Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, January 28, 2012

Partial Acquisitions: Recent MOFCOM Action Suggests Possible Divergence with U.S. Standards

Posted by D. Daniel Sokol

Paul Cuomo, Changrong Xu, & Charles M. Malaise (Baker Botts) have written on Partial Acquisitions: Recent MOFCOM Action Suggests Possible Divergence with U.S. Standards.

ABSTRACT: Long ago, the U.S. Supreme Court confirmed that partial acquisitions are subject to the Clayton Act's prohibition against transactions that may substantially lessen competition. Since that time, the Department of Justice and Federal Trade Commission have challenged many partial acquisitions (as have private plaintiffs-typically firms attempting to fend off hostile tender offers). And, after years of explaining their views in consent decrees and litigated cases, the agencies included an entire section on partial acquisitions in the 2010 Horizontal Merger Guidelines. While the agencies have challenged partial acquisitions in a variety of contexts and have imposed a variety of remedies, all such challenges share an underlying theme-there must be more than an "ephemeral possibility" that a transaction may cause competitive harm. As one court has explained, in order to violate the Clayton Act, a transaction must create an "appreciable danger" of anticompetitive effects.

Merger enforcement in China is not as well-established as it is in the United States and the Ministry of Commerce of the People's Republic of China is still developing its substantive and procedural standards. There is no doubt, however, that, as in the United States, partial acquisitions can violate China's Anti-Monopoly Law ("AML"), although MOFCOM has provided little guidance to date on how it will apply the AML to partial acquisitions. MOFCOM's recent enforcement action in the Alpha V-Savio transaction required remedies because MOFCOM "could not rule out the possibility" that a partial acquisition "might have" anticompetitive effects. Whether this recent action suggests that MOFCOM may be adopting something akin to an ephemeral possibility standard, and will be much less tolerant of partial acquisitions than their counterparts in the United States, remains to be seen.

January 28, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, January 27, 2012

Buyer Power and Intraband Coordination

Posted by D. Daniel Sokol

Jeanine Miklos-Thal University of Rochester and ZEW Mannheim, Patrick Rey Toulouse School of Economics (GREMAQ and IDEI) and Thibaud Verge CREST (Laboratoire d'Economie Industrielle) discuss Buyer Power and Intraband Coordination.

ABSTRACT: We analyse the competitive effects of various contractual provisions in a situation where rival retailers make offers to a common manufacturer. In contrast to Marx and Shaffer (2007), who find that a strong retailer can use slotting allowances (that is, upfront payments from manufacturers) to exclude its weaker rival, we show that foreclosure is no longer inevitable once retailers' offers can be contingent on the relationship being exclusive or not. There then exist equilibria that sustain the industry monopoly outcome; moreover, as long as retailers can use non-linear tariffs, such equilibria exist irrespectively of whether slotting allowances are allowed or banned. Non-contingent contracts, on the other hand, necessarily lead to exclusion, with or without slotting allowances. A ban on slotting allowances may therefore prove ineffective, while a ban on exclusive dealing options in supply contracts leads to foreclosure.

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

Experimentation in Two-Sided Markets

Posted by D. Daniel Sokol

Martin Peitz, University of Mannheim - Department of Economics, Sven Rady, University of Bonn, Centre for Economic Policy Research (CEPR), CESifo (Center for Economic Studies and Ifo Institute for Economic Research), and Piers Trepper, Ludwig Maximilians University of Munich describe Experimentation in Two-Sided Markets.

ABSTRACT: We study optimal experimentation by a monopolistic platform in a two-sided market framework. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profi t stream in a continuous-time infi nite-horizon framework by setting participation fees or quantities on both sides. We show that a price-setting platform provider sets a fee lower than the myopically optimal level on at least one side of the market, and on both sides if the two externalities are of approximately equal strength. If the externality that one side exerts is suffi ciently weaker than the externality it experiences, the optimal fee on this side exceeds the myopically optimal level. We obtain analogous results for expected prices when the platform provider chooses quantities. While the optimal policy does not admit closed-form representations in general, we identify special cases in which the undiscounted limit of the model can be solved in closed form.

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

Conference Announcement: Buyer Power in Competition Law - Tuesday 15 May 2012 0930

Posted by D. Daniel Sokol

Buyer Power in Competition Law

Tuesday 15 May 2012 0930

bullet Venue: St Catherine's College Mary Sunley Lecture Theatre

Organised by Centre for Competition Law & Policy in conjunction with Oxford/Stockholm Wallenberg Venture

Buyer power enables a single buyer, or a group of buyers, to influence or dictate the terms of trade with upstream suppliers. This power may stem from strategic advantages enjoyed by the purchaser. Alternatively, it may derive from the attainment of a dominant or collective dominant position on the input market. 

Powerful buyers are capable of obtaining favourable commercial terms and extract greater value from the upstream suppliers. Such power, and the subsequent reduction in input costs, may lead to reduction in price to consumers and increase consumer welfare. This is often facilitated by economies of scale and efficiencies in distribution. These efficiencies, and the greater values extracted from the upstream suppliers may often benefits consumers and enhance consumer welfare. Yet at times, buyer power may have adverse effects on welfare. Powerful buyers may refrain from passing savings to consumers, increase the output price, distort competition upstream and abuse their market power. 

The assessment of the welfare effects generated by buyer power is often challenging. It depends on the nature of buyer power, being monopsony or bargaining power, and the market characteristics. It requires careful balancing between short, mid, and long term welfare effects.

The one day event will bring together leading academics, practitioners and competition officials to discuss questions of policy, economics and law. The discussion will focus on the treatment of buyer power in merger analysis, the dividing line between buying alliances and buyer cartels, and the possible abuse of buyer power. The effects of buyer power in the retail and agricultural sectors will also be explored.

 

Speakers include:

Claes Bengtsson, European Commission

Matthew Bennett, Office of Fair Trading

Ulf Bernitz, Oxford IECL

Peter Carstensen, University of Wisconsin Law School

Cristina Caffarra, CRA

Ariel Ezrachi, Oxford CCLP 

Lars Henriksson, Stockholm School of Economics

Matthew Johnson, OXERA

Jack Kirckwood, Seattle University School of Law

Birgit Krueger, Bundeskartellamt

Andrew McCarthy, British Brands

Michael Rowe, Slaughter and May

Howard Smith, Oxford University

Maurice E. Stucke, University of Tennessee

John Thanassoulis, Oxford University

Bob Young, Europe Economics

 

The cost of the conference is £50 which includes a registration fee, lunch, refreshments and all conference materials. To register and pay please click here.

This conference is accredited with CPD hours by the Solicitors Regulation Authority and the Bar Standards Board. Number of accredited hours to be confirmed. 

bullet For more information on this event, please contact: Jenny Dix

bullet The Conference Programme can be viewed here (Acrobat PDF file)

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

From Regulatory Tool to Competition Law Rule: The Case of Margin Squeeze under EU Competition Law

Posted by D. Daniel Sokol

Hendrik Auf'mkolk, University of Muenster, has posted From Regulatory Tool to Competition Law Rule: The Case of Margin Squeeze under EU Competition Law.

ABSTRACT: The concept of margin squeeze has recently emerged into a stand-alone abuse of dominance under EU competition law. It is no coincidence that this development was triggered by a series of high-profile cases involving former statutory monopolists in newly liberalized telecommunication markets. As this paper shows, the concurrent application of competition law and regulation in these cases had a ‘feedback effect’ on the competition law concept of margin squeeze itself. It has been continually broadened to pursue regulatory goals and impose quasi-regulatory remedies. In the process, imputation tests designed to help regulators determine entry-inducing access prices have become competition law standards applicable beyond the realm of regulated network industries and bottleneck facilities. While this may facilitate the scaling back of sector-specific regulation it does not come without risks to legal and economic coherence. Against this background, this paper reviews the evolution of the margin squeeze doctrine under EU competition law and asks whether it should serve as a blueprint for the transition from regulation to competition.

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

Thursday, January 26, 2012

Product Bundling and Incentives for Merger and Strategic Alliance

Posted by D. Daniel Sokol

Sue Mialon (Emory) has a new paper on Product Bundling and Incentives for Merger and Strategic Alliance.

ABSTRACT: This paper analyzes firms' choice between a merger and a strategic alliance in bundling their product with other complementary product. We consider a framework in which firms can improve profits only from product bundling. While mixed bundling is not profitable, pure bundling is because pure bundling reduces consumers' choices, and thus, softens competition among firms. Firms benefit the most from this reduced competition if they form an alliance. Firms do not gain as much from a merger because, internalizing the complementarity between the two products, a merged firm is inclined to pursue aggressive pricing to gain market share. Yet, firms may be motivated to choose a merger over an alliance because of foreclosure possibility as foreclosure is not possible under strategic alliance. However, in response, unmerged rivals can use a strategic alliance to avert foreclosure. Hence, the possibility of counter-bundling via stra! tegic alliance by rivals reduces the incentives for merger. In equilibrium, bundling is offered only through strategic alliances.

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

The 2011 Basketball Lockout The Union Lives to Fight Another Day—Just Barely

Posted by D. Daniel Sokol

William B. Gould IV (Stanford Law) has a short piece on The 2011 Basketball Lockout The Union Lives to Fight Another Day—Just Barely.

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

Market Power in EU Antitrust Law

Posted by D. Daniel Sokol

Luis Ortiz Blanco (Garrigues and College of Europe) has a new book on Market Power in EU Antitrust Law.

BOOK ABSTRACT: The notion of market power is central to antitrust law. Under EU law, antitrust rules refer to appreciable restrictions of competition (Article 101 (1) TFEU, ex Article 81(1) TEC), the elimination of competition for a substantial part of the market (Article 101 (3) TFEU, ex Article (81(3) TEC), dominant positions (Article 10 2 TFEU, ex Article 82 TEC) and substantial impediment to effective competition, in particular by creating or reinforcing a dominant position (Article 2 of the EU Merger Regulation). At first sight, only the concept of dominant position relates to market power but it is the aim of this book to demonstrate that the other concepts are directly linked to the notion of market power. This is done by reference to the case law of the EU Courts and the precedents of the European Commission and the author goes on to argue that for very good reasons (clarity and enforceability, among others) the rules should be interpreted in this way.

Beginning with market definition, the book reviews the different rules and the different degrees of market power they incorporate. Thus it analyses the notion of 'appreciable restriction of competition' to find a moderate market power obtained by agreement among competitors to be the benchmark for the application of Article 101 TFEU, ex Article 81TEC. It then goes on to the concept of dominance under Article 102 TFEU, ex Article 82 TEC, which is equivalent to substantial (or important) market power and then focuses on the old and new tests for EU merger control. Finally, it addresses the idea of elimination of competition in respect of a substantial part of the market (Article 101 (3) TFEU, ex Article 81 (3) (b) TEC), in which the last two types of market power (Article 102 TFEU, ex Article 82 TEC and EU Merger Regulation) converge. To exemplify this, an in-depth study of the notion of collective dominance is made.

The book concludes that a paradigm of market power exists under the EU antitrust rules that both fits with past practice and provides for a useful framework of analysis for the general application of the rules by administrative and even more importantly judicial authorities in the Member States, under conditions of legal certainty.

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

An Overview of Competition Law in Southeast Asia

Posted by D. Daniel Sokol

Robert Ian McEwin (Director, Global Economics Group; Visiting Professor of Law, National University of Singapore and Chulalongkorn University, Bangkok; Senior Advisor, Rajah & Tann, Singapore) discusses competition laws and regulators in the ASEAN countries. His overview also covers the two main approaches to abuse of dominance--regulatory abuse of dominance and ex-post regulation--and the two main approaches to merger review.

Download video lecture (.wmv file format)

Download lecture slides (.ppt file format)

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

Refusals to License Intellectual Property: Testing the Limits of Law and Economics

Posted by D. Daniel Sokol

Ian Eagles (Auckland University of Technology) and Louise Longdin (Auckland University of Technology) have a new book on Refusals to License Intellectual Property: Testing the Limits of Law and Economics.

BOOK ABSTRACT: Economic analysis rarely appears on the judicial horizon in intellectual property litigation. In competition cases, by contrast, economists are familiar figures in the courtroom and the language of economics is scattered throughout the judgments of even the highest courts. One might expect, therefore, that refusals to license intellectual property would generate the same fruitful symbiosis between law and economics when those refusals surface in competition proceedings. This however, has not been how the law on this subject has developed in most jurisdictions. Courts and enforcement agencies faced with a unilateral refusal to license have instead tended to retreat into sketchily articulated black letter rules and presumptions which then have to be fenced off from the rest of competition law by economically irrelevant qualifications and distinctions based on private law categorisations of, and rationales for, individual intellectual property rights. This bypassing of case-by-case analysis in favour of more traditional modes of legal reasoning is not entirely the fault of lawyers. Economists have contributed to this state of affairs by urging judges and regulators to convert empirically undernourished theories about the proper role of intellectual property in a market economy into rules of law and evidentiary presumptions intended to be binding in future cases. How this came about and what it means for the future of effective competition enforcement globally are the twin concerns of this book.

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

Discounts and Rebates

Posted by D. Daniel Sokol

Anca Daniela Chirita, Durham Law School, Europa-Institut, Saarland University discusses Discounts and Rebates.

ABSTRACT: This sub-chapter deals comparatively with the rebate system under German and EU competition law in recent cases such as Intel, Imperial Chemicals, Tomra and the German ruling in the Rossmann case.

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

Wednesday, January 25, 2012

Institutional Coherence and Effectivity of a Regional Competition Policy: The Case of the West African Economic and Monetary Union (WAEMU)

Posted by D. Daniel Sokol

Mor Bakhoum, Max Planck Institute for Intellectual Property and Competition Law and Julia Molestina, Max Planck Institute for Intellectual Property and Competition Law have written on Institutional Coherence and Effectivity of a Regional Competition Policy: The Case of the West African Economic and Monetary Union (WAEMU).

ABSTRACT: In the context of globalization the shift from the national to the global has become an economic reality and advanced the emergence of regional integration groups alongside regional competition policies. In the same vein, the West African Economic and Monetary Union (WAEMU) has adopted a regional competition law, which entered into force in 2003.

WAEMU follows a centralized approach to its competition policy, in which the Union not only has the exclusive competence to legislate on anticompetitive practices, but also bears the exclusive decision-making power regarding the enforcement of the law. National competition-law authorities are mainly excluded from the decision-making process and limited to consulting or executive functions.

However, the centralized approach is not flawless. The expected reforms in the member states are still pending, the collaboration of national structures and the community is not effective and the regional institutional level, which was supposed to constitute a strong authority, faces severe constraints in terms of resources and flexibility. The regional case law also remains limited. The effectiveness of the community competition law thus far has failed to live up to its expectations.

This paper builds on WAEMU’s eight years experience of enforcement as well as other regional integration experiences, such as ECOWAS or the EU, and identifies a certain number of criteria, which should be taken into account when designing a regional competition policy. The so called “competition constraints” are the number of states and the level of integration of the regional market, the fluidity of trade between member states, the respective institutional capacities of the member states and the Union, the existence or lack of a competition culture in the member states and the time dimension.

By analyzing the interaction between the competition constraints and the institutional design of a regional competition policy, one can extract certain principles of orientation regarding the applicable substantive law and the distribution of competences.

Applying the lessons learned to the case of WAEMU, the insufficient involvement of the national competition law authorities appears as one of the main deficiencies of the institutional framework of WAEMU. Therefore, this paper calls for a “controlled decentralization”, which includes the installation of a new collaboration framework between the regional and the national level.

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Call For Papers Searle Center on Law, Regulation, and Economic Growth Third Annual Conference on Internet Search and Innovation

Posted by D. Daniel Sokol

Call For Papers
Searle Center on Law, Regulation, and Economic Growth Third Annual Conference on Internet Search and Innovation


Northwestern University, Thursday, June 21st, 2012 - Friday, June 22nd, 2012

The Searle Center on Law, Regulation, and Economic Growth is issuing a call for original research papers to be presented at the Third Annual Conference on Internet Search and Innovation. The conference will be held at the Northwestern University School of Law in Chicago, IL. The conference will run from approximately 12:00 P.M. on Thursday, June 21st, 2012 to 3:00 P.M. on Friday, June 22nd, 2012. There will be a dinner reception and keynote address on Thursday night.

CONFERENCE DETAILS: The conference is organized by Professor Daniel F. Spulber, Research Director, Searle Center on Law, Regulation, and Economic Growth and Elinor Hobbs Distinguished Professor of International Business, Professor of Management Strategy, Kellogg School of Management, and Professor of Law, Northwestern University School of Law (Courtesy). The goal of this conference is to provide a forum where economists and legal scholars can gather together with Northwestern's own distinguished faculty to present and discuss highquality research relevant to Internet search and innovation. The conference will cover academic work on Internet search and innovation and the discussion will examine related public policy issues in antitrust, regulation, and intellectual property.

TOPICS: Topics include:
- Internet search and antitrust
- Privacy issues in Internet search and marketing
- Competition and barriers to entry in two-sided markets
- Business method inventions and patents for Internet inventions
- The Internet, innovation, and intellectual property
- Market design, platforms, and e-commerce
- R&D and innovation in high-tech
- Open standards and entrepreneurship
- Data portability
- Cloud computing
- Joint work in economics and computer science on search algorithms and other topics related to Internet search

PAPER SUBMISSION PROCEDURE: Papers for the conference should be submitted to the following email address: editjems@kellogg.northwestern.edu

PARTICIPATION: Attendance for this conference is by invitation only. Potential attendees should indicate their interest in receiving an invitation by sending a message to Derek Gundersen at: d-gundersen@law.northwestern.edu

Authors will receive an honorarium of $1,500 per paper. The honorarium is intended to cover reasonable transportation expenses. Government employees and non-US residents may be reimbursed for travel expenses up to the honorarium amount. Authors are expected to attend and participate in the full duration of the conference. If more than one author attends the conference, the honorarium or travel reimbursement will be divided equally between the attending authors.

The Searle Center will make hotel reservations and pay for rooms for authors and discussants for the night of Thursday, June 21st. For those travelling from the West Coast or from out of the country, we will also reserve and pay for the night of Wednesday, June 20th. The Searle Center gratefully acknowledges the support and participation of Microsoft and Google.

REVIEW PROCEDURE AND TIMELINE: Conference Papers Submission Deadline: Papers for the conference should be submitted to the following email address: editjems@kellogg.northwestern.edu by February 7, 2012.

NOTIFICATION DEADLINE: Authors will be notified of decisions by February 23, 2012. Potential attendees should send a message indicating their interest to Derek Gundersen at d-gundersen@law.northwestern.edu by June 17, 2012.

The conference is organized in cooperation with the Journal of Economics & Management Strategy (JEMS), which is edited by Daniel F. Spulber. JEMS encourages submissions on Internet search and innovation. Submissions are independent of the conference. Authors presenting papers at the conference need not submit to JEMS and are welcome to publish their work in other venues (with appropriate acknowledgement of the Searle Center). To submit to the Journal of Economics & Management Strategy, access ScholarOne at http://mc.manuscriptcentral.com/jems

Papers prepared for the conference will be permanently hosted on the Searle Center website: http://www.law.northwestern.edu/searlecenter

The Searle Center on Law, Regulation, and Economic Growth at Northwestern University School of Law was established in 2006 to research how government regulation and interpretation of laws and regulations by the courts affect business and economic growth. Information on the Searle Center's activities may be found at: http://www.law.northwestern.edu/searlecenter


January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

An Examination of Frank Wolak's Model of Market Power and Its Application to the New Zealand Electricity Market

Posted by D. Daniel Sokol

Lewis T. Evans, Victoria University of Wellington - New Zealand Institute for Study of Competition and Regulation Inc. (ISCR) and Graeme Guthrie, Victoria University of Wellington - School of Economics & Finance An Examination of Frank Wolak's Model of Market Power and Its Application to the New Zealand Electricity Market.

ABSTRACT: We appraise the theoretical basis and the consequent empirical work of Frank Wolak in his study of the New Zealand Electricity market in a report to the New Zealand Commerce Commission released in March 2009. The report found no multilateral actions, but concluded there was evidence of market power. We find that the theoretical and empirical methodologies employed do not imply the existence of unilateral market power in oligopoly electricity markets.

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Measuring Antitrust Agency Performance

Posted by D. Daniel Sokol

This photo of Thurman Arnold gives you a sense that we have yet to solve agency effectiveness issues and that we are not much closer today than when this photo was taken.

http://images.google.com/hosted/life/04b06411fbe19fa5.html

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Recent Amendments to Hong Kong's Competition Bill

Posted by D. Daniel Sokol

Ping Lin (Lingnan University of Hong Kong) & Jingjing Zhao (Norton Rose) have an update on Recent Amendments to Hong Kong's Competition Bill.

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Public Procurement: An Overview of EU and National Case Law (from an EU Competition Law Perspective)

Posted by D. Daniel Sokol

Albert Sanchez Graells, Comillas Pontifical University offers Public Procurement: An Overview of EU and National Case Law (from an EU Competition Law Perspective).

ABSTRACT: This foreword to a special issue of e-competitions explores the EU competition law implications of public procurement activities. More specifically, it tries to highlight how bid rigging seems pervasive in the public procurement setting despite increased enforcement efforts (a situation that should come as no surprise to economists) (Part I), how there are very significant limitations and almost absolute difficulties in curving the market behavior of power public buyers (Part II) and how other issues, such as the treatment of mergers or State aid in public procurement markets may require more refined analyses than those applied so far (Part III). References to EU and national case law are used to color the depiction of the current situation in the enforcement of EU competition law in the public procurement setting, but the selection of cases or jurisdictions considered does not attempt to be exhaustive.

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Antitrust Issues in Defining Markets in the Newspaper Industry

Posted by D. Daniel Sokol

Seth B. Sacher, FTC analyzes Antitrust Issues in Defining Markets in the Newspaper Industry.

ABSTRACT: A variety of antitrust market definition questions arise in the newspaper industry. One crucial factor affecting this industry with respect to market definition is that it involves two-sided platforms, with the two key groups being advertisers and readers. For the most part antitrust cases in the newspaper industry have focused on the impact of practices or transactions on advertisers. Despite the growth of so-called new media and its likely role in the continued decline in newspaper circulation rates both the DOJ and the courts continue to view the product market for newspapers fairly narrowly and to argue that various media operate in separate product markets. Geographic markets also tend to be viewed locally, such as a single city or MSA. A key factor leading to such findings is that price discrimination can be exercised with respect to those advertisers that are less able to substitute across media or geographic areas.

January 25, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 24, 2012

Merger Control: Key International Norms and Differences

Posted by D. Daniel Sokol

I have a new working paper up with Bill Blumenthal of Clifford Chance for a chapter in INTERNATIONAL RESEARCH HANDBOOK ON COMPETITION LAW that Ariel Ezrachi (Oxford) is editing.

D. Daniel Sokol (University of Florida - Law) and William Blumenthal (Clifford Chance) discuss Merger Control: Key International Norms and Differences.

ABSTRACT: More than ninety jurisdictions have some form of merger control regime under their antitrust or competition laws. Numerous other jurisdictions lack a formal merger control mechanism, but reserve the right to review and challenge mergers under their general competition laws, sector-specific laws, or regional trade agreements. Observing the substantive approaches to merger analysis across jurisdictions, one sees many commonalities, but also some important areas of variation. The procedural approaches across merger control regimes are even more varied.

This chapter seeks to identify and catalog the key substantive and procedural norms and differences in various systems, to provide a sense of the direction of the academic scholarship on various issues and to offer some analytical underpinnings for optimal merger enforcement based on the reality of merger control in recent years. We conclude with suggestions regarding the future direction of merger control.

January 24, 2012 | Permalink | Comments (1) | TrackBack (0)

In Defense of Market Definition

Posted by D. Daniel Sokol

Malcolm B. Coate, U.S. Federal Trade Commission (FTC) and Joseph J. Simons, Paul, Weiss, Rifkind, Wharton & Garrison LLP write In Defense of Market Definition.

ABSTRACT: Market definition, a concept that has long served to structure competitive analysis, is under assault from theoreticians who object to the inability of the standard analysis to define a market compatible with their models of unilateral effects. Although these unilateral models have not been shown to reliably predict competitive behavior in the real world, our paper raises other concerns associated with substituting unilateral effects models for market definition. We suggest that the criticisms of market definition are misplaced, because the theoretical analyses lack the benchmarks necessary to establish findings of monopoly power. Moreover, market analysis serves to build the foundation for a case-specific competitive analysis that reaches well beyond the confines of any one particular economic model.

Market definition, structured by the hypothetical monopolist test, and implemented with critical loss analysis, remains a valuable tool for antitrust analysis. As usually applied, the test accepts a proposed market definition as relevant for antitrust analysis whenever the predicted loss in volume (Actual Loss) from a small, but significant and non-transitory increase in price is less than the computed break-even loss in volume (Critical Loss). We discuss how markets can be defined in homogeneous goods, static differentiated goods, and dynamic differentiated goods structures, drawing examples from the case law. Within a relevant market, a case-specific analysis, structured by the concepts in the Merger Guidelines, is able to determine if the merger at issue is likely to substantially lessen competition. Comparable economic analyses can be defined to evaluate a range of other potentially anti-competitive behavior associated using the Rule-of-Reason as a guide.

January 24, 2012 | Permalink | Comments (0) | TrackBack (0)