Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, November 3, 2012

What consumers want in FTC v. Google

Posted by D. Daniel Sokol

David Balto advocates What consumers want in FTC v. Google.

November 3, 2012 | Permalink | Comments (0) | TrackBack (0)

Friday, November 2, 2012

Can the Supreme Court Be Fixed? Lessons from Judicial Activism in First Amendment and Sherman Act Jurisprudence

Posted by D. Daniel Sokol

Warren Grimes (Southwestern Law) asks Can the Supreme Court Be Fixed? Lessons from Judicial Activism in First Amendment and Sherman Act Jurisprudence.

ABSTRACT: The paper addresses judicial activism in Supreme Court decisions. It defines judicial activism as decisions that use statutory or constitutional provisions to reach broad decisions that make it difficult or impossible for democratically elected officials in local, state or federal government to implement a desired policy. It offers six content-neutral tests for measuring judicial activism and applies them to key Supreme Court decisions involving First Amendment election law and the Sherman Antitrust Act. A final section of the paper reviews possible reform options aimed at restoring the Court to a role as a traditional judicial tribunal that decides cases or controversies narrowly. It urges a public discussion aimed at refining and implementing reform.

November 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Landmark Cases in Competition Law: Around The World in Fourteen Stories

Posted by D. Daniel Sokol

Barry Rodger (University of Strathclyde Law) has edited Landmark Cases in Competition Law: Around The World in Fourteen Stories.

BOOK ABSTRACT: It is the thesis of this fascinating and highly instructive book on competition law that an examination of one landmark case, scenario, or 'saga' each from a range of legal systems leads to a thorough understanding of the issues informing and arising from competition policy, law, and legal practice. To that end, leading scholars from 14 jurisdictions enhance their academic authority and rigour with an element of panache to describe a particularly salient case in each of their countries, commenting in depth on the contribution of the case to the development of their particular competition law culture and to the case’s enduring significance for competition law and its enforcement from a global perspective. There are chapters for each of thirteen countries as well as the European Union, preceded by an informative and thoughtful introduction. For each landmark case selected, the legislative background, the case facts, and the legal ruling and reasoning are all minutely described, along with commentary, critique, and assessment of the case’s impact and contemporary significance. The cases cover vast swathes of the competition law territory in terms of substance and procedure, dealing with cartels, abuse of dominance, mergers, and vertical restraints, and involving diverse forms of public and private enforcement processes. Aspects covered include the following:

  • the tension between the objective of economic efficiency and that of low prices;
  • the public interest test;
  • bid-rigging in public procurement;
  • entitlement of dominant companies to compete as other firms do;
  • the hard-to-draw line between legitimate competition and unlawful monopolizing conduct;
  • the dangers of eclectic borrowing in the development and interpretation of competition law rules;
  • price-fixing collusion;
  • ‘hub and spoke’ cartels;
  • resale price maintenance agreements and the U.S. ‘rule of reason’;
  • the increasing use of private enforcement and the right for victims of a competition law infringement to seek compensation;
  • merger control in energy markets and the political use of merger review rules to benefit domestic firms;
  • cooperation with criminal enforcement agencies and prosecutors;
  • the role courts play in undertaking adequate legal supervision of competition authorities;
  • leniency processes and obtaining access to ‘confidential’ whistleblowing documentation;
  • imposition of administrative fines and other deterrence-based sanctions; and
  • how the ‘consumer welfare’ standard is interpreted
More than a set of landmark case descriptions, this book, in which many chapters reflect upon recent and consider further future significant reforms, demonstrates that competition law and its enforcement processes form part of a chronological narrative, and that it is important to understand the broader legal, social, and economic context within which competition law and policy develop. This wider perspective will prove immeasurably valuable to the many practitioners, business people, jurists, and policymakers engaged in the shaping of competition law in any jurisdiction, and will moreover be essential reading for postgraduate students studying any aspects of comparative competition law enforcement.

November 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Merger Remedies in a Small Market Economy: The Estonian Experience

Posted by D. Daniel Sokol

Alexandr Svetlicinii, European University Institute - Department of Law (LAW) and Kulliki Lugenberg describe Merger Remedies in a Small Market Economy: The Estonian Experience.

ABSTRACT: This article discusses merger remedies practice of the Estonian Competition Authority (ECA), identifies the degree of convergence with the EU merger remedies policy and analyses its responsiveness to the realities of a small market economy such as Estonia. The authors summarise the ECA’s experience with accepting structural and behavioral commitments and the problems related to their monitoring and implementation.

November 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Endogenous Mergers and Collusion in Asymmetric Market Structures

Posted by D. Daniel Sokol

Mattias Ganslandt, Centre for European Law and Economics, Research Institute of Industrial Economics, University of Colorado at Boulder - Department of Economics, Lars Persson, Research Institute of Industrial Economics (IFN), Centre for Economic Policy Research (CEPR), and Helder Vasconcelos, University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) and Department of Economics explore Endogenous Mergers and Collusion in Asymmetric Market Structures.

ABSTRACT: Recent empirical evidence shows that cartels are often asymmetric, while cartel theory suggests that firm symmetry is conducive to collusion. Including an indivisible cost of cartelization, we show that medium asymmetric market structures are more conducive to collusion, since they balance the small firms' incentives to stay in the cartel against the need to cover the cartel leaders' indivisible cartelization cost. Using an endogenous merger model, we also show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion. Current antisymmetry merger policy can thus be counterproductive.

November 2, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, November 1, 2012

Antitrust Health Care Chronicle Discussion on Antitrust - Election issue - Antitrust and Health Care for the Next Four Years

Posted by D. Daniel Sokol

The Section of Antitrust Law, Health Care and Pharmaceuticals Committee has a new issue of the Chronicle, in which it has an election issue. In it is a discussion of health care and antitrust.

ABSTRACT: With Election Day on November 6th fast approaching, we are pleased to bring you this special “election issue” of the Chronicle, which features a blockbuster panel of antitrust practitioners and scholars who were willing to share with us their views on various antitrust and health care issues to be addressed during the next administration. We note from the outset that this issue is not intended to serve as an advocacy session for one candidate over another (we’ve all seen the commercials by now). Rather, our goal was to elicit a healthy debate regarding issues likely to arise in antitrust and health care over the next four years. We hope we have accomplished that.

Joining us on the panel are:
  • Christine Varney: current partner at Cravath and former Assistant Attorney General for the Department of Justice Antitrust Division;
  • William Kovacic: current professor at George Washington University Law School and former FTC Commissioner;
  • Daniel Sokol: current visiting professor at the University of Minnesota School of Law and an associate professor at the University of Florida Levin College of Law; and
  • Michael Salinger: current professor of economics at the Boston University School of Management and former Director of the FTC’s Bureau of Economics

Download Antitrust_Health_Care_Chronicle_-_November_2012_(Election_Issue).pdf

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Davis Polk Awarded Law Firm of the Year for Antitrust for 2013 by US News & World Report

Posted by D. Daniel Sokol

Davis Polk (located in midtown Manhattan and hence, it has power) was just awarded Law Firm of the Year for Antitrust for 2012 by US News & World Report. See here. I note that for part of 2012, Howard Shelanski was with the firm as Of Counsel until he returned in July to the FTC to head the Bureau of Economics.

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

‘Everything must go!’- Cournot as a Stable Convention within Strategic Supply Function Competition

Posted by D. Daniel Sokol

Michal Krol (Manchester) explains ‘Everything must go!’- Cournot as a Stable Convention within Strategic Supply Function Competition.

ABSTRACT: This paper considers competition in supply functions in a homogeneous goods market. It demonstrates that when …rms are few, production costs rise steeply and are largely sunk, a restriction of the players’strategy sets equivalent to Cournot competi- tion constitutes an instance of the von Neumann-Morgenstern Stable Set. Speci…cally, any player who believes others will compete à la Cournot (but is ignorant of their exact quantity choices) …nds a strategy admissible if and only if it is within her restricted strategy set. In fact, under capacity constraints Cournot may constitute the unique set-valued solution satisfying these conditions. It also follows that Cournot then full…lls the ‘preparation’requirement of Voorneveld [2004] and has the three de…ning charac- teristics of the Self-Admissible Set by Brandenburger, Friedenberg, and Keisler [2008].

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly

Posted by D. Daniel Sokol

Sebastien Mitraille (Universite de Toulouse, Toulouse Business School) and Michel Moreaux (Toulouse School of Economics (IDEI and LERNA)) discuss Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly.

ABSTRACT: Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash-perfect equilibria, in which some firms store to exert endogenously a leadership over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased sales and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and aggregate sales increase due to the strategic use of inventories.

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Webinar: What to Do about LIBOR - November 8, 2012

Posted by D. Daniel Sokol Oct 31, 2012

November 8, 2012 11:00 New York, 16:00 London, 17:00 Paris

Rosa Abrantes-Metz, Michael Barr, and Miguel De La Mano discuss how to reform LIBOR with David S. Evans

Competition Policy International has assembled an all-star team to discuss what to do about the LIBOR — the interest rate index that acts as the benchmark for hundreds of trillions of dollars on contracts, from home mortgages to credit-default swaps, globally. The Barclay’s settlement with the US CFTC and the UK FSA identified extensive manipulation of the LIBOR rate, which is established through the daily submission of rates to a central body. There is widespread agreement that the current LIBOR process must end. But should it be tweaked, overhauled, and blown up? And what happens to all those contracts that are pegged to LIBOR now.

To discuss these issues CPI has brought together: Rosa Abrantes-Metz, a Principal at Global Economics Group and an Adjunct Professor at New York University. Professor Abrantes-Metz, an economist, published a widely cited 2008 paper that raised alarms over the LIBOR rate setting process. Michael Barr, Professor of Law University of Michigan Law School, and former Assistant Secretary for Financial Institutions, U.S. Department of the Treasury, where he was a key architect of the Dodd-Frank Act. Miguel De La Mano, Head of Unit for the Analysis of Financial Market Issues, DG internal Market and Services, European Commission and former Chief Economist, UK Competition Commission. David S. Evans, Chairman of Global Economics Group and Lecturer, University of Chicago Law School, will moderate the discussion. Evans is the co-author with Professor Abrantes-Metz of a widely discussed proposal for replacing LIBOR.

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

A Simple Model of Bertrand Duopoly with Noisy Prices

POsted by D. Daniel Sokol

Bogumil Kaminski (Trier) and Maciej Latek (George Mason) offer A Simple Model of Bertrand Duopoly with Noisy Prices.

ABSTRACT: We examine a market in which consumers are forced to rely on noisy price signals to select between homogeneous products. The noise originates either from firms' price obfuscation or consumers' bounded information processing capabilities. Standard models and empirical experiments of markets with noise or price obfuscation show that it leads to higher prices detrimental to consumers' welfare. This paper identifies conditions under which an opposite result can be expected. In particular, it shows that a moderate level of noise is beneficial to consumers in a market with a cost leader.

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange

Posted by D. Daniel Sokol

Keith M. Marzilli Ericson has posted Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange.

ABSTRACT: I use the Medicare Part D prescription drug insurance market to examine the dynamics of firm interaction with consumers on an insurance exchange. Enrollment data show that consumers face switching frictions leading to inertia in plan choice, and a regression discontinuity design indicates initial defaults have persistent effects. In the absence of commitment to future prices, theory predicts firms respond to inertia by raising prices on existing enrollees, while introducing cheaper alternative plans. The complete set of enrollment and price data from 2006 through 2010 confirms this prediction: older plans have approximately 10% higher premiums than comparable new plans.

November 1, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 31, 2012

Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland

Posted by D. Daniel Sokol

Joni Hokkanen, Centre for Health and Social Economics, National Institute for Health and Welfare, Aki Kangasharju, Nordea Markets, Ismo Linnosmaa, Centre for Health and Social Economics, National Institute for Health and Welfare, and Hannu Valtonen, Department of Health and Social Management, University of Eastern Finland Kuopio, discuss Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland.

ABSTRACT: The present paper evaluates the quantitative impact of a pharmaceutical reform on pharmaceutical prices. A generic substitution policy was introduced in Finland in 2003 to contain rising pharmaceutical expenditure. After the reform pharmacists were obliged to propose a cheaper alternative to a prescribed pharmaceutical product whenever a substitutable product was available. There were three possible channels through which the price effect might have been transmitted.

First, the policy might have affected manufacturers? pricing behaviour for existing pharmaceutical products. Second, firms might have introduced new product variants of existing drugs to the market in the form of new generics or different package sizes. Third, the policy might have affected prices through the market structure, with more firms offering new product variants entering the market.

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

Consolidation and Merger Activity in the United States Banking

Posted by D. Daniel Sokol

Robert M. Adams (Federal Reserve) describes Consolidation and Merger Activity in the United States Banking Industry from 2000 through 2010.

ABSTRACT: This study investigates trends in consolidation and merger activity in the United States banking industry from 2000 through 2010. Over this period, the U.S. banking industry has consistently experienced over 150 mergers annually, with the largest banking organizations holding an increasing share of banking assets. While the industry has undergone considerable consolidation at the national level, local banking markets have not experienced significant increases in concentration. The dynamics of consolidation raise concerns about competition, output, efficiency, and financial stability. This study uses a comprehensive proprietary data set to examine mergers and acquisitions involving banks and thrifts. The methodology in this paper expands the definition of mergers to include more types of transactions than previous studies on bank mergers.

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

Horizontal Product Differentiation: Disclosure and Competition

Posted by D. Daniel Sokol

Maarten C. W. Janssen (University of Vienna) and Mariya Teteryanikova (University of Vienna) discuss Horizontal Product Differentiation: Disclosure and Competition.

ABSTRACT: The unraveling argument says that when a rm may produce dierent qualities and quality is unknown to consumers, the rm has an incentive to disclose the private information as in any pool of rms there is a best quality rm and this rm has an incentive to disclose. Recent literature has established that this argument does not carry over to an environment where the product is not vertically, but horizontally dierentiated. This paper argues that with horizontally dierentiated products, competition restores the unraveling argument. In a duopoly market we show that all equilibria of the disclosure game have rms fully disclosing the variety they produce.

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

An experimental study of mixed strategy equilibria in simultaneous price-quantity games

Posted by D. Daniel Sokol

Daniel Cracau (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) Benjamin Franz (Mathematical Institute, University of Oxford) describe An experimental study of mixed strategy equilibria in simultaneous price-quantity games.

ABSTRACT: We study oligopoly games with firms competing in prices and quantities at the same time. We systematically compare our experimental results to the theoretical predictions using the mixed strategy equilibria for linear demand functions. For the duopoly game, we observe that the mixed strategy equilibrium predicts average outcomes better than Cournot and Bertrand do. Subjects' price choices are mainly between marginal cost and monopoly level but do not follow the equilibrium distribution. Although average prices and profits are above theoretical values, we do not observe a high level of collusion as expected in the literature. By comparing simulations based on the mixed strategy equilibrium to our experimental outcomes, we conclude that in this game price setting can be explained by strategic reaction to preceding round results. In contrast to the equilibrium prediction, we observe a decrease in prices and negative average! profits for the triopoly game.

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

Tuesday, October 30, 2012

Private Enforcement Of Antitrust Law In The United States: A Handbook

Posted by D. Daniel Sokol

Albert A. Foer and Randy M. Stutz (AAI) have edited Private Enforcement Of Antitrust Law In The United States: A Handbook.

Description
Private Enforcement of Antitrust Law in the United States is a comprehensive Handbook, providing a detailed, step-by-step examination of the private enforcement process, as illuminated by many of the country’s leading practitioners, experts, and scholars.

 

Contents
Contributors: W.K. Arends, A.C. Briggs, W.J. Bruckner, P.B. Clayton, C.C. Corbitt, E.L. Cramer, M.B. Eisenkraft, A.A. Foer, A.J. Gaughan, P. Gilbert, J. Goldberg, D.E. Gustafson, M.D. Hausfeld, K. Kinsella, R.H. Lande, J. Langenfeld, S. Martin, K.J.L. O’Connor, H.L. Renfro, J.D. Richards, V. Romanenko, J.L. Rubin, M.R. Salzwedel, A.E. Shafroth, D.C. Simons, S.P. Slaughter, R.M. Stutz, B.E. Sweeney, J. Tabacco, M.J. Waters, S. Wheatman, K.C. Wildfang, G.G. Wrobel, J.A. Zahid

Further information

Private Enforcement of Antitrust Law in the United States is a comprehensive Handbook, providing a detailed, step-by-step examination of the private enforcement process, as illuminated by many of the country’s leading practitioners, experts, and scholars.

Written primarily from the viewpoint of the complainant, the Handbook goes well beyond a detailed cataloguing of the substantive and procedural considerations associated with individual and class action antitrust lawsuits by private individuals and businesses. It is a collection of thoughtful essays that delves deeply into practical and strategic considerations attending the decision-making of private practitioners.

This eminently readable and authoritative Handbook will prove to be an invaluable resource for anyone associated with the antitrust enterprise, including both inexperienced and seasoned practitioners, law professors and students, testifying and consulting economists, and government officials involved in overlapping public/private actions and remedies.

Full table of contents

Contents:

Preface
Albert A. Foer and Randy M. Stutz

Introduction: Benefits of Private Enforcement
Robert H. Lande

1. Defining Antitrust Violations in the United States
Bonny E. Sweeney

2. Pre-complaint Activities
Craig C. Corbitt, Judith A. Zahid and Patrick B. Clayton

3. Parties Entitled to Pursue a Claim
Eric L. Cramer and Daniel C. Simons

4. Initiation of a Private Action
Michael D. Hausfeld

5. Class Actions
J. Douglas Richards, Michael B. Eisenkraft and Abigail E. Shafroth

6. Procedural Defenses Short of Trial
Jonathan L. Rubin

7. Pretrial Discovery in Civil Litigation
Joseph Goldberg and Dan E. Gustafson

8. Economic Experts
James Langenfeld, Gregory G. Wrobel and Michael J. Waters

9. Plaintiffs’ Remedies
W. Joseph Bruckner and Matthew R. Salzwedel

10. Funding Litigation
K. Craig Wildfang and Stacey P. Slaughter

11. Interaction of Public and Private Enforcement
Kevin J.L. O’Connor, Anthony J. Gaughan, Hannah L. Renfro, Adam C. Briggs and Wendy K. Arends

12. Settlement Practice from Both a Plaintiff and Defense Perspective
Joseph Tabacco and Scott Martin

13. Class Notice and Claims Administration
Katherine Kinsella and Shannon Wheatman

14. Cy Pres as a Remedy in Private Antitrust Litigation
Albert A. Foer

15. Proposals for Reform
Pamela Gilbert and Victoria Romanenko

Index

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

Healthcare Intermediaries: Competition and Healthcare Policy at Loggerheads?

Posted by D. Daniel Sokol

Diana L. Moss, American Antitrust Institute asks Healthcare Intermediaries: Competition and Healthcare Policy at Loggerheads?

ABSTRACT: Competitive concerns in the U.S. healthcare industry have focused largely to date on providers, such as large hospital and managed care organizations. Recent attention has been drawn, however, to potential competitive concerns in other important parts of the supply chain, namely intermediaries or “middlemen.” Of particular interest are Pharmacy Benefit Managers (PBMs) and buying groups such as Group Purchasing Organizations (GPOs) and Physician Buying Groups (PBGs). Healthcare intermediaries can enhance economic efficiency by achieving scale and scope economies through access to larger product portfolios and multiple distribution networks. Buying group intermediaries can also reduce transactions costs by negotiating prices on behalf of multiple buyers, thus aggregating demand and leveraging buying power to obtain more favorable pricing for health plans, hospitals, and physician practices. In doing so, buying groups can potentially counteract the exercise of seller market power elsewhere in the supply chain. Intermediaries thus offer, at least in principle, benefits to competition and consumers.

Intermediary markets, however, have undergone fundamental changes, and those changes may provide a powerful motivation for re-examining the conventional wisdom. For example, mergers of intermediaries drive higher levels of market concentration and create dominant firms. Vertical integration also extends the influence of some intermediaries to other levels in the supply chain. Some intermediary markets may therefore be conducive to anticompetitive outcomes that are not outweighed by claimed efficiencies. Yet federal antitrust authorities generally have not challenged intermediary conduct or consolidation, much like the merger approved by the Federal Trade Commission (FTC) in April 2012 between the two largest PBMs, Express Scripts and Medco.

The foregoing developments in intermediary markets lay the groundwork for growing competitive concerns, including exclusionary practices and anticompetitive agreements. Anticompetitive practices impair beneficial vertical and horizontal competition while unduly influencing outcomes in markets upstream and downstream of intermediaries, many of which are highly concentrated. A complex overlay of legislated safe harbors, antitrust exemptions, and tailored antitrust policies governing the evaluation of healthcare intermediaries exacerbate competitive concerns.

Intermediary conduct that is potentially designed to constrain competition affects a number of participants in the healthcare supply chain. Smaller manufacturers of pharmaceuticals, medical devices, and medical supplies, smaller distributors, and independent pharmacies are particularly exposed. Intermediate consumers of medical products (e.g., hospitals and physician practices) bear the adverse effects of antitcompetitive practices, which are passed on to insurers and, in turn, to the ultimate consumer or patient. The potential harm that flows from exclusionary practices is reflected in the traditional antitrust metrics of higher prices, restricted output, lower quality, less choice, barriers to entry, and slower innovation.But it is also apparent in more indirect ways that threaten to impair the achievement of healthcare policy goals such as affordable healthcare, choice in medical products, a stable supply chain, and diversity of supply.

This American Antitrust Institute (AAI) White Paper examines the competitive role of healthcare intermediaries. These entities have become increasingly powerful and entrenched in the supply chain, a fact that has not escaped the attention of Congress, regulators, and state antitrust enforcers. The White Paper does not conclude that intermediary practices are anticompetitive – only thorough antitrust investigations can do that. However, it does articulate, using examples, the reasons that the conduct of certain healthcare intermediaries may be potentially detrimental to competition and consumers. Section II examines major features of intermediaries that are relevant to the analysis. Section III examines the intersection between public policy concerns and competition issues in healthcare. Section IV gives a brief overview of antitrust enforcement issues and the state of the law involving bundled discounts and exclusive contracts. To illustrate potential competitive and public policy concerns, Section V presents three case studies of healthcare intermediaries: (1) pediatric vaccines and PBGs, (2) drug shortages and GPOs, and (3) pharmacy choice and PBMs. Section VI concludes with policy recommendations and suggestions for further study.

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

Buyer Power and Suppliers' Incentives to Innovate

Posted by D. Daniel Sokol

Christian Koehler, Centre for European Economic Research (ZEW) Christian Rammer, Centre for European Economic Research (ZEW) - Industrial Economics and International Management Research explore Buyer Power and Suppliers' Incentives to Innovate.

ABSTRACT: Buyer power is widely considered to decrease innovation incentives of suppliers. However, there is little empirical evidence for this statement. Our paper analyses how buyer power influences innovation incentives of upstream firms while taking into account the type of competition in the downstream market, namely price and technology. We explore this relationship empirically for a unique dataset containing 1,129 observations of German firms from manufacturing and service sectors including information on the economic dependency of firms from their buyers. Using a generalised Tobit model, we find a negative effect of buyer power on a supplier’s likelihood to start R&D activities. This negative effect is mitigated if the supplier faces powerful buyers operating under strong price competition. There is also weak evidence for a negative effect of buyer power on suppliers’ R&D intensity if the powerful buyer operates under strong technology competition.

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

Monday, October 29, 2012

A Bad Antitrust Policy by the Florida Bar

Posted by D. Daniel Sokol

Earlier today, I received the following email from the Florida Bar:

I am a member of the Florida Bar's Antitrust and Trade Certification Committee, and just wanted to let you know that you may have an opportunity to get a certification without taking an exam--assuming you have been a member of the Bar for 20 plus years. Have you? If not, you can still certify but would have to take an exam.

I was horrified by this policy. My response was as follows:

As a policy matter, let me suggest that at automatic 20 year grandfathering clause reduces the quality signal of the certification as many people with one off experiences 15 years ago would claim antitrust expertise. This cheapens the certification for those practitioners who do have antitrust skills.

Antitrust by its nature is an area of complex economic regulation. I don't think that large companies will hire based on an antitrust certificate. However, unsophisticated middle sized firms with real antitrust problems as potential victims as well as individuals caught in a cartel investigation might be duped into hiring a shlock lawyer based on this bogus standard and the bar does a disservice by promoting bad lawyers without antitrust skills as so-called experts. 

This policy suggests a real problem with the Florida Bar regarding its standards. In my opinion, makes the state bar look rather pedestrian.

October 29, 2012 | Permalink | Comments (0) | TrackBack (0)