Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, March 13, 2012

AN ECONOMIC ANALYSIS OF THE 2011 SETTLEMENT BETWEEN THE DEPARTMENT OF JUSTICE AND CREDIT CARD NETWORKS

Posted by D. Daniel Sokol

Scott Schuh (Federal Reserve Bank of Boston), Oz Shy, Joanna Stavins, and Robert Triest undertake AN ECONOMIC ANALYSIS OF THE 2011 SETTLEMENT BETWEEN THE DEPARTMENT OF JUSTICE AND CREDIT CARD NETWORKS.

ABSTRACT: In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently approved settlement between the DOJ and Visa and MasterCard (“the Settlement”) is likely to achieve its central objective: “to allow Merchants to attempt to influence the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market.” In word and spirit, the Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Settlement's new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers' credit cards. We analyze the likely consequences of this information problem and consider ways in which it could be remedied. We also evaluate the probable welfare consequences of allowing merchants to impose surcharges to reflect the fees associated with the use of payment cards.

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

Monday, March 12, 2012

The Application of EU Competition Law in the Energy Sector

Posted by D. Daniel Sokol

Ulrich Scholz (Freshfields) and Stephan Purps (Freshfields) explore The Application of EU Competition Law in the Energy Sector.

ABSTRACT: The centre of gravity of EU competition law enforcement in the energy sector has shifted from the European Commission towards national competition authorities, which are following the lead set by the Commission over the last couple of years while also setting their own priorities. The Commission is instead focusing on achieving the internal market for energy by regulatory means, by trying to ensure implementation of the third energy package and by facilitating the convergence of market rules in cooperation with ACER. Perceived regulatory gaps in the regulation of wholesale energy trade have been addressed with a new transparency regulation, which is supposed to enhance regulatory oversight by imposing far-reaching reporting obligations on undertakings and prohibiting insider trading.

March 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Bertrand Competition with an Asymmetric No-Discrimination Constraint

Posted by D. Daniel Sokol

Jan Bouckaert, University of Antwerp - Department of Economics Hans Degryse, Katholieke Universiteit Leuven - Faculty of Business and Economics (FBE), Tilburg University and Theon van Dijk, Lexonomics explore Bertrand Competition with an Asymmetric No-Discrimination Constraint.

ABSTRACT: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behavior-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.

March 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Bohannan & Hovenkamp Respond to Symposium on Creation Without Restraint

Posted by Christina Bohannan & Herb Hovenkamp

We are grateful to Danny Sokol for taking the time to assemble this mini-symposium, and are flattered and humbled to have such a thoughtful and diverse array of reviewers. We appreciate both the praise and critiques of the reviewers. Creation Without Restraint paints with a broad brush, giving every reader something to appreciate as well as something to doubt. We realize that it might take time to determine how to implement our central proposal of an IP injury requirement. Yet, we also believe that appropriate rules are likely to develop only once the law requires them, just as data and models of economic competition developed once antitrust law established competitive injury as the touchstone for statutory violations.

To be sure, there is much work to be done, and our book is no panacea for all of the ills that currently plague the law on innovation. We believe, however, that our proposals would be a big step in the right direction.

Thanks again to Danny and all the reviewers of our book. We wish that more symposia could be as engaging as this one.

March 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Private Labels (Own Brands) in the Grocery Sector: Competition Concerns and Treatment in EU Competition Law

Posted by D. Daniel Sokol

Victoria I. Daskalova, TILEC, Tilburg Law School has written on Private Labels (Own Brands) in the Grocery Sector: Competition Concerns and Treatment in EU Competition Law.

ABSTRACT: The past decade has seen growing antitrust concerns about the impact of private label goods on consumer welfare and competition in the grocery trade. Market investigations of the sector have been launched in several Member States, and there have also been legislative attempts to curb the power of large grocery retailers. Private labels have provoked interest not only because they increase the bargaining power of a retailer, but also because they fundamentally change the relationship between retailers and suppliers from one between trading partners to one between competitors. Because they place the retailer in the double role of a customer and a competitor of its suppliers, private labels are believed to create incentives for the grocery chains to resort to practices, which in turn lead to unfavorable outcomes for the consumers. Some of these practices include: misuse of a branded good’s product information to introduce competing private label products, de-listing of tertiary brands in order to replace them with undifferentiated me-too private labels, and using the strict rules on resale price maintenance to position the private label product in a more favorable position vis-à-vis the brand. Legal scholars and practitioners have been under pressure to find out in what ways competition rules may be used to limit these practices.

The goal of this paper is to give a comprehensive overview of the competition law issues that might arise in the context of private labels. The paper is divided into two parts: first, it contextualizes the claims related to the welfare effects of the introduction and continued presence of private labels. It shows that private labels may lead to a reduction in consumer welfare and discusses the practices and conditions that might lead to this negative outcome. The second part of the paper sketches the applicable legal framework under EU competition law as it may apply to the practices mentioned. The paper concludes with a discussion of the challenges for the effective treatment of harm arising from the retailer practices associated with private labels.

March 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Google and European Competition Law

Posted by D. Daniel Sokol

Martin Cave (LSE) and Howard Peter Williams (Oxford Internet Institute) address Google and European Competition Law.

ABSTRACT: Google has been in the wars for the past year or so. Its status as a new kind of beneficent company has increasingly been questioned, and it has faced more and more criticism in Europe and elsewhere. Critics have been active on two principal fronts – privacy and market power. As the months pass, the latter issue has taken higher salience, with the launch of an investigation by the Federal Trade Commission in the US in June 2011 and an investigation begun in November 2010 by the key European competition authority, the European Commission, of complaints made by three companies. In Europe this is in addition to actions instituted within individual member states, such as France.

The goal of this paper is to consider Google‟s interactions to date with European competition law, particularly the Merger Regulations, and to discuss possible bases in the future for impugning Google‟s conduct under that law. In some ways this is premature, as competition investigations advance at best at a slow and steady pace. For example, the Microsoft case in Europe, which is often cited as a point of comparison with any action against Google, took nearly a decade from start to finish, even if it did ultimately involve fines on the company of the order of €1 billion. Nonetheless the Google investigation does raise some extremely interesting issues which may help to illuminate the future regulation of search and other high tech activities, whatever the outcome of the current complaints.

The paper is organised as follows. Section 1 gives a very brief outline of the relevant European law, while section 2 discusses some aspects of search and related activities. Section 3 discusses the treatment of two mergers and acquisitions involving Google in Europe, and section 4 seeks to set the current investigation within the framework of competition law. Section 5 notes the results of a completed inquiry in France, and Section 6 gives some brief and tentative conclusions.

March 12, 2012 | Permalink | Comments (0) | TrackBack (0)