Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, July 21, 2012

When the Antitrust Laws May Not Allow Healthcare Providers to Pursue Merger-Specific Efficiencies—And What Healthcare Providers Can Do About It

Posted by D. Daniel Sokol

Ashley Fischer, Jeffrey Brennan, & David Marx (McDermott Will and Emery) discuss When the Antitrust Laws May Not Allow Healthcare Providers to Pursue Merger-Specific Efficiencies—And What Healthcare Providers Can Do About It.

ABSTRACT: As hospitals and health systems continue to prepare for value-based reimbursement and other reforms of the Patient Protection and Affordable Care Act ("ACA"), many independent hospitals are left wondering how they can seek to achieve meaningful efficiencies-improvements in quality and access, and reductions in cost-mandated by those reforms if the antitrust laws may not allow them to seek to achieve those efficiencies by merging with another hospital in their service area. This article explores the issue facing healthcare providers-as well as the alternatives providers may have in today's antitrust enforcement climate.

July 21, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, July 20, 2012

Price flexibility in British supermarkets

Posted by D. Daniel Sokol

Jonathan S Seaton (Loughborough University) and Michael Waterson (University of Warwick) explore Price flexibility in British supermarkets.

ABSTRACT: This paper delivers a significantly different empirical perspective on micro pricing behaviour and its impact on macroeconomic processes than previous studies. We examine a seven year period of pricing behaviour by the major British supermarkets encompassing the recession year 2008 and the partial recovery of 2009. Several of our findings run strongly counter to established empirical regularities, in particular the high overall frequency of regular or reference price changes we uncover, the greater intensity of change in more turbulent times and the numerical dominance of price falls over rises. The pricing behaviour revealed also significantly challenges the implicit assumption that prices are tracking cost changes.

July 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Spatial competition in the French supermarket industry

Posted by D. Daniel Sokol

Stephane TUROLLA (INRA) addresses Spatial competition in the French supermarket industry.

ABSTRACT: This paper challenges the conventional wisdom on the competitive grocery retail sector in France. To that end, I develop a structural model of spatial competition that accounts for (i) market geography on consumers' preferences, and (ii) differences in their shopping list. The demand estimates are used to recover stores' price-cost margin under alternative pricing strategies. I select the best pricing model by applying non-nested tests and show that retailers noticeably distort their offer in highly concentrated markets. Finally, I perform counterfactual experiments to quantify the expected gain of an additional store on consumer welfare and retail prices.

July 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Physician Market Power and Medical-Care Expenditures

Posted by D. Daniel Sokol

Abe Dunn and Adam Hale Shapiro (Bureau of Economic Analysis) discuss Physician Market Power and Medical-Care Expenditures.

ABSTRACT: We study the degree to which greater physician market power via consolidation leads to higher service prices in the commercially insured medical-care market. We also examine whether these potentially higher service prices translate into different levels of physician service utilization. We find that physicians in more concentrated markets charge higher service prices. However, due to the unique nature of patient cost sharing as well as the incentives of physicians, these higher prices lead to either no change or, in some cases, an expansion of services. This is in contrast to a typical market, where higher prices attributable to consolidation are thought to decrease quantity demanded.

July 20, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 19, 2012

British economists on competition policy (1890-1920)

Posted by D. Daniel Sokol

Nicola Giocoli, University of Pisa, Department of Economics offers a historical examination of British economists on competition policy (1890-1920).

ABSTRACT: Most late 19th-century US economists gave a rather cool welcome to the Sherman Act (1890) and, though less harshly, to the Clayton and FTC Acts (1914). A large literature has identified several explanations for this surprising attitude, calling into play the relation between big business and competition, a non-neoclassical notion of competition and a weak understanding of anti-competitive practices. Much less investigated is the reaction of British economists to the passing of antitrust statutes in the U.S. What we know is simply that none of them (including the top dog, Alfred Marshall) championed the adoption of a law-based competition policy during the three decades (1890-1920) of most intense antitrust debates in the U.S. The position of three prominent British economists will be examined in this paper: H.S. Foxwell, D.H. MacGregor, and, of course, Alfred Marshall – the latter in two moments at the extremes of our ! period, 1890 and 1919. It will turn out that they all shared with their American colleagues a theoretical and operational skepticism about the government and judiciary interference with the free working of markets. They also believed that British industrial structure and business habits were so different from those in the U.S. that the urge of interfering with markets in order to preserve competition was much weaker. Among the paper's insights is that Marshall’s key concept of “defending a competitor’s right to compete” foreran the modern characterization of the goal of competition policy as "the protection of the competitive process". Yet Marshall developed his concept without making recourse to the post-1930s neoclassical notion of competition as a static market structure which lies at the foundation of most contemporary antitrust policy: a useful lesson from the history of economic thought for those IO economists who still claim that the classical dynamic view of competition is unsuited as a foundation for an effective competition policy.

July 19, 2012 | Permalink | Comments (0) | TrackBack (0)

Fines for Failure to Cooperate within Antitrust Proceedings – the Ultimate Weapon

Posted by D. Daniel Sokol

Konrad Stolarski describes Center for Antitrust and Regulatory Studies Fines for Failure to Cooperate within Antitrust Proceedings – the Ultimate Weapon.

ABSTRACT: The aim of this article is to analyse a powerful competence available to antitrust authorities in Europe in the form of the imposition of fines for the failure to cooperate within antitrust proceedings. While fines of that type are imposed in practice very rarely, the article considers the existing decisional practice of the Polish antitrust authority as well as the European Commission, and presents the way in which their approach has evolved throughout the years. The article analyses also the question of the formal initiation of proceedings concerning procedural violations and the importance of the use of a uniform and fair approach towards the scrutinized undertakings, especially as fine graduation is concerned. For that purpose, the article provides also a comparative analysis of past proceedings conducted by the European Commission and selected judgments of EU Courts.

July 19, 2012 | Permalink | Comments (0) | TrackBack (0)

A Note on Upward Pricing Pressure:The possibility of false positives

Posted by D. Daniel Sokol

Lars Mathiesen (Dept. of Economics, Norwegian School of Economics and Business Administration), Oivind Anti Nilsen (Dept. of Economics, Norwegian School of Economics and Business Administration) and Lars Sorgard (Dept. of Economics, Norwegian School of Economics and Business Administration) offer A Note on Upward Pricing Pressure:The possibility of false positives.

ABSTRACT: Farrell and Shapiro proposed a simple test of the possible upward pricing pressure (UPP) following a merger. They showed that the test may give false negatives, that is, indicate that a merger may not give an UPP, while a more comprehensive test would indicate the opposite. We show that their test applied to a case with asymmetric firms may give false positives.

July 19, 2012 | Permalink | Comments (0) | TrackBack (0)

Market Power in the Global Economy: The Exhaustion and Protection of Intellectual Property

Posted by D. Daniel Sokol

Kamal Saggi (Department of Economics, Vanderbilt University) discusses Market Power in the Global Economy: The Exhaustion and Protection of Intellectual Property.

ABSTRACT: We develop a North-South model in which a firm that enjoys monopoly status in the North (by virtue of a patent or a trademark) has the incentive to price discriminate internationally because Northern consumers value its product more than Southern ones. While North's policy regarding the territorial exhaustion of intellectual property rights (IPR) determines whether the firm can exercise market power across regions, Southern policy regarding the protection of IPR determines the firm's monopoly power within the South. In equilibrium, each region's policy takes into account the firm's pricing strategy, its incentive to export, and the other region's policy stance. Major results are: (i) the North is more likely to choose international exhaustion if the South protects IPR whereas the South is more willing to offer such protection if the North implements national exhaustion; (ii) the firm values IPR protection less than the f! reedom to price discriminate internationally if and only if its quality advantage over Southern imitators exceeds a certain threshold; and (iii) requiring the South to protect IPR increases global welfare iff such protection is necessary for inducing the firm to export to the South.

July 19, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 18, 2012

Merger Enforcement in the Americas: Update from the U.S. Department of Justice

Posted by D. Daniel Sokol

Rachel Brandenburger (DOJ) delivered a speech at the New York State Bar Association Summer Merger Forum on Merger Enforcement in the Americas: Update from the U.S. Department of Justice.

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Troubled Times: What Role for Competition and Regulatory Policy?

Posted by D. Daniel Sokol

Paul K. Gorecki (Research Professor at the Economic and Social Research Institute (ESRI) and Department of Economics, Trinity College Dublin) asks Troubled Times: What Role for Competition and Regulatory Policy?

ABSTRACT: Hard times, occasioned by a prolonged recession resulting in a series of austerity budgetary measures, generate much economic insecurity. How should the State respond? One clear choice is between robustly enforcing competition and regulatory policy and relaxing these policies. What does the international as well as Irish evidence suggest is the result of such relaxation? Could relaxation of competition and regulatory policy provide greater economic security than robust enforcing? If so, at what price? Are there any conditions under which groups or sectors should be sheltered from market forces to provide greater economic security without losing the overall benefits associated with good principles of competition and regulatory policy? Drawing on international evidence this paper addresses these questions. It finds that choosing to relax competition and regulatory policy may deliver transitory benefits but that it is ultim! ately likely to be an economically costly policy. Even without relaxation, competition and regulatory policy contain provisions that permit otherwise restrictive agreements and regulations to be allowed, but only when the benefits exceed the costs. These well established precedents are contained in Irish competition law. However, the regulatory process in Ireland has, as yet, to fully reflect international best practice in judging ex ante regulation. The OECD (2010) report for Ireland contains recommendations to rectify the situation.

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Does Leegin Liberate the Law Governing Horizontal Conspiracies From its Vertical Contamination?

Posted by D. Daniel Sokol

Lawrence Popofsky (Orrick) asks Does Leegin Liberate the Law Governing Horizontal Conspiracies From its Vertical Contamination? Download Popofsky ALJ 78-1 FINAL_ant102

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

What Former Antitrust Lawyers Do

Posted by D. Daniel Sokol

See here.

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

The effect of foreign competition on product switching activities: A firm level analysis

Posted by D. Daniel Sokol

Aadil Nakhoda, University of California, Santa Cruz has posted The effect of foreign competition on product switching activities: A firm level analysis.

ABSTRACT: Pressure from foreign competition on the decision to introduce new products or on production costs may influence firms to particpate in product switching activities. Firms switch products if they either add or drop products within their product range. I test whether pressure from foreign competition is likely to influence firms that concurrently add and drop (churn) products rather than firms that i) do not undertake any product switching activity, ii) add products only, or iii) drop products only. Firms pay substantial fixed costs to switch products and their productivity levels are likely to determine such ability. I consider whether firms that invest in research and development activities and export their final products are likely to churn products as they are able to generate greater productivity levels than firms that undertake either one of the two activities. As firms constrained by the lack of adequately educated! workers may have workers who cannot adapt to different set of skills necessary for product switching activities, I consider whether such firms are likely to churn products as they are exposed to pressure from foreign competition in comparison to firms not constrained by the lack of adequately educated workers. In addition, the contract-intensive nature of an industry can also dictate whether firms exposed to foreign competition can churn products as they may be constrained due to their contract obligations with their buyers and suppliers. The results indicate that pressure from foreign competition is likely to influence the decision of firms to churn products rather than add products only or undertake neither product switching activities. There is little evidence that firms facing pressure from foreign competition will churn products rather than drop products only, except for the most productive firms that invest in research and development activities and export participation.

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Has the Obama Justice Department Reinvigorated Antitrust Enforcement?

Posted by D. Daniel Sokol

Dan Crane (Michigan) asks Has the Obama Justice Department Reinvigorated Antitrust Enforcement?

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Post Danmark: The CJEU calls for an effect-based assessment of pricing policies

Posted by D. Daniel Sokol

Stefano Barazza, Studio Legale Barazza notes that in Post Danmark: The CJEU calls for an effect-based assessment of pricing policies.

ABSTRACT: In Post Danmark, the Court of Justice of the EU clarifies that price discrimination cannot, of itself, constitute an exclusionary abuse, and endorses an effect-based approach to Article 82 EC (Art. 102 TFEU), centred upon the ‘as efficient competitor’ test.

July 18, 2012 | Permalink | Comments (0) | TrackBack (0)

Legal Challenges to Dawn Raid Inspections under the Principles of EU, French and ECHR Law

Posted by D. Daniel Sokol

Didier Theophile and Igor Simic (Darrois Villey Maillot Brochier) discuss Legal Challenges to Dawn Raid Inspections under the Principles of EU, French and ECHR Law.

ABSTRACT: The Commission's powers of inspection under Regulation 1/2003 are wide-ranging and their implementation entails a significant intervention into the concerned undertakings’ private activities and premises. Decisions ordering inspections are subject to a narrow ex post review by the General Court and no immediate recourse is available against the measures implementing the inspection decision, which are only reviewed with the final infringement decision. While the effectiveness of the judicial protection thus offered is already questionable, undertakings’ procedural guarantees are further weakened by the Court's restrictive interpretation of certain procedural rights, e.g., the protection against self-incrimination. French practice with regard to the judicial review of competition inspections offers a useful counterpoint, the level of scrutiny there being higher. However, even French procedural guarantees do not conform entirely to the ECHR standards, as the condoning by French courts of sweeping seizures of electronic data demonstrates.

July 18, 2012 | Permalink | Comments (1) | TrackBack (0)

Tuesday, July 17, 2012

How Does the Experience of U.S. Telecommunications Regulation Inform the Forced Sharing of Intellectual Property Rights under Global Competition Law?

Posted by D. Daniel Sokol

J. Gregory Sidak, Criterion Economics, L.L.C., Tilburg Law & Economics Center (TILEC), Tilburg University asks How Does the Experience of U.S. Telecommunications Regulation Inform the Forced Sharing of Intellectual Property Rights under Global Competition Law?

ABSTRACT: Competition authorities in foreign jurisdictions have recently adopted or are considering guidelines on applying competition law to intellectual property rights (IPR). A common concern that certain exercises of IPR can restrict competition underlies IPR provisions that would enable competition authorities to compel holders of IPR to license their IP at regulated royalties. The experience of telecommunications regulation in the United States, from the AT&T divestiture in the early 1980s to the implementation of the Telecommunications Act of 1996, illustrates the potential harm to competition and innovation that such forced-sharing policies would cause. The AT&T divestiture was a costly exercise that prevented or delayed the introduction of new services. Forced sharing of incumbents’ network elements at regulated rates under the Telecommunications Act reduced investment by both incumbents and entrants. Ironically (yet predictably), the competition for local telephone service that the Act sought but failed to foster was provided by wireless and cable operators, which were deliberately left unregulated and thus had both the incentive and means to upgrade and expand their networks to handle mass volumes of voice and data communications. The failure of forced sharing to promote competition and innovation counsels competition authorities to proceed with caution when using competition law to regulate IPR.

July 17, 2012 | Permalink | Comments (0) | TrackBack (0)

Don't Shoot the Samaritan

Posted by D. Daniel Sokol

David Balto argues Don't Shoot the Samaritan.

July 17, 2012 | Permalink | Comments (0) | TrackBack (0)

The Future of the Court of Justice in EU Competition Law - New Role and Responsibilities

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege contemplates The Future of the Court of Justice in EU Competition Law - New Role and Responsibilities.

ABSTRACT: This paper seeks to offer perspectives of the future role of the upper EU Court in competition law matters. It argues first that due to several institutional, substantive and procedural idiosyncracies, the Court's rule-making function will gain further importance. The raft of recent preliminary references that landed before the Court in X BV, VEBIC, Tele2 Polska, Pierre Fabre Dermocosmétiques, FAPL and Pfleiderer brings support to this prediction. In turn, the paper argues that with this role, come the heightened responsibility of setting the 'right' competition law standard. Given the lack of benchmark to distinguish what makes good and bad law, the paper offers thoughts on the necessity to set 'consistent' competition law standards, and explores several facets of rule-making cons

July 17, 2012 | Permalink | Comments (0) | TrackBack (0)

The OECD's Proposal to Cartelize Mexican Telecommunications

Posted by D. Daniel Sokol

J. Gregory Sidak, Criterion Economics, L.L.C., Tilburg Law & Economics Center (TILEC), Tilburg University discusses The OECD's Proposal to Cartelize Mexican Telecommunications.

ABSTRACT: The OECD’s proposed regime of asymmetric ex ante regulation for Mexico’s telecommunications marketplace would reduce competition, contrary to the OECD’s aims. The OECD’s proposals would harm Mexican consumers and force an increase in prices paid for telecommunications services. They would create a government-sanctioned price cartel among the telecommunications providers. They would reward inefficient competitors and penalize efficient carriers, all to the detriment of the consumers. Instead of relying on new layers of counterproductive or ineffective regulations, the Mexican government should remove regulatory entry barriers between video and telephone, thereby creating enduring, facilities-based competition.

July 17, 2012 | Permalink | Comments (0) | TrackBack (0)