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 27, 2012

Competition and Illicit Quality

Posted by D. Daniel Sokol

Victor Manuel Bennett (USC Marshall School of Business), Lamar Pierce (Washington University in St. Louis), Jason A. Snyder (Anderson School of Management, University of California at Los Angeles) and Michael W. Toffel (Harvard Business School, Technology and Operations Management Unit) explore Competition and Illicit Quality.

ABSTRACT: Competition among firms can have many positive outcomes, including decreased prices and improved quality. Yet competition can have a darker side when firms can gain competitive advantage through illicit and corrupt activities. In this paper, we argue that competition can lead organizations to provide illicit quality that satisfies customer demand but violates laws and regulations and that this outcome is particularly likely when price competition is restricted. Using 28 million vehicle emissions tests from more than 11,000 facilities, we show that increased competition is associated with greater inspection leniency, a form of illicit quality that customers value but is illegal and socially costly. Firms with greater numbers of local competitors pass customers at considerably higher rates and are more likely to lose customers they fail to pass, suggesting that the alternatives that competition provides to customers intens! ify pressure to illegally provide leniency. We also show that, at least in contexts when pricing is restricted, firms use illicit quality as an entry strategy.

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

Differentiation and the relationship between product market competition and price discrimination

Posted by D. Daniel Sokol

MANUEL BECERRA (Instituto de Empresa) and JUAN SANTALO (Instituto de Empresa) discuss Differentiation and the relationship between product market competition and price discrimination.

ABSTRACT: We investigate how the effect of competition on price discrimination varies depending on the level of quality provided by companies in the hospitality industry. Our findings reconcile conflicting results of previous literature on this topic. Namely, we provide strong empirical evidence that competition affects differently the price of single and double rooms of hotels with greater quality versus those with lower quality. In the presence (absence) of differentiation, competition increases (decreases) price discrimination. Our findings are robust to the use of econometric techniques that alleviate endogeneity concerns.

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

Does Independence Affect Regulatory Performance? The case of national competition authorities in the European Union

Posted by D. Daniel Sokol

Mattia Guidi (EUI) asks Does Independence Affect Regulatory Performance? The case of national competition authorities in the European Union.

ABSTRACT: Despite having always been assumed to be true, a relationship between the independence of regulatory agencies and their performance has never been formally tested. This paper aims at verifying whether formal regulatory independence affects the performance of national competition authorities in the EU member states. The author presents and discusses a statistical analysis which shows that greater formal independence leads competition authorities to investigate more cases and to issue more decisions.

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

Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority

Posted by D. Daniel Sokol

Tim Reuter (Department of Economics, University of Konstanz, Germany) addresses Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority.

ABSTRACT: It is commonly believed that the possibility to sue privately for antitrust damages decreases the number of type II errors in enforcement at the cost of creating more type I errors. We extend the analysis by taking into account the fact that private parties often submit evidence during public prosecution. Such parties consider private suit as a partial substitute for public prosecution, as both imply desistance of the violation. The trial option might induce these parties to be less willing to contribute evidence to public cases. Private trials crowd out public prosecution and can have ambiguous effects on the number of enforcement errors.

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

Monday, March 26, 2012

2012 ABA Antitrust Section Spring Meeting This Week and Thoughts on Outside Law Firms

Posted by D. Daniel Sokol

This week is the always excellent ABA Antitrust Section Spring Meeting. It is the 60th annual Spring Meeting or roughly the amount of time that Milton Handler was active as an antitrust professor for his career. This year I will not make it as I cannot justify leaving my wife at home alone with the baby (and our other girls) for such an extended period of time. Every year I have attended the program has been great and what always strikes me is how international the meetings have become.

At the Spring Meeting, one thing that I always love to do is to talk to in-house antitrust counsel. They are the front lines of dealing with the business unit on issues such as compliance, pricing and product strategies, M&A, etc. Oftentime I hear from counsel who rely very heavily on their outside law firms. Last week in my antitrust mergers class, I had the privilege of having Ron Stern of GE and his outside counsel Debbie Feinstein of Arnold & Porter discuss competition issues in the Comcast/NBC Universal merger. The two worked incredibly well together in the presentation and you can tell that they have a great working relationship. This semester has been incredible in terms of the talent that has discussed merger cases for my class (more on that in a future post includes lots of thank yous).

Given that antitrust lawyers try to work so hard to create success for their clients, I tried to think of a musical theme for the Spring Meeting that captured this relationship. My choice is an acoustic version of Weezer's "Jamie", in which Weezer sings lovingly about their lawyer.

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)

The Robustness of Exclusion in Multi-dimensional Screening

Posted by D. Daniel Sokol

Paulo Barelli (University of Rochester), Suren Basov (La Trobe University), Mauricio Bugarin (Insper Institute) and Ian King (University of Melbourne) explore The Robustness of Exclusion in Multi-dimensional Screening.

ABSTRACT: We extend Armstrong's result on exclusion in multi-dimensional screening models in two key ways, providing support for the view that this result is generic and applicable to many different markets. First, we relax the strong technical assumptions he imposed on preferences and consumer types. Second, we extend the result beyond the monopolistic market structure to generalized oligopoly settings with entry. We also analyze applications to several quite different settings: credit markets, the automobile industry, research grants, the regulation of a monopolist with unknown demand and cost functions, and involuntary unemployment in the labor market.

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)

OFT Competition Law Compliance Resources

Posted by D. Daniel Sokol

Steven Preece (OFT) explains OFT Competition Law Compliance Resources.

ABSTRACT: But enforcement is only one aspect of the OFT's work. The OFT recognizes that the majority of businesses wish to comply with competition law. The documents published in 2011 aim to assist businesses to do so, and avoid breaching competition law in the first place.

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Compliance with Competition Rules—The Way to Go

Posted by D. Daniel Sokol

Ingrid Breit, Jeroen Capiau, and Andrew Essilfie (DG Comp) discuss Compliance with Competition Rules—The Way to Go.

ABSTRACT: Any effort by a company to ensure compliance with EU competition rules is important. But what is critical is the fact that the rules are actually complied with. When it comes to taking practical steps to ensure compliance, firms should keep in mind that their efforts will be assessed by competition authorities on the basis of results or, in other words, by their success in avoiding infringements.

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)

The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy

Posted by D. Daniel Sokol

D. Daniel Sokol (University of Florida Levin College of Law) has a new article on The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy.

ABSTRACT: This Article claims that there may be a subset of cases in which private rights of action may work with public rights as an effective strategy for a firm to raise costs against rival dominant firms. A competitor firm may bring its own case (which is costly) and/or have government bring a case on its behalf (which is less costly). Alternatively, if the competitor firm has sufficient financial resources, it can pursue an approach that employs both strategies simultaneously. This situation of public and private misuse of antitrust may not happen often. As the Article will explore, it is not only a theoretical argument. This Article will provide examples of where this may have occurred both in antitrust's formative years and in its present.

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)

Evolution of competition in Vietnam industries over the recent economic transition

Posted by D. Daniel Sokol

Tinh Doan, Ministry of Economic Development, New Zealand has written on Evolution of competition in Vietnam industries over the recent economic transition.

ABSTRACT: Understanding the degree and evolution of competition across industries is an important step towards understanding the impact of economic reform and competition on economic growth in Vietnam during the economic transition. In this paper, the author investigates the evolution of competition in Vietnam during the economic transition using the price-cost margin (PCM) or mark-up that has been widely applied in the economic literature and the profit elasticity (PE) recently developed by Boone in his paper Competition (2000). This paper provides the first empirical study of intensity and evolution of competition across selected industries in Vietnam in the last decade using firm-level data from the Vietnam Enterprise Census (VEC) conducted annually since 2000 by the Vietnam General Statistical Office (GSO).

March 26, 2012 | Permalink | Comments (0) | TrackBack (0)