Antitrust & Competition Policy Blog

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

Tuesday, May 8, 2012

Competition and Financial Services, a free Symposium - June 7, Columbia Law School, New York City

Posted by D. Daniel Sokol

Competition and Financial Services, a free Symposium. June 7, Columbia Law School, New York City

Presented by the ABA Section of Antitrust Law and Columbia Law School

Join Paul Volcker and an exceptional group of leading scholars, current and former enforcement officials, and experienced practitioners, who will explore the importance of the financial services sector to competition, and the growing importance of competition and consumer protection law to financial services.

Too big? Too fragile? Too profitable? Too competitive? No industry is more important to the global economy, making it essential to get the rules on competition and consumer protection right. The recent shock waves jolting the industry highlighted critical questions: Should the rules of competition be different for financial institutions? Should mergers among financial institutions be subject to greater (or fewer) limitations? Are the antitrust laws being adequately enforced against arrangements among financial firms? How can the various protections for consumers of financial products be reconciled and managed?

This symposium, jointly sponsored by the ABA Section of Antitrust Law and Columbia University School of Law, will dissect the role of competition and consumer protection in financial services as the industry enters a new stage. Panels will focus on (1) the role of competition in the financial sector in a Dodd-Frank era; (2) mergers in the banking industry and the extent to which size matters; (3) consumer protection in the financial sector and its implications for competition; and (4) the effectiveness of antitrust enforcement in the financial sector.

C. Scott Hemphill, Chief of the Antitrust Bureau of the New York State Attorney General’s Office, F.M. Scherer of Harvard’s Kennedy School of Government, FTC Commissioner Julie Brill, and Lawrence J. White of NYU’s Stern School of Business provide the anchors for each discussion, and will be joined by Thomas Baxter, General Counsel of the Federal Reserve Bank of New York, Joseph Wayland, Acting Assistant Attorney General in charge of the Antitrust Division of the United States Department of Justice, and a host of leading experts. Harvey Goldschmid of Columbia Law School (and a former SEC Commissioner) and James Wilson, a former Chair of the ABA Section of Antitrust Law, co-chair this important event.

Take advantage of a unique opportunity to hear some of the nation’s best minds tackle the most vital issues at the intersection of law and the economy—in one day, free of charge. This symposium promises to be singularly informative and thought provoking for anyone with an interest in antitrust law, consumer protection, financial services, and what happens when they meet. For more information, go to

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Collusion and the Political Differentiation of Newspapers

Posted by D. Daniel Sokol

Lapo Filistrucchi, Department of Economics, CentER & TILEC, Tilburg University, Dipertimento di Scienze Economiche, University of Florence and Marco Antonielli, Barcelona Graduate School of Economics discuss Collusion and the Political Differentiation of Newspapers.

ABSTRACT: We analyze a newspaper market where two editors first choose the political position of their newspaper, then set cover prices and advertising tariffs. We build on the work of Gabszewicz, Laussel and Sonnac (2001, 2002), whose model of competition among newspaper publishers we take as the stage game of an infinitely repeated game, and investigate the incentives to collude and the properties of the collusive agreements in terms of welfare and pluralism. We analyze and compare two forms of collusion: in the first, publishers cooperatively select both prices and political position; in the second, publishers cooperatively select prices only. We show that collusion on prices reinforces the tendency towards a Pensée Unique discussed in Gabszewicz, Laussel and Sonnac (2001), while collusion on both prices and the political line would tend to mitigate it. Our findings question the rationale for Joint Operating Agreements among US newspapers, which allow publishers to cooperate in setting cover prices and advertising tariffs but not the editorial line. We also show that, whatever the form of collusion, incentives to collude first increase, then decrease as advertising revenues per reader increase.

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Brands, Consumer Protection, and Antitrust – Why China is Special

Posted by D. Daniel Sokol

David Stallibrass (University of International Business and Economics) & Jenny Huang (Chinese Academy of Social Sciences (CASS)) discuss Brands, Consumer Protection, and Antitrust – Why China is Special.

ABSTRACT: From China's first and only decision to block a merger, involving the purchase of the Huiyuan juice brand by Coca-Cola, brands have been widely observed to be one of the important factors in Chinese merger control decisions. Brands are also at the forefront of Chinese industrial policy, with a clear focus from the State Council on the need for China to improve the quality of its brands. International commentators have noticed this, and have sometimes criticized the Ministry of Commerce ("MOFCOM"), the Chinese merger authority, for an excessive focus on protecting famous Chinese brands as a result of broader industrial policy.

This paper proposes a microeconomic justification for treating brands differently in Chinese antitrust analysis. It argues that, due to the weaker level of consumer protection in China, there are good reasons for thinking that a strong brand confers more market power in China than it does in other jurisdictions, but also that this market power may have greater beneficial side-effects than it would elsewhere. As a consequence, we believe that it is correct in general to place a relative emphasis on brands in Chinese antitrust analysis, though we do not discuss to what extent MOFCOM treats brands differently from authorities in other jurisdictions, or whether the treatment of brand mergers in China is more compatible with industrial policy, social policy, or microeconomic considerations. Instead, we conclude with a discussion of the ways the special nature of brands in the Chinese economy might lead to decisions that may differ from those in alternative jurisdictions. We focus almost exclusively on merger analysis in China due to the relative scarcity of relevant enforcement decisions in other areas of the law.

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Strategic Investment, Industry Concentration and the Cross Section of Returns

Posted by D. Daniel Sokol

Maria Cecillia Bustamante (LSE) explores Investment, Industry Concentration and the Cross Section of Returns.

ABSTRACT: This paper provides an alternative real options framework to assess how firms strategic interaction under imperfect competition affects the industrial dynamics of investment, concentration, and expected returns. When firms have similar production technologies, the cross sectional variation in expected returns is low, firms investments are more synchronized, firms. expected returns co-move positively, and the industry is less concentrated. Conversely, in more heterogeneous industries, the cross sectional variation in expected returns is high, there are leaders and followers whose expected returns co-move negatively, and the industry is more concentrated. The model rationalizes several empirical facts, including: (i) that firms returns co-move more positively in less concentrated industries; (ii) that booms and busts in industry returns are more pronounced in less concentrated industries; and (iii) that less concentrated industries earn higher returns on average.

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Call for Papers: 2013 AALS Section on Antitrust and Economic Regulation Annual Meeting

Posted by D. Daniel Sokol

Call for Papers Announcement
AALS Section on Antitrust and Economic Regulation
Google and Antitrust |
2013 AALS Annual Meeting
January 4-7, 2013 New Orleans, Louisiana

The AALS Section on Antitrust and Economic Regulation will hold a program on Google and Antitrust during the AALS 2013 Annual Meeting in New Orleans. The program will explore the Federal Trade Commission’s potential antitrust case against Google and the Google Book Search settlement. The program will feature a roundtable panel involving leading scholars who have addressed these issues: Dan Crane (Michigan), Marina Lao (Seton Hall), Frank Pasquale (Seton Hall), and Pam Samuelson (Berkeley). We are looking to add one additional panelist through this Call for Papers.

Submission procedure: Anyone interested in participating is encouraged to submit a draft paper (preferred, and roughly in the range of 20-40 pages) or proposal by e-mail to Michael A. Carrier, at by September 4, 2012.

Eligibility: Full-time faculty members of AALS member law schools are eligible to submit papers. Faculty at fee-paid law schools; foreign, visiting and adjunct faculty members; graduate students; fellows; and non-law school faculty are not eligible to submit. Papers may already be accepted for publication, as long as the paper will not be published before the AALS meeting.

Registration fee and expenses: Call-for-Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.

How will papers be reviewed? Papers will be reviewed and selected by members of the Executive Committee of the AALS Section on Antirust and Economic Regulation: Darren Bush (Houston), Michael Carrier (Rutgers-Camden), Daniel Crane (Michigan), Hillary Greene (Connecticut), Scott Hemphill (Columbia), and D. Daniel Sokol (Florida).

Will the program be published in a journal? Yes, as a symposium in the Harvard Journal of Law & Technology Digest.

Deadline date for submission: September 4, 2012. Decisions will be announced by September 28, 2012.

Program date and time: Saturday, January 5, 2013, 10:30am - 12:15pm. Contact for submission and inquires: Michael A. Carrier Chair, AALS Section on Antitrust and Economic Regulation Rutgers Law School - Camden 217 North Fifth Street Camden, NJ 08102 (856) 225-6380

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Nonlinear dynamics in a Cournot duopoly with relative profit delegation

Posted by D. Daniel Sokol

Luciano Fanti (Department of Economics, University of Pisa) Luca Gori (Department of Law and Economics “G.L.M. Casaregi”, University of Genoa, Via Balbi) and Mauro Sodini (Department of Statistics and Mathematics Applied to Economics, University of Pisa) describe Nonlinear dynamics in a Cournot duopoly with relative profit delegation.

ABSTRACT: The present study analyses the dynamics of a nonlinear Cournot duopoly with managerial delegation and bounded rational players. Problems concerning strategic delegation (based on relative performance evaluations) have recently received in depth attention in both the theoretical and empirical industrial economics literatures. In this paper, we take a dynamic view of this problem and assume that the owners of both firms hire a manager and delegate output decisions to him. Each manager receives a fixed salary plus a bonus offered in a publicly observable contract. The bonus entitled to the manager hired by the owner of every firm is based on relative (profit) performance. Managers of both firms may collude or compete. In such a context, we find, in either cases of collusion and low degree of competition, that synchronised dynamics takes place. However, when the degree of competition increases the dynamics can undergo symmet! ry-breaking bifurcations that may cause relevant global phenomena. In particular, on-off intermittency and blow-out bifurcations are observed for several parameter values. Moreover, coexistence of attractors may also occur. The global behaviour of the noninvertible map is investigated through the study of the transverse Lyapunov exponent and the folding action of the critical curves of the map. These phenomena are impossible under profit maximisation.

May 8, 2012 | Permalink | Comments (0) | TrackBack (0)

Monday, May 7, 2012

Patent Wars and Technology Transfer Agreements: Should the EU Rules Change?

Posted by D. Daniel Sokol

Lorenzo Coppi & Stefano Trento (Compass-Lexecon) ask Patent Wars and Technology Transfer Agreements: Should the EU Rules Change?

ABSTRACT: The European Commission has recently launched a consultation on whether the rules governing intellectual property licensing should be revised after April 2014, when the current Technology Transfer Block Exemption and Guidelines will expire.

The Commission has not yet put any proposal for reform on the table, choosing instead to canvass stakeholders' opinions regarding the functioning of the TTBER and Guidelines in general. However, in order to stimulate the debate, the Commission has also commissioned an economic study on the interplay between Intellectual Property Rights and competition policy, which is intended to contribute to the Commission's review of the TTBER and Guidelines.

The study, carried out by Professors Pierre Regibeau and Katharine Rockett, consists of an excellent review of the existing economic literature, supplemented at times by the authors' own economic models covering principally the areas of cross-licensing, patent pools, grant-backs, and pass-through. The extensive review of the literature is commendable, especially given the rapidly evolving nature of economic research in this field, and provides a very useful base for discussing the interaction of competition and IPR policy.

May 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Price patterns resulting from different producer behavior in spatial equilibrium

Posted by D. Daniel Sokol

Lars Mathiesen (Dept. of Economics, Norwegian School of Economics and Business Administration) describes Price patterns resulting from different producer behavior in spatial equilibrium.

ABSTRACT: We are concerned with economic analyses of markets from the perspective of supporting a decision maker selling in the market. The competitive pressure and the price formation are central issues. The goal of this paper is to highlight the remarkably different price patterns obtained from different modes of seller behavior in a spatial market. This is exemplified by models of price taking versus the oligopolistic Cournot mode of behavior. Although a particular market, namely the European market for natural gas is used for illustration, the insights from this exercise apply to any industry where suppliers have market power, their locations differ, and their costs of supplying individual segments of the market are non-negligible and differ. When market power is present and one seeks insight into competition and price formation, details in other dimensions cannot compensate for not modeling the exertion of market power.

May 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Industrial Policy and Competition

Posted by D. Daniel Sokol

Philippe Aghion, Harvard University - Department of Economics, Mathias Dewatripont, Université Libre de Bruxelles (ULB), Luosha Du, Ann E. Harrison, University of California, Berkeley, and Patrick Legros, Université Libre de Bruxelles (ULB) have written on Industrial Policy and Competition.

ABSTRACT: The economic slowdown in the 70s in Latin America and Japan in the late 90s, generated a growing skepticism about the role of industrial policy in the process of economic development. Yet, new considerations have emerged over the recent period, which invite us to revisit the issue. This paper argues that sectoral state aids tend to foster productivity, productivity growth, and product innovation to a larger extent when it targets more competitive sectors and when it is not concentrated on one or a small number of firms in the sector. Using a theoretical framework in which two firms may choose either to operate in the same "higher-growth" sector or in different, "lower-growth" sector. We use a panel of medium and large Chinese enterprises for the period 1998 through 2007 to test for complementarity between competition and industrial policy. A main implication from our analysis is that the debate on industrial policy should no longer be for or against having such a policy. As it turns out, sectoral policies are being implemented in one form or another by a large number of countries worldwide, starting with China. Rather, the issue should be on how to design and govern sectoral policies in order to make them more competition-friendly and therefore more growth-enhancing.

May 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Antitrust’s State Action Doctrine and the Ordinary Powers of Corporations

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law, Antitrust’s State Action Doctrine and the Ordinary Powers of Corporations.

ABSTRACT: In its Phoebe-Putney decision the Eleventh Circuit held that a state statute permitting a hospital authority to acquire hospitals implicitly authorized such acquisitions when they were anticompetitive – in this particular case very likely facilitating a merger to monopoly. Under antitrust law’s “state action” doctrine a state may in fact authorize such an acquisition, provided that it “clearly articulates” its desire to approve an action that would otherwise constitute an antitrust violation and also “actively supervises” any private conduct that might fall under the state’s regulatory scheme.

“Authorization” in the context of state action doctrine has two meanings. The first is state authority to do the act; the second is state intent to permit the relevant actor to act anticompetitively, and thus to displace the antitrust laws. A statute giving a quasi-governmental or state chartered entity the power to “execute contracts” covers only the first category. Surely no state court would conclude that a simple authorization to a corporation to enter into contracts justified contracting that involved unlawful race discrimination, fraud, or embezzlement, or even state law antitrust violations. Indeed, for more than a century the Supreme Court has held that the fact that an acquisition was lawful under state corporate law did not immunize the transaction from federal antitrust scrutiny.

The Eleventh Circuit’s decision blurs these two meanings of “authorization.” In fact, virtually every state chartered business corporation in the United States has both the power to make contracts and the power to acquire the assets or share capital of other firms. But these simple grants of what have come to be ordinary corporate powers cannot form the basis of a state action immunity. To find authorization that broadly would virtually immunize business corporations from the great majority of antitrust claims. While the court claimed to find authorization in state approval twenty years earlier of what it described as a merger to monopoly, that case actually did not involve a merger to monopoly at all, but rather the transfer of a monopoly hospital from one owner to another. The transfer had no impact whatsoever on competition.

Federal antitrust policy’s commitment to federalism is strong – so strong, in fact, that it permits states to immunize almost any kind of intrastate conduct as long as they state their wishes clearly and do not permit private actors to hijack the process. At the same time, however, the inference is strong that the states have a commitment to the maintenance of competition – attested by the fact that nearly every state has an antitrust law of its own, most of them modeled on the Sherman Act. For that reason the presumption must be strong that before state action immunity will be granted the state must assert with clarity that this was the policy it intended.

May 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Identifying Two-Sided Markets

Posted by D. Daniel Sokol

Lapo Filistrucchi, Department of Economics, CentER & TILEC, Tilburg University, Dipertimento di Scienze Economiche, University of Florence, Damien Geradin, Tilburg University - Tilburg Law and Economics Center (TILEC), University of Michigan Law School and Eric van Damme, TILEC and CentER, Tilburg University are Identifying Two-Sided Markets.

ABSTRACT: We review the burgeoning literature on two-sided markets focusing on the different definitions that have been proposed. In particular, we show that the well-known definition given by Evans is a particular case of the more general definition proposed by Rochet and Tirole. We then identify the crucial elements that make a market two-sided and, drawing from both theory and practice, derive suggestions for the identification of the two-sided nature of a market. Our suggestions are relevant not only for the analysis of traditional two-sided markets, such as newspapers and payment cards, but also for the analysis of many new markets, such as those for online social networks, online search engines and Internet news aggregators.

May 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Sunday, May 6, 2012

Product quality, competition, and multi-purchasing

Posted by D. Daniel Sokol

Simon P Anderson (University of Virginia), Oystein Foros (Norwegian School of Economics and Business Administration) and Hans Jarle Kind (Norwegian School of Economics and Business Administration) have written on Product quality, competition, and multi-purchasing.

ABSTRACT: In a Hotelling duopoly model, we introduce quality that is more appreciated by closer consumers. Then higher common quality raises equilibrium prices, in contrast to the standard neutrality result. Furthermore, we allow consumers to buy one out of two goods (single-purchase) or both (multi-purchase). Prices are strategically independent when some consumers multi-purchase because suppliers price the incremental benefit to marginal consumers. In a multi-purchase regime, there is a hump-shaped relationship between equilibrium prices and quality when quality functions overlap. If quality is sufficiently good, it might be a dominant strategy for each supplier to price high and eliminate multi-purchase.

May 6, 2012 | Permalink | Comments (0) | TrackBack (0)