Antitrust & Competition Policy Blog

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

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Tuesday, July 31, 2012

vGUPPI: Scoring Unilateral Pricing Incentives in Vertical Mergers

Posted by D. Daniel Sokol

Serge Moresi, Charles River Associates (CRA) and Steven C. Salop, Georgetown University Law Center explain vGUPPI: Scoring Unilateral Pricing Incentives in Vertical Mergers.

ABSTRACT: One key concern in vertical merger cases is input foreclosure. Input foreclosure involves raising the costs of competitors in the downstream market, which could in turn increase the sales and profits of the downstream merger partner. In this article, we explain how the upward pricing pressure resulting from unilateral incentives following a vertical merger can be scored with vertical Gross Upward Pricing Pressure Indices (“vGUPPIs”). These vGUPPIs are derived from an economic model where upstream firms sell differentiated inputs to downstream firms which in turn sell differentiated products. There are separate vGUPPIs for the upstream and downstream merging firms and, in addition, vGUPPIs for the rivals of the downstream firm whose costs are raised. Our model also explains how the vGUPPIs can account for potential input substitution and merger-specific elimination of double marginalization. These vGUPPIs are analogous to the horizontal GUPPIs commonly used for the evaluation of unilateral effects in horizontal mergers. Like the horizontal GUPPIs, the vGUPPIs provide more direct evidence on unilateral pricing incentives than other metrics commonly carried out in vertical merger cases, such as concentration indices and vertical arithmetic. They also are simpler to implement and require less data than merger simulation models.

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

Monday, July 30, 2012

Estimating Damages from Price-Fixing - The Value of Transaction Data

Posted by D. Daniel Sokol

Kai Huschelrath, Centre for European Economic Research (ZEW), Kathrin Mueller, Centre for European Economic Research (ZEW) and Tobias Veith, Centre for European Economic Research (ZEW) offer thoughts on Estimating Damages from Price-Fixing - The Value of Transaction Data.

ABSTRACT: We use a unique private data set of about 340,000 invoice positions from 36 smaller and larger customers of German cement producers to study the value of such transaction data for an estimation of cartel damages. In particular, we investigate, first, how structural break analysis can be used to identify the exact end of the cartel agreement and, second, how an application of before-and-after approaches to estimate the price overcharge can benefit from such rich data sets. We conclude that transaction data allows such a detailed assessment of the cartel and its impact on direct customers that its regular application in private antitrust cases is desired as long as data collection and preparation procedures are not prohibitively expensive.

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

IPR, Competition Law and Dynamic Development - IPR's Constitutionalisation and Expansion: Can the 'Common Goals' Description Cope?

Posted by D. Daniel Sokol

Jens Schovsbo, University of Copenhagen Centre for Information and Innovation Law asks IPR, Competition Law and Dynamic Development - IPR's Constitutionalisation and Expansion: Can the 'Common Goals' Description Cope?

ABSTRACT: The article opens by reminding that in most countries it is generally accepted that competition law has come to serve as a “second tier” of balancing norms to control specific cases of misuse where right holders exercise their rights to restrict competition excessively and in ways not anticipated by intellectual property law (IPR). Next, the article identifies and discusses two issues: The “constitutionalising” of IPR and the ban on compulsory licenses for trade marks in TRIPS Article 21. Regarding the first issues it pointed out that even though both competition law intervention and a “constitutional” approach to IPR may both aim to “rebalance” (i.e. limit protection) protection tensions may occur since competition law is based on an economic rational whereas the constitutional approach included no-economic interests. Interestingly, it is then pointed out that the EU's Charter on Fundamental Rights and the Lisbon Treaty have blurred the boundaries by injecting non-economic values into the basis for the competition law analysis and economic ones into the fundamental rights analysis. As far as the second issue is concerned, it is pointed out that there is a tension between the expansion of trade mark law which would be assumed to be accompanied by increased focus on competition law issues and TRIPS Article 21. On that basis it is recommended that the prohibition in TRIPS Article 21 should be construed narrowly and that one shouldn’t rule out the use of compulsory licenses in situations of misuse involving trade marks where the origin-function isn’t jeopardised but where the normal criteria for compulsory licenses are met.

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

Dynamic Analysis and the Limits of Antitrust Institutions

Posted by D. Daniel Sokol

Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia and Joshua D. Wright, George Mason University School of Law discuss Dynamic Analysis and the Limits of Antitrust Institutions.

ABSTRACT: The static model of competition, which dominates modern antitrust analysis, has served antitrust law well. Nonetheless, as commentators have observed, the static model ignores the impact that competitive (or anti-competitive) activities undertaken today will have upon future market conditions. An increased focus upon dynamic competition surely has the potential to improve antitrust analysis and, thus, to benefit consumers. The practical value of proposals to increase the use of dynamic analysis must, however, be evaluated with an eye to the institutional limitations that antitrust agencies and courts face when engaged in predictive fact-finding. We explain and evaluate both the current state of dynamic antitrust analysis and some recent proposals that agencies and courts incorporate dynamic considerations more deeply into their analyses. We show antitrust analysis is not willfully ignorant of the limitations of static analysis; on the contrary, when reasonably confident predictions can be made, they are readily incorporated into the analysis. We also argue agencies and courts should view current proposals for a more dynamic approach with caution because the theories underpinning those proposals lie outside the agencies’ expertise in industrial organization economics, do not consistently yield determinate results, and would place significant demands upon reviewing courts to question predictions based upon those theories. Considering the current state of economic theory and empirical knowledge, we conclude that competition agencies and courts have appropriately refrained from incorporating dynamic features into antitrust analysis to make predictions beyond what can be supported by a fact-intensive analysis.

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