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 31, 2012

How Privacy Has Become an Antitrust Issue

Posted by D. Daniel Sokol

Senator Al Fraken has written on How Privacy Has Become an Antitrust Issue.

March 31, 2012 | Permalink | Comments (0) | TrackBack (0)

Pre-Order The Global Limits of Competition Law Today!

Posted by D. Daniel Sokol

The first book of my series with Stanford University Press, The Global Limits of Competition Law, will be out in bookstores in May. In the meantime, you can pre-order a copy via Amazon.

Competition law and economics (known in the United States as antitrust) is an area of cutting-edge academic work with significant policy implications. Once confined to the United States and a few other countries, antitrust has taken off as an area of study in a relatively short period of time. More than 100 jurisdictions now have competition laws. Increasingly, enforcement activities abroad have far-reaching implications for any antitrust regime. Moreover, developments in economic thinking have helped to reformulate attitudes in both academic and policy circles. This book series will be at the forefront of the development of new ideas and approaches within the field.

Reviews for the series:

“Given the increasingly global dynamics of competition law and economics, Lianos and Sokol will make an important contribution to the field of antitrust with this new series.” —Einer Elhauge, Petrie Professor of Law, Harvard Law School

"With the growth in the number of competition agencies worldwide, there is an increasing opportunity to apply sophisticated economic reasoning to shape competition policy and make it work for the long run interests of society. A series in global competition policy is a welcome development that should accelerate the dissemination of knowledge in this important area of policy.” —Dennis Carlton, Katherine Dusak Miller Professor of Economics, University of Chicago Booth School of Business

"This series promises to offer a vital set of books that will fill a real need. The interaction of competition law, economics, and institutions in view of globalized markets is a critical problem of our times." —Eleanor Fox, Walter J. Derenberg Professor of Trade Regulation, NYU School of Law

"I am delighted that this new series on Global Competition Law and Economics has been launched. Competition law involves the economic analysis of markets within the context of a legal process. This series promises to contribute vital scholarship to this important and ever-growing area of economic policy." —Richard Whish, King's College London, School of Law

"With over 100 jurisdictions enforcing competition policy, officials need to know how to cooperate with other authorities, and undertakings devising a global strategy need to how to comply with the requirements of many different authorities operating under different legislation. Both groups need to understand competition advocacy. Skills in both economics and law are required. Laws that suit large well-developed countries may not suit smaller or less developed countries. The two series editors are well known internationally in the area of competition law, and I am sure that they will attract excellent authors for the different volumes of the series. This new series of books will fill a gap and is warmly welcome." —Valentine Korah, University College London, Faculty of Laws

"With the recent global proliferation of competition laws, many of these competition authorities are in a phase of learning and experimentation. This makes it an opportune time for practitioners and scholars to exchange ideas, discuss the challenges we face, and develop new solutions. The new book series, Global Competition Law and Economics, is exactly the time of venue that will assist in this process by promoting the communication of what we know right now and enhancing the development of what we'll know tomorrow." —Joseph E. Harrington, Jr., Johns Hopkins University, Department of Economics

March 31, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, March 30, 2012

Coordinated Conduct: A Review of Preconditions for Profitability and Stability

Posted by D. Daniel Sokol

Richard Stockton Higgins, FSGexperts and Mark Perelman, explore Coordinated Conduct: A Review of Preconditions for Profitability and Stability.

ABSTRACT: We have investigated the likelihood of cartel formation within various oligopoly models relying on various previous works which analyzed cartel profitability as well as cartel stability in the sense of d’Aspremont, Jacquemin, Gabszewicz and Weymark (1983). Specifically, a cartel is considered stable whenever no outsider desires to join and no insider desires to defect even though for a given cartel size, outsiders may earn more than insiders. Our review has addressed the basic structural preconditions for profitable cartel formation when some but not all firms in a market engage in coordinated pricing and production. We think that prior to consideration of the various factors that influence the profitability of establishing and enforcing an agreement, a structural screen is appropriate.

March 30, 2012 | Permalink | Comments (0) | TrackBack (0)

The Application of Article 102 TFEU by the European Commission and the European Courts

Posted by D. Daniel Sokol

Romano Subiotto (Cleary) and David R. Little (Cleary) discuss The Application of Article 102 TFEU by the European Commission and the European Courts.

ABSTRACT: During the period under consideration, the Commission closed a number of Article 102 TFEU investigations without further action—other enforcement areas, such as mergers, State aid and cartels, appear to have taken precedence. The European Courts have led the development of Article 102 TFEU case law during this period, ruling on four cases in liberalised sectors (postal services, telecommunications) and examining a range of abusive practices, including selective price cuts, margin squeeze and refusal to deal. Other cases have focused largely on procedural matters, such as the ability of national competition authorities to adopt decisions finding that Article 102 TFEU has not been infringed, and the procedural rights of companies during Commission investigations.

March 30, 2012 | Permalink | Comments (0) | TrackBack (0)

DG Comp releases internal manual of procedures for the application of Articles 101 and 102 TFEU

Posted by D. Daniel Sokol

DG Comp has released its Antitrust Manual of Procedures for the application of Articles 101 and 102 TFEU.

HT: Connor Maguire

March 30, 2012 | Permalink | Comments (0) | TrackBack (0)

Reform of Russian Competition Law: It's a Long Way from Brussels to Moscow

Posted by D. Daniel Sokol

Ianis Girgenson (Covington) and Anna Numerova (ALRUD) address Reform of Russian Competition Law: It's a Long Way from Brussels to Moscow.

ABSTRACT: The level of competition enforcement in Russia is excessive, with thousands of new investigations launched every year. The regulator sometimes pursues objectives unrelated to the promotion of competition. Economic analysis plays a marginal role in Russian competition enforcement. A drastic reform is required: the regulator should focus on the most serious infringements and improve the quality of its economic analysis.

March 30, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 29, 2012

Exclusion as a Core Competition Concern

Posted by D. Daniel Sokol

Jon Baker (American University Law) explores Exclusion as a Core Competition Concern.

ABSTRACT: This article challenges the consensus in contemporary antitrust discourse placing exclusionary conduct at the periphery of competition policy. Contrary to common antitrust rhetoric, exclusion is as central as collusion as a matter of precedent, economics, the structure of doctrinal rules, and sound competition policy. The article’s economic analysis incorporates the modern learning about the conditions for profitability of foreclosure through purchase of an exclusionary right; its legal analysis synthesizes from the case law a truncated rule for the reasonableness review of exclusionary conduct across a wide range of doctrinal categories; and its policy analysis explains why decision-theoretic (error cost) considerations do not suggest a lesser role for exclusion than collusion. Recognizing exclusion as a core antitrust concern will protect the legitimacy of antitrust’s exclusionary conduct rules against pressure for modifications that would limit enforcement. It may also encourage criminal prosecutions of exclusionary conduct and shift enforcement attention toward preventing exclusionary conduct that forecloses potential entry in markets subject to rapid technological change.

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

The ‘Feedback Effect’ of Applying EU Competition Law to Regulated Industries: Doctrinal Contamination in the Case of Margin Squeeze

Posted by D. Daniel Sokol

Hendrik Auf'mkolk (University of Munster) describes The ‘Feedback Effect’ of Applying EU Competition Law to Regulated Industries: Doctrinal Contamination in the Case of Margin Squeeze.

ABSTRACT: Applying EU competition law to industries under sector-specific regulation can have ‘feedback effects’ on its substantive principles if the two regimes and their respective goals and standards of intervention are not clearly distinguished. The emergence of a standalone rule against margin squeeze under EU competition law based on regulatory models of access pricing is a case in point. An overly broad competition law rule may chill legitimate price competition and discriminate against vertically integrated firms, particularly in markets that lack the economic characteristics of regulated network industries.

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

DOJ Antitrust Division's annual newsletter (2012 edition) is out

Posted by D. Daniel Sokol

DOJ Antitrust Division's annual newsletter (2012 edition) is out.

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

M&A Under China’s Anti-Monopoly Law: Update

Posted by D. Daniel Sokol

Yee Wah Chin, Ingram Yuzek Gainen Carroll & Bertolotti, LLP, Victoria University of Wellington Law School describes M&A Under China’s Anti-Monopoly Law: Update.

ABSTRACT: Since August 2010, China’s Ministry of Commerce has reviewed over 230 notified transactions and issued 5 decisions under the Anti-Monopoly Law. These 5 decisions, plus the unconditional clearance of other transactions, reveal MOFCOM’s rapidly increasing sophistication in analyzing the competition implications of transactions, as well as its continued delicate balancing of competition factors with other considerations. The decisions may also reflect the natural conservatism when acting in what is for China still fairly uncharted territory, a law that became effective only in August 2008. They confirm that China is a major competition law hurdle for cross-border transactions, sometimes surpassing the United States and the European Union. This article reviews developments in merger control under the AML since August 2010, and discusses what they reveal and their implications for cross-border transactions.

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

Concurrences publishes its 2012 writing awards

Posted by D. Daniel Sokol

At an awards dinner in DC, Concurrences announced its winning articles for its 2012 writing award.

Winning articles (March 27, 2012)

1. Academic Articles

1.1 Best General Antitrust Article
Todd Fishman, David Gabathuler, Olivier Fréget, US and EU antitrust enforcement: What role in a more heavily regulated financial sector?, Competition Policy International Journal, Fall 2011, Vol. 7. No. 2

1.2 Best Anticompetitive Practices Article
John M. Connor, Has the European Commission become more severe in punishing cartels? Effects of the 2006 Guidelines, European Competition Law Review, Volume 32, Issue 1, 2011, 27

1.3 Best Unilateral Conducts Article
Nicolas Petit, Credit Rating Agencies, the Sovereign Debt Crisis and Competition Law, European Competition Journal, 2011, Vol 7 No. 3, p. 587

1.4 Best Mergers Article Damien M.B. Geradin, Ianis Girgenson, Industrial Policy and European Merger Control: A Reassessment, TILEC Discussion Paper No. 2011-053

1.5 Best Economics Article
Marcel Boyer, Marie-Laure Allain, Jean-Pierre Ponssard, The determination of optimal fines in cartel cases: Theory and practice, Concurrences, N° 4-2011, n°39887, pp. 32-40

1.6 Academic Readers Award James A. Keyte, Kenneth B. Schwartz, ‘Tally-Ho!’: UPP and the 2010 horizontal merger guidelines, Antitrust Law Journal, Vol. 77, No. 587, 2011

2. Business Articles

2.1 Best General Antitrust Article Steven Levitsky, David Turetsky, Britain: New Limits on Exchanging Price Information Data, Dewey & LeBoeuf Antitrust News in Five Minutes, February 15, 20

2.2 Best Anticompetitive Practices Article Ian Forrester Q.C., Mark Powell, and Axel Schulz, AG Sharpston voices opinion on the standard of judicial review over fines in cartel cases, White & Case Client Alert, February 2011

2.3 Best Unilateral Conducts Article Alexandre G. Verheyden and Serge Clerckx, EU Court of Justice Provides Guidance on Abusive Margin Squeezes, Jones Day Antitrust Alert, February 2011

2.4 Best Mergers Article Götz Drauz, Michael Rosenthal, Charles E. Biggio, Scott A. Sher, EU and US Antitrust Authorities Update: Best Practices on Cooperation in Merger Investigations, WSGR Alert, November 2011

2.5 Best Economics Article David Henry, Martina Maier, Philipp Werner, European developments impacting dominant, vertically integrated operators – the TeliaSonera judgment, McDermott Antitrust Newsletter, March 10, 2011

2.6 Business Readers Award Matthew I. Bachrack, James R. Modrall, Shan Hu, Plaintiff Victory in Chinese Unfair Competition Case, CGSH Alert Memo, 2 May, 2011

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

Access to Leniency Related Documents after Pfleiderer

Posted by D. Daniel Sokol

Caroline Cauffman, Universities of Maastricht and Antwerp discusses Access to Leniency Related Documents after Pfleiderer.

ABSTRACT: On 14 June 2011 the Court of Justice reached its long-awaited decision in Pfleiderer. The Court decided that EU cartel law must be interpreted as not precluding a person who has been adversely affected by an infringement of EU competition law and is seeking to obtain damages from being granted access to documents relating to a leniency procedure involving the perpetrator of that infringement. It is, however, for the courts and tribunals of the Member States, on the basis of their national law, to determine the conditions under which such access must be permitted or refused by weighing the interests protected by European Union law. This contribution analyses the scope of this decision as well as its possible impact on access to leniency related information submitted to the Commission under the EU leniency programme and on disclosure orders by non-EU courts.

March 29, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 28, 2012

Job Alerts: World Bank Looking for Competition Lawyers and Economists

Posted by D. Daniel Sokol

The World Bank is looking to hire three competition specialists (both lawyers and economists). 120649 Competition Specialist, 120648 Competition Specialist, and 120625 Senior Competition Specialist. These seem like interesting jobs.

March 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Antitrust and the Movement of Technology

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law has written on Antitrust and the Movement of Technology.

ABSTRACT: Patents create strong incentives for collaborative development. For many technologies fixed costs are extremely high in relation to variable costs. A second feature of technology that encourages collaborative development is the need for interoperability or common standards. Third, in contrast to traditional commons, intellectual property commons are almost always nonrivalrous on the supply side. If ten producers all own the rights to make a product covered by a patent, each one can make as many units as it pleases without limiting the number that others can make. That might seem to be a good thing, but considered ex ante it may not give producers the correct incentive to develop the patented technology in the first place. In any event, product differentiation in the output market will typically be sufficient to eliminate the problem of returns that are driven to short run marginal cost.

In its Bement and General Electric decisions the Supreme Court permitted the members of a patent pool to set the product price, reasoning that the protections given by the patent laws are intended to meter the correct amount of innovation, and an explicit cartel selects the same output and price as a single firm. This reasoning confuses patent value with the value of collusion in the product market. Permitting the firms to collude on product price incorrectly predicates the value of the entire cartel markup to the patents.

Often patents are pooled because the problem of identifying and defending boundaries is so significant that the patents are worthless or may even have negative value. A firm will pool when the cost of identifying and defending individual boundaries exceeds the cost of forming an IP commons. Nevertheless, the social cost of using pooling to reverse the effects of worthless patents is substantial. First are the significant costs of operating an economically useless system for acquiring the patent rights in the first place. Then are the significant costs of creating and operating a pool that is designed to reverse the consequences of worthless patent grants.

Under United States antitrust law no firm has a general duty to deal with rivals. One difference between refusals to share ordinary productive assets and refusals to share IP rights is that ordinary productive assets can typically be replicated by others. But a patent gives a right to the technology that it covers and makes it unlawful for rivals to duplicate that technology, even if they do so on their own.

March 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Why (Ever) Define Markets? An Answer to Professor Kaplow

Posted by D. Daniel Sokol

Greg Werden (DOJ) has written Why (Ever) Define Markets? An Answer to Professor Kaplow.

ABSTRACT: Professor Louis Kaplow has argued that market delineation in antitrust should be abandoned because it is not useful in assessing market power or evaluating competitive effects. This article takes issue with that view, explaining that market delineation serves purposes overlooked by Professor Kaplow. Most importantly, market delineation separates active forces of competition from those in the background. This separation is significant in the application of economic models and in the narrative of presenting an antitrust case. This article also explains why Professor Kaplow’s proposed analyses dispensing with market delineation would break down in important circumstances.

March 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Vertical Integration and Market Structure

Posted by D. Daniel Sokol

Timothy F. Bresnahan (Stanford - Economics) and Jonathan D. Levin (Standford - Economics) have a new paper on Vertical Integration and Market Structure.

ABSTRACT: Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization.

March 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Does Competition Improve Public Hospitals' Efficiency? Evidence from a Quasi-Experiment in the English National Health Service

Posted by D. Daniel Sokol

Zack Cooper Stephen Gibbons Simon Jones Alistair McGuire (all LSE) ask Does Competition Improve Public Hospitals' Efficiency? Evidence from a Quasi-Experiment in the English National Health Service.

ABSTRACT: This paper uses a difference-in-difference style estimation strategy to test separately the impact of competition from public sector and private sector hospitals on the efficiency of public hospitals. Our identification strategy takes advantage of the phased introduction of a recent set of substantive reforms introduced in the English NHS from 2006 onwards. These reforms forced public sector health care providers to compete with other public hospitals and eventually to face competition from existing private sector providers for care delivered to publicly funded patients. In this study, we measure efficiency using hospitals' average length of stay (LOS) for patients undergoing elective surgery. For a more nuanced assessment of efficiency, we break LOS down into its two key components: the time from patients' admission to the hospital until their surgery and the time from their surgery until their discharge. Here, pre-surg! ery LOS serves as a proxy for hospitals' lean efficiency. Our results suggest that competition between public providers prompted public hospitals to improve their productivity by decreasing their pre-surgery, overall and post-surgery length of stay. In contrast, competition from private hospitals did not spur public providers to improve their performance and instead left incumbent public providers with a more costly case mix of patients and led to increases in post-surgical LOS.

March 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 27, 2012

Coolest Video Ever on Price Fixing

Posted by D. Daniel Sokol

The Competition Commission of Singapore has an amazing anti-cartel video.

HT: Andreas Stephan

March 27, 2012 | Permalink | Comments (0) | TrackBack (0)

Intensification of International Cooperation: The Antitrust Division's Recent Efforts

Posted by D. Daniel Sokol

Rachel Brandenburger (DOJ) has given a speech on Intensification of International Cooperation: The Antitrust Division's Recent Efforts.

March 27, 2012 | Permalink | Comments (0) | TrackBack (0)

Singapore Steps up Competition Enforcement

Posted by D. Daniel Sokol

Chester Toh (Rajah & Tan) analyzes how Singapore Steps up Competition Enforcement.

ABSTRACT: On February 20, 2012, the Competition Commission of Singapore ("CCS") issued a public consultation paper proposing changes to its Guidelines on Merger Procedures. This consultation signals CCS' intention to step up its merger enforcement in a number of ways. The first is to refine the existing merger notification procedures to make it easier for merging parties to assess whether to notify their transaction under Singapore's voluntary merger notification regime. This is achieved by moving away from the indicative market share thresholds, which require parties to undertake market definition at the notification assessment stage. Under the proposals, merging parties are strongly encouraged to notify their transaction to the CCS if the parties supply goods or services of the same description and their share of supply of such goods or services exceeds 40 percent of the total supply in Singapore. However, one would not be able to apply this bright-line test to vertical or conglomerate mergers for obvious reasons. It is therefore still necessary to conduct a preliminary merger assessment based on the substantial lessening of competition ("SLC") test to determine whether to notify the transaction in Singapore. Another important aspect of the proposals is introduce a process for merging parties to obtain confidential advice from CCS on whether their proposed transaction is likely to raise concerns. Yet such advice would not be granted as of right. The CCS has full discretion whether to provide the confidential advice, after taking into account amongst others its resources at that particular point in time. Parties seeking such confidential advice should also be aware that the advice would be qualified by the fact that the CCS would not have taken into account views of third parties in providing the advice. There are a number of other criteria to satisfy before parties can take advantage of this process, including demonstrating to the CCS that the merger situation presents genuine issues relating to competition assessment in Singapore. As this confidential advisory mechanism is generally intended to apply to transactions that are not in the public domain save for exceptional circumstances, confidential guidance is unlikely to be commonly sought. The proposed revisions to the Guidelines also seek to formalize the pre-notification discussions ("PNDs") process. In practice, some have already been approaching the CCS for such discussions before submitting their notifications. PNDs, particularly when used in conjunction with a draft Form M1, allow a notifying party to better manage the clearance process and timelines. For example, the CCS may seek clarification on certain information in the draft Form M1 or identify gaps in the information submitted. The notifying party can also have the opportunity to point out information that is not relevant to the particular transaction under consideration. From CCS' perspective, PNDs allow the agency to plan its resource allocation to facilitate a more expeditious merger review process. The CCS has also spelled out its approach towards market intelligence and surveillance in the revised Guidelines. Aside from monitoring the media for transactions that may potentially raise competition concerns, as a number of its international counterparts do, CCS may also publish a notice on its website indicating that it is in the process of considering whether a non-notified transaction could possibly raise concerns under Singapore merger provisions. Such a move may encourage third parties, particularly those that have not been approached by the CCS for views on the transaction, to provide their feedback on the transaction to the CCS.

Despite being a relatively young agency, CCS has made notable progress in its enforcement efforts since its establishment in 2005. In recent years, there has been a noticeable uptrend in the number of investigations and infringement decisions. Most recently, on March 9, 2012, the CCS issued its proposed infringement decision against two ferry operators plying the Singapore-Batam route. If the CCS proceeds with a final decision against these two operators, this would be its sixth cartel decision and the third in a space of six months. The CCS has stated on a number of occasions that cartels remain its enforcement priority and it is expected to continue focusing on trade associations and certain services sectors with a history of coordinated activities.

Aside from the usual investigatory activities, the CCS has also undertaken eight market studies in the past two years, a stark increase from none in 2009. These market studies covered a broad range of sectors including retail mall rental, healthcare services, retail petrol, pay TV, airport ground handling, concrete and cement, as well as real estate services.

CCS has also recently signalled its intention to conduct a market study into the industrial property sector. Such a market study is a timely one given that prices of multi-user industrial space for 2011 have increased by 27.1 percent, with rentals increasing by 16.2 percent. Industrial property was by far the top-performing real estate sector in Singapore last year. The emergence of industrial property real estate investment trusts ("REITs") coupled with strong demand from retail investors shifting to industrial space in response to residential property cooling measures are possible contributing factors. The move demonstrates CCS's continued emphasis on markets with broader impact on the local economy as the competitiveness of small and medium-sized enterprises ("SMEs") are significantly affected by rising rentals in the industrial property market.

Some commentators have observed that Singapore has not taken an infringement decision against an international cartel so far. There is no doubt that we will see such infringement decisions in due course, some of which may be brought to CCS attention through its leniency program. However, one should recognize that international cartels have far greater impact on bigger economies. Without similar levels of resources as its larger counterparts in more mature jurisdictions, CCS should be applauded for directing its enforcement efforts towards conduct and behavior that presents significant competitive harm to the local economy. In time to come, CCS will no doubt join the global fight against international cartels, and recent trends suggest that CCS is clearly well placed to do so.

March 27, 2012 | Permalink | Comments (0) | TrackBack (0)