competitive behaviour. This paper takes stock of changes in the European Commission’s use of theories of harm in competition cases over the past ten years and suggests areas where enforcement could benefit from a more explicit use of theories of harm.

March 16, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 15, 2012

Conspiracy Screens: Practical Defense Perspectives

Posted by D. Daniel Sokol

Donald C. Klawiter (Sheppard Mullin) has written on Conspiracy Screens: Practical Defense Perspectives.

ABSTRACT: Despite the enormous increase in cartel detection and the internationalization of both detection and enforcement since 1995, many believe that the enforcement agencies have just scratched the surface. How do the enforcers-and compliance counsel-detect more cartel activity? Simply put, aggressive compliance, due diligence, econometric analysis, leniency programs, and careful observation of markets are all central ingredients to keep markets free and fully competitive. Screens provide an additional and complementary tool that fits perfectly into the leniency paradigm, enhancing detection and punishment around the globe.

March 15, 2012 | Permalink | Comments (0) | TrackBack (0)

Cartel Sanctions: A Time for Convergence?

Posted by D. Daniel Sokol

Terry Calvani, Freshfields asks Cartel Sanctions: A Time for Convergence?

ABSTRACT: Globalization has been the most salient feature of competition law enforcement for the past two decades. Today there are more than one-hundred countries with competition law regimes almost all of which proscribe cartels. Unquestionably some of these enforcement agencies do little more than attend international conferences, but many have active enforcement agendas. The increase in the number of agencies has presented increased opportunities for inter-agency cooperation. (Few programs on competition law do not have a session devoted to international agency cooperation.) But the increase in the number of enforcement participants has also created opportunities for conflict.

March 15, 2012 | Permalink | Comments (0) | TrackBack (0)

The Economics of Resale Price Maintenance —Why Europe is right not to follow the USA on the slippery slope of Leegin

Posted by D. Daniel Sokol

Christian Ewald has written on The Economics of Resale Price Maintenance —Why Europe is right not to follow the USA on the slippery slope of Leegin.

ABSTRACT: As a result of the US Leegin case on Resale Price Maintenance (RPM), there is an intense debate as to whether the EU should abandon its current approach which is to assess RPM under a rebuttable presumption of illegality. Under the current state-of-play of economic analysis, one should conclude that neither per se illegality of RPM nor a full-blown rule of reason approach are appropriate. In the EU legal framework which—contrary to the US—largely relies on public enforcement of competition law, it is economically sound to stick to the current approach of a rebuttable presumption of illegality. The note explains how the state-of-play in economics may help to minimize the risk of over-enforcement under such an approach.

March 15, 2012 | Permalink | Comments (0) | TrackBack (0)

The Impact of Cartelization on Pricing Dynamics

Posted by D. Daniel Sokol

Kai Huschelrath, Centre for European Economic Research (ZEW) and Tobias Veith, Centre for European Economic Research (ZEW) address The Impact of Cartelization on Pricing Dynamics.

ABSTRACT: Although the pricing dynamics of hardcore cartels have been studied intensively from a theoretical perspective, empirical evidence is still rare. We combine publicly available data with a unique private data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers to study the pricing dynamics during and after the breakdown of a German cement cartel. We find that, first, after the breakdown of the cartel cartel members reduce net prices to a far larger extent than gross prices and that, second, noncartel members slip under the price umbrella of the cartel to increase profits. Our results have important implications for both the design of screening tools to detect cartels as part of public enforcement and the calculation of damages as part of private enforcement of competition law.

March 15, 2012 | Permalink | Comments (0) | TrackBack (0)

The Enforcement of the Anti-Monopoly Law in China: An Institutional Design Perspective

Posted by D. Daniel Sokol

Angela Huyue Zhang has an interesting article on The Enforcement of the Anti-Monopoly Law in China: An Institutional Design Perspective.

ABSTRACT: The unveiling of the Anti-Monopoly Law (the “AML”) on August 30, 2007 marked a symbolic commencement of a new era of competition for China. Since the law was enacted in 2008, every move made by the Chinese antitrust authorities has been closely watched by the international community. While much attention has been devoted to second-guessing the political motives behind each of the Chinese government’s decisions, little effort has been directed to studying problems in the institutional framework for implementing the AML. This article identifies three problems in the institutional design of China’s antitrust enforcement system and calls for attention to remedy them. The first problem originates from China’s tripartite system of administrative enforcement, which will lead to many potential conflicts between the National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”), the two agencies that share enforcement responsibilities in the areas of restrictive agreements and abuse of dominant positions. While decentralization of enforcement has some modest benefits such as promoting competition among agencies and hedging the risks if any single agency fails to perform, it is imperative for NDRC and SAIC to have a work-sharing agreement that clearly delineates their rights and obligations in cases of concurrent jurisdiction. Moreover, the Anti-Monopoly Commission should set up a formal supervisory mechanism to resolve potential conflicts among the administrative enforcement agencies. Second, the concentration of authority in the Ministry of Commerce (“MOFCOM”) in the merger control regime has led to a myriad of adverse consequences including asymmetric bargaining, prosecutor bias, selective enforcement and lack of transparency. In this regard, China could learn from the E.U.’s experience and introduce more checks and balances into its merger control regime. Finally, private litigation has not been successful in China due to the challenges plaintiffs face in satisfying their burden of proof under the AML. However, private enforcement is an indispensible complement to public enforcement and should be encouraged in China.

March 15, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 14, 2012

How Far Can Screens Go in Distinguishing Explicit from Tacit Collusion? New Evidence from the Libor Setting

Posted by D. Daniel Sokol

Rosa M. Abrantes-Metz Global Economics Group, LLC; Leonard N. Stern School of Business - Department of Economics and Albert D. Metz Moody's Investors Service ask How Far Can Screens Go in Distinguishing Explicit from Tacit Collusion? New Evidence from the Libor Setting.

ABSTRACT: Recently, large-scale investigations have been launched around the world on allegations of possible collusion and manipulation of the London Interbank Offered Rate (“Libor”). These investigations followed empirical research that highlighted anomalous patterns in the Libor data. The Libor is determined from sealed daily quotes submitted by sixteen member banks. Empirical research has shown that for a period of nearly a year, the Libor was essentially constant. This is the first anomaly. The second anomaly, which is less well understood, is the virtual unanimity of individual quotes submitted by the member banks. These anomalies lead us to ask whether coordination of some type may have been involved.

While screens can highlight such anomalous patterns, it is unclear whether they can differentiate between the various possible causes of those patterns. In principle, this unanimity in quotes across banks could simply reflect a non-cooperative outcome, or it could be the result of collusion. But whether that collusion was explicit, or a form of tacit or strategic collusion, is not immediately obvious.

Though distinguishing explicit from tacit collusion may be very difficult through screening, this is the challenge we take up in this article. We explore, in the context of the Libor, whether screens can move one step further and distinguish illegal (explicit) from legal (tacit) collusion. While we have always argued that a purely empirical analysis of market outcomes can never be the final proof of illegal behavior, under particular circumstances screens can indeed provide additional evidence to assess the more likely form of collusion.

March 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Evaluating Leniency and Modeling Cartel Durations: Time-Varying Policy Impacts and Sample Selection

Posted by D. Daniel Sokol

Jun Zhou, Bonn University, Wirtschaftspolitische Abteilung, Tilburg Law and Economics Center (TILEC) is Evaluating Leniency and Modeling Cartel Durations: Time-Varying Policy Impacts and Sample Selection.

ABSTRACT: The objective of this paper is to investigate the efficacy of the European Commission's leniency in destabilizing and deterring cartels. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and market and macroeconomic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of cartels and the non-proportional time dependence suggested by theory. Statistical tests are consistent with the theoretic predictions that following a more efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long-run.

March 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Post Doctoral Researchers Wanted: University of East Anglia Centre for Competition Law and Policy

Posted by D. Daniel Sokol

Faculty of Social Sciences
ESRC Centre for Competition Policy (CCP)
Post Doctoral Researcher
Ref: RA823

£30,122 to £35,938 per annum On joining the Centre (www.competitionpolicy.ac.uk) you will support research by an interdisciplinary team of researchers, including industrial economists, competition lawyers and political scientists. You have the opportunity to contribute to developing the Centre's research agenda both individually and through joint research with other Centre members. Candidates must have submitted their PhD in a relevant discipline prior to commencing in post, or have been awarded within the last three years, and be able to satisfy all the essential criteria detailed in the person specification.

The posts are available from 1 September 2012 as two full-time posts, for a fixed term period until 31 August 2014.

Closing date: 12 noon on Friday 30 March 2012.

March 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Elasticities of Gasoline and Fuel Demands in Switzerland

Posted by D. Daniel Sokol

Andrea Baranzini, Geneva School of Business Administration - Haute Ecole de Gestion (HEG) de Genève, University of Applied Sciences, Western Switzerland (HES SO) and Sylvain Weber, University of Neuchatel - Institute for Research in Economics (IRENE) analyze Elasticities of Gasoline and Fuel Demands in Switzerland.

ABSTRACT: Using co-integration techniques, we investigate the determinants of gasoline and fuel demands in Switzerland over the period 1970-2008. In particular, we focus on the impact of prices and estimate the demand price elasticities. In the short run, we obtain very weak price elasticities of -0.09 for gasoline demand and -0.08 for fuel demand. In the long run, the corresponding estimates are -0.34 and -0.27. The exceptionally rich dataset we built allows us to work with quarterly data and with more explicative variables than usual in this literature. In addition to the traditional price and income variables, we account for variables like vehicles stocks, fuel prices in neighboring countries, oil shocks and fuel taxes. All of these additional variables are found to be significant determinants of of demand.

March 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Using Proxy Variables to Control for Unobservables When Estimating Productivity: A Sensitivity Analysis

Posted by D. Daniel Sokol

Carmine Ornaghi, University of Southampton - Division of Economics and Ilke Van Beveren, Lessius Antwerp - Department of Business Studies, Katholieke Universiteit Leuven are Using Proxy Variables to Control for Unobservables When Estimating Productivity: A Sensitivity Analysis.

ABSTRACT: The use of proxy variables to control for unobservables when estimating a production function has become increasingly popular in empirical works in recent years. The present paper aims to contribute to this literature in three important ways. First, we provide a structured review of the different estimators and their underlying assumptions. Second, we compare the results obtained using different estimators for a sample of Spanish manufacturing firms, using definitions and data comparable to those used in most empirical works. In comparing the performance of the different estimators, we rely on various proxy variables, apply different definitions of capital, use alternative moment conditions and allow for different timing assumptions of the inputs. Third, in the empirical analysis we propose a simple (non-graphical) test of the monotonicity assumption between productivity and the proxy variable. Our results suggest that productivity measures are more sensitive to the estimator choice rather than to the choice of proxy variables. Moreover, we find that the monotonicity assumption does not hold for a non-negligible proportion of the observations in our data. Importantly, results of a simple evaluation exercise where we compare productivity distributions of exporters versus non-exporters shows that different estimators yield different results, pointing to the importance of making suitable timing assumptions and choosing the appropriate estimator for the data at hand.

March 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Exclusive Dealing as a Barrier to Entry? Evidence from Automobiles

Posted by D. Daniel Sokol

Laura Nurski, Katholieke Universiteit Leuven - Faculty of Business and Economics (FBE) and Frank Verboven, Katholieke Universiteit Leuven - Faculty of Business and Economics (FBE) ask Exclusive Dealing as a Barrier to Entry? Evidence from Automobiles.

ABSTRACT: Exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market. We ask whether such contracts may act as an entry barrier, and provide an empirical analysis of the European car market. We first estimate a demand model with product and spatial differentiation, and quantify the role of a dense distribution network in explaining the car manufacturers’ market shares. We then perform policy counter-factuals to assess the pro.t incentives and entry-deterring effects of exclusive dealing. We find that there are no individual incentives to maintain exclusive dealing, but there can be a collective incentive by the industry as a whole, even absent efficiencies. Furthermore, a ban on exclusive dealing would shift market shares from the larger European firms to the smaller entrants. More importantly, consumers would gain substantially, mainly because of the increased spatial availability and less so because of intensified price competition. Our findings suggest that the European Commission’s recent decision to facilitate exclusive dealing in the car market may not have been warranted.

March 14, 2012 | Permalink | Comments (1) | TrackBack (0)

Tuesday, March 13, 2012

Annotated Bibliography for the Transparency Papers: Version 1.0

Posted by D. Daniel Sokol

Malcolm B. Coate, U.S. Federal Trade Commission (FTC) has posted Annotated Bibliography for the Transparency Papers: Version 1.0.

ABSTRACT: This paper contains an annotated bibliography of the studies associated with transparency in merger policy at the Federal Trade Commission. After a brief introduction to provide context and a list of topics addressed in the particular studies, the 26 papers are briefly reviewed, with links to the SSRN versions as well as citations to the final versions. This note is not intended to summarize the research in detail, just provide an overview of the areas studied and easy access to the research papers.

March 13, 2012 | Permalink | Comments (0) | TrackBack (0)

Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach

Posted by D. Daniel Sokol

Jun Zhou, Bonn University, Wirtschaftspolitische Abteilung, Tilburg Law and Economics Center (TILEC) discusses Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach.

ABSTRACT: Colluding firms often exchange private information and make transfers within the cartels based on the information. Estimating the impact of such collusive practices- known as the "lysine strategy profile (LSP)"- on cartel duration is difficult because of endogeneity and omitted variable bias. I use firms' linguistic differences as an instrumental variable for the LSP in 135 cartels discovered by the European Commission since 1980. The incidence of the LSP is not significantly related to cartel duration. After correction for selectivity in the decision to use the LSP, statistical tests are consistent with a theoretic prediction that the LSP increases cartel duration.

March 13, 2012 | Permalink | Comments (0) | TrackBack (0)

CAREER DEVELOPMENT AFTER CARTEL PROSECUTION: CARTEL VERSUS NON-CARTEL MANAGERS

Posted by D. Daniel Sokol

N.S.R. Rosenboom (SEO Economic Research) has written on CAREER DEVELOPMENT AFTER CARTEL PROSECUTION: CARTEL VERSUS NON-CARTEL MANAGERS.

ABSTRACT: I examine the career development of managers after they have been subjected to cartel prosecution by the Netherlands Competition Authority (NMa). A representative function is used as an indicator for a career outcome after prosecution. I compare the career development of Dutch managers involved in a cartel with that of a control group of Dutch managers of non-cartel companies. I analyze the different factors that may influence the career development of cartel-involved managers. This article concludes that cartel-involved managers face negative career effects after the prosecution of the cartel. A cartel-involved manager has a lower probability of a representative function than another manager. This negative career effect is smaller if the cartel was active in the construction sector. This outcome might point at a different culture towards cartels in the construction sector in the Netherlands, which seems plausible considering the wide-ranging cartel that existed in this sector between 1998 and 2001.

March 13, 2012 | Permalink | Comments (0) | TrackBack (0)