Antitrust & Competition Policy Blog

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

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Monday, April 16, 2012

The Rule of Reason and the Goals of Antitrust: An Economic Approach

Posted by D. Daniel Sokol

Roger D. Blair University of Florida - Warrington College of Business Administration - Department of Economics and D. Daniel Sokol, University of Florida - Levin College of Law; University of Minnesota School of Law have posted The Rule of Reason and the Goals of Antitrust: An Economic Approach.

ABSTRACT: In this paper, we discuss the problem of the rule of reason and the welfare standard in antitrust. We begin with the Introduction (Section I), which provides an overview of the problem. In Section II, we review the Supreme Court’s guidance on the standard for conducting a rule of reason analysis. Put simply, the Supreme Court has failed to identify clearly what standard to use in conducting a rule of reason inquiry. After a careful — albeit selective — reading of Supreme Court opinions it is simply not clear. While a case can be made for total welfare as the guiding principle of a rule of reason analysis, which is the standard that we advocate, an argument also can be made, based upon case law, for consumer welfare. In most simple cases, the antitrust welfare standard does not matter. Beyond these simple cases, however, there are more complicated cases for which the welfare standard does matter. The article introduces the first set of complications in Section III where we analyze the need to weigh efficiencies that are accompanied by increased market power flowing from joint ventures or mergers. In Section IV, we turn our attention to the creation of countervailing power through joint ventures or mergers. In Section V, we turn our attention to restraints that have no apparent total welfare effects, but do have pronounced distributive effects. Finally, we close the article with some concluding comments in Section VI regarding how to solve the policy dilemma of the implementation of proper goal of antitrust.

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

The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition

Posted by D. Daniel Sokol

Swati Dhingra and John Morrow (both LSE) describe The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition.

ABSTRACT: A fundamental question in monopolistic competition theory is whether the market allocates resources efficiently. This paper generalizes the Spence-Dixit-Stiglitz framework to heterogeneous firms, addressing when the market provides optimal quantities, variety and productivity. Under constant elasticity demand, each firm prices above its average cost, yet we show market allocations are efficient. When demand elasticities vary, market allocations are not efficient and reflect the distortions of imperfect competition. After determining the nature of market distortions, we investigate how integration may serve as a remedy to imperfect competition. Both market distortions and the impact of integration depend on two demand side elasticities, and we suggest richer demand structures to pin down these elasticities. We also show that integration eliminates distortions, provided the post-integration market is sufficiently large.

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

The value of future damages claims in energy: proven, probable or possible?

Posted by D. Daniel Sokol

OXERA has posted The value of future damages claims in energy: proven, probable or possible?

ABSTRACT: The value of future damages claims in energy: proven, probable or possible? Identifying competition law infringements in the energy sector is challenging, as is subsequently quantifying any damage potentially caused by such infringements. Are there any ‘typical’ infringements found in the sector, and what issues are encountered when assessing the associated damages?

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

Three Possibilities for Reform of the Procedure of the European Commission in Competition Cases Under Regulation 1/2003

Posted by D. Daniel Sokol

John Temple Lang, Cleary Gottlieb Steen and Hamilton explores Three Possibilities for Reform of the Procedure of the European Commission in Competition Cases Under Regulation 1/2003.

ABSTRACT: Following an examination of the present procedures of the European Commission in competition cases under Regulation 1/2003, this paper finds that the existing safeguards for due process are not sufficient and explains why reform is urgently needed. Three possible radical solutions are outlined: 1) setting up a decision-making body within the Commission, 2) setting up a separate European competition authority and 3) making the Commission a “prosecutor” bringing competition cases before the General Court, which would adopt the first legally binding decisions.

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

The strategic interplay between bundling and merging in complementary markets

Posted by D. Daniel Sokol

Andreas Mantovani (Department of Economics, University of Bologna) and Jan Vandekerckhove (Department of Economics, Maastricht University) describe The strategic interplay between bundling and merging in complementary markets.

ABSTRACT: In this paper, two pairs of complementors have to decide whether to merge and eventually bundle their products. Depending on the degree of competitive pressure in the market, either both pairs decide to merge (with or without bundling), or only one pair merges and bundles, while rivals remain independent. The latter case can very harmful for consumers as it brings surge in prices. We also consider the case in which one pair moves first. Interestingly, we find a parametric region where first movers merge but refrain from bundling, to not induce rivals to merge as well.

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