Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, February 6, 2012

A Practitioner's Look at Merger Control Remedies in China

Posted by D. Daniel Sokol

Francois Renard (Allen & Overy) offers A Practitioner's Look at Merger Control Remedies in China.

ABSTRACT: Since the entry into force of its antitrust rules, China has approved transactions subject to "restrictive conditions," also called "remedies" or "commitments" in other jurisdictions, in only ten out of approximately 370 transactions notified. This is a particularly low proportion of cases compared to other jurisdictions, including the European Union. This shows that instead of prohibiting these transactions, the Chinese competition authority has preferred to opt for a favorable outcome allowing companies to proceed with their operation, which must be welcomed.

The remedies imposed in China are sometimes quite creative and do not always seem burdensome for the parties, which is another positive sign. However, the authority has started to impose more and more remedies recently, in particular in the recent Seagate/Samsung decision where the number of remedies was noticeably high. In addition, practice shows that there is room for improvement in the way the authority imposes these remedies, as well as in the types of remedies themselves. After summarizing the regulatory context for merger control remedies in China, this article summarizes the remedies that have been imposed in China and suggests possible ways to improve the authority's nascent practice.

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

Non-Comparative versus Comparative Advertising of Quality

Posted by D. Daniel Sokol

Winand Emons (University of Bern) and Claude Fluet (University of Quebec) have written on Non-Comparative versus Comparative Advertising of Quality.

ABSTRACT: Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the unobservable quality levels determines how the firms share the market. We consider two scenarios: in the first one, firms disclose quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own quality, under comparative advertising a firm advertises the quality differential. In either scenario, under comparative advertising the firms never advertise together which they may do under non-comparative advertising. Moreover, under comparative advertising firms do not advertise when the informational value to consumers is small.

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Dynamic product diversity

Posted by D. Daniel Sokol

Ramon Caminal, Institut d’Analisi Economica, CSIC, and Barcelona GSE explores Dynamic product diversity.

ABSTRACT: The goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation. We focus on those types of goods for which consumers purchase at most one unit of each variety, but repeat purchases in the same product category. The model considers infinitely-lived, forward-looking consumers and firms. We show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation. If the latter is sufficiently strong then the rate of introduction of new products is higher than socially desirable (excessive dynamic product diversity.)

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

Public Enforcement Against Cartels in China

Posted by D. Daniel Sokol

John Yong Ren (T&D Associates) and Jet Zhisong Deng (T&D Associates, University of International Business and Economics) discuss Public Enforcement Against Cartels in China.

ABSTRACT: China's Anti-Monopoly Law ("AML") is entering its fourth year since taking effect on August 1, 2008. Regulations, rules, and cases are still in development and it is expected that these outcomes will further shape antitrust law not only in China, but overall antitrust practice around the world.

Cartelization has long been recognized as classic monopolistic behavior. China, too, acknowledges the problem in Chapter II in the AML. Article 13 prohibits horizontal monopoly agreements, while Article 14 prohibits vertical monopoly agreements. The two administrative agencies handling public enforcement against cartels, the National Development and Reform Commission ("NDRC") and the State Administration for Industry and Commerce ("SAIC") investigate some cartel cases, although not all of the results of these investigates are disclosed to the public.

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

Organizational structure, strategic delegation and innovation in oligopolistic industries

Posted by D. Daniel Sokol

Evangelos Mitrokostas (University of Portsmouth) Emmanuel Petrakis (University of Crete) address Organizational structure, strategic delegation and innovation in oligopolistic industries.

ABSTRACT: We endogenize firms’ organizational structures in a homogenous goods duopoly where firms invest in cost reducing R&D and compete in quantities, and examine their impact on R&D efforts, market performance and social welfare. Each firm’s owner can either delegate to a manager both market competition and R&D investment decisions (Full Delegation strategy) or delegate the market competition decision alone (Partial Delegation strategy). We show that when the initial marginal cost is relatively high, Universal Full Delegation emerges in equilibrium. Otherwise, an asymmetric equilibrium with one owner choosing a Full Delegation strategy and the other a Partial Delegation strategy arises. Welfare is always higher in the asymmetric equilibrium configuration, thus, market and societal incentives are not always aligned. Finally, Universal Partial Delegation can arise in equilibrium only if goods are poor substitutes! or if competition is in prices.

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

Market Structure and the Competitive Effects of Vertical Integration

Posted by D. Daniel Sokol

Simon Loertscher (Department of Economics, University of Melbourn) and Markus Reisinger (Economics Department, WHU - Otto Beisheim School of Management) have written on Market Structure and the Competitive Effects of Vertical Integration.

ABSTRACT: We analyze the competitive effects of backward vertical integration in a model with oligopolistic firms that exert market power upstream and downstream. In contrast to previous literature, we show that a small degree of vertical integration is always procompetitive because efficiency effects dominate foreclosure effects. Moreover, vertical integration even to monopoly can be procompetitive. With regard to market structure, we find, somewhat surprisingly, that vertical integration is more likely to be procompetitive if the industry is more concentrated. Our model thus suggests that antitrust authorities should be particularly wary of vertical integration in relatively competitive industries. We demonstrate that the quantitative welfare effects can be substantial there.

February 6, 2012 | Permalink | Comments (1) | TrackBack (0)