Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, March 30, 2013

INSTITUTIONS AND COMPETITION POLICY, ESRC Centre for Competition Policy Annual Summer Conference, 6-7 June 2013

Posted by D. Daniel Sokol

INSTITUTIONS AND COMPETITION POLICY
ESRC Centre for Competition Policy Annual Summer Conference
6-7 June 2013

Thursday 6 June 2013

10:00 – 10:50

Registration and Tea/Coffee/Pastries

SESSION 1 INSTITUTIONS

Chair: Hussein Kassim, CCP and School of Political, Social & International Studies, UEA

10:50 – 11:00

Welcome: Morten Hviid, Professor of Law, CCP Director & UEA Law School

11:00 – 11:45

Bill Kovacic, Global Competition Professor of Law and Policy & Director of Competition Law Center at George Washington University - 'Institutions and competition policy'

SESSION 2 HISTORY

Chair: Pinar Akman, CCP & UEA Law School

11:45 – 12:30

Laurent Warlouzet, Lecturer in History, Université d'Artois and Marie Curie Fellow, LSE - 'Evolution of European competition policy'

12:30 – 13:15

Stephen Martin, Professor of Economics, Purdue University - 'Institutional context and the goals of competition policy''

13:15 – 14:00

Lunch

SESSION 3 EFFECTIVENESS

Chair: Amelia Fletcher, Professor of Competition Policy, CCP & Norwich Business School

14:00 -14:45

Tomaso Duso, Professor of Empirical Industrial Economics, Düsseldorf Institute for Competition Economics - 'The Evaluation of Competition Policy Enforcement and Institution''

14:45 – 15:30

Bruce Lyons, Professor Economics, CCP and School of Economics, UEA- 'What Determines the Reputation of Competition Agencies?'

15:30 – 16.15

Stephen Davies, Professor Economics, CCP and School of Economics, UEA - 'Deterrence and Non-detection: Evaluating Competition Policy when faced with Inevitable Selection Bias'

16:15-16:30

Tea/Coffee

SESSION 4 NETWORKS

Chair: Catherine Waddams, CCP Founding Director & Norwich Business School

16:30 – 17:15

Imelda Maher, Professor in European Law, University College Dublin - 'Transparency and Networks: Accounting for Governance in the Competition Sphere'

17:15 – 18:00

Hussein Kassim, Professor of Politics, School of Political, Social and International Studies, UEA - ‘Influence and power in international networks: ECN and ICN'

18:15

Coach to restaurant

18:45

Drinks

19:30 – 22:30

Dinner

 

 

Friday 7 June 2013

08:45 – 09:00

Late Registration and Tea/Coffee/Pastries

SESSION 5 REFORM I

Chair: Morten Hviid, Professor of Law, CCP Director & UEA Law School

09:00 – 09:45

David Gerber, Distinguished Professor of Law at Chicago-Kent College of Law - ‘The evolution of and the interaction between EU and national competition policy: the last 15 years'

09:45 – 10:30

Francisco Marcos, Professor of Law, IE Law School, Madrid - ‘Institutional reform in Spain'

10:30 – 10:45

Tea/Coffee

SESSION 6 REFORM II

Chair: Bruce Lyons, CCP Deputy Director & School of Economics, UEA

10:45 – 11:30

Thibaud Verge, Chief Economist, Autorite de la Concurrence, France - ‘French institutional reform and the quality of competition decisions'

11:30 – 12:15

Alex Chisholm, Chief Executive Designate, UK Competition and Markets Authority - ‘The new Competition and Markets Authority (CMA)'

12:15 – 13:15

Lunch

SESSION 7 ENFORCEMENT

Chair: Michael Harker, CCP & UEA Law School

13:15 – 14:00

[Speaker] (tbc)

14:00 – 14:45

Peter Freeman, Chairman, Competition Appeal Tribunal, UK - 'Competition decision-making and judicial control – the role of the specialist tribunal'

14:45 – 15:00

Tea

SESSION 8 EMERGING ECONOMIES

Chair: Andreas Stephan, CCP & UEA Law School

15:00 – 15:45

Hassan Qaqaya, Head, Competition law and Consumer Policies Branch, UNCTAD, Switzerland - ‘Problems and effectiveness of competition policy in emerging economies'

15:45 – 16:30

Sean Ennis, Executive Director, Competition Commission of Mauritius - "When Different Economic Problems Reign, What are the Implications for Competition Law Design and Application?"

16:30 – 16:40

Concluding remarksBruce Lyons, Deputy Director, CCP and School of Economics, UEA, 

16:45

Delegates depart

March 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Balto on how Microsoft Makes An Empty Promise on Patents

Posted by D. Daniel Sokol

David Balto has an op-ed is Newsweek on Microsoft Makes An Empty Promise on Patents.

March 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Preliminary Injunctive Relief – Non-Merger Cases Beware?

Posted by D. Daniel Sokol

David Reichenberg (Wilson Sonsini) asks Preliminary Injunctive Relief – Non-Merger Cases Beware?

ABSTRACT: Preliminary injunctions in antitrust cases are sought most frequently-almost exclusively in fact-in the merger context. Perhaps this is because, to some degree, the fate of such motions is often outcome determinative. Namely, if the Government's PI motion is granted, that often results in the abandonment of a deal, and vice versa. Even though a District Court may be working with a limited record in a highly fact specific inquiry, both parties are willing to accept the associated risks so that a conclusion can be reached sooner.

Some have argued that the evidentiary hurdle the Department of Justice must clear to obtain a PI in a merger case is higher than the Federal Trade Commission's hurdle. In Whole Foods Market, the D.C. Circuit suggested that pursuant to Section 15(b) of the FTC Act, the FTC could seek a PI pursuant to a "more lenient rule" in which "a unique public interest standard . . . rather than the more stringent, traditional equity standard for injunctive relief" is applied. Regardless of whether this is true or not, it seems undisputed that PIs, whether sought by the FTC or DOJ, are an effective tool to address the time sensitivity associated with merger challenges. The cases come out both ways, with unique facts driving each outcome.

Yet, in cases between private parties in the non-merger context, PI motions seem infrequent, and cases in which they are granted appear even rarer. This is despite the fact the same general questions are applied in both contexts: 1. Has the party seeking the injunction shown a substantial likelihood of success on the merits?

2. Is there is a substantial threat of irreparable injury in absence of the injunction?

3. Do the balance of harms favor the party seeking the injunction? and

4. Would entry of the injunction serve the public interest?

The following discussion suggests that a primary factor driving this outcome is
the sacrifice a damage-seeking plaintiff must make in seeking such relief. The
private plaintiff must show that its threatened loss cannot be fully quantified
by a future damages award. This is because "[a] prerequisite to a preliminary
injunction, as to other forms of equitable relief, is a showing that the
plaintiff's remedy at law is inadequate." Thus, to some extent, a PI seeking
plaintiff is forced to admit that at least some of the damage it will sustain
cannot be tied to a monetary award without undue speculation.

 

 

March 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, March 29, 2013

Collective Rights Management, Competition Policy and Cultural Diversity: EU Lawmaking at a Crossroads

Posted by D. Daniel Sokol

Christoph B. Graber, University of Luzern Law School discusses Collective Rights Management, Competition Policy and Cultural Diversity: EU Lawmaking at a Crossroads.

ABSTRACT: In the digital networked environment, user’s expectations of getting easy access to digital content all the time and through a multitude of devices clash with the territorial structure of copyright and the complications of the licensing process. Under these circumstances, systems of collective rights management (CRM) offering a one-stop shop for rights clearance would seem to be an attractive solution to simplify cross-border licensing and save on transaction costs. In the European Union (EU), the Commission has made many attempts over the last decade not only to make collective management organizations (CMOs) work more efficiently but also to bring them from a system of national licenses granted by national monopolies to a system of EU-wide authorizations. The European Commission’s Proposal of 12 July 2012 for a directive on CRM is a confirmation of this policy. However, it is questionable whether these regulatory attempts are compatible with cultural diversity interests. This paper discusses the role of CRM in ensuring cultural diversity and how a purely competition-orientated approach can impinge on this. It does so through analyzing EU case law and the Commission’s Proposal.

March 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Defying Conventional Wisdom: The Case for Private Antitrust Enforcement

Posted by D. Daniel Sokol

Joshua P. Davis, University of San Francisco - School of Law and Robert H. Lande, University of Baltimore - School of Law Defying Conventional Wisdom: The Case for Private Antitrust Enforcement.

ABSTRACT: The conventional wisdom is that private antitrust enforcement lacks any value. Indeed, skepticism of private enforcement has been so great that its critics make contradictory claims. The first major line of criticism is that private enforcement achieves too little — it does not even minimally compensate the actual victims of antitrust violations and does not significantly deter those violations. A second line of criticism contends that private enforcement achieves too much — providing excessive compensation, often to the wrong parties, and producing overdeterrence. This article undertakes the first ever systematic evaluation of these claims. Building upon original empirical work and theoretical inquiry by the authors, and an assessment of the specific factual bases of the criticisms, the article demonstrates that private enforcement provides important and beneficial compensation and deterrence, although the level of both is likely suboptimal. Moreover, the article shows it is highly unlikely that private enforcement produces excessive compensation or deterrence. The article concludes that private enforcement should be strengthened and explores some implications of this conclusion.

March 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Policy Recommendations on the Competition Law Issues of the Re-Use of Public Sector Information (PSI)

Posted by D. Daniel Sokol

Mariateresa Maggiolino, Bocconi University - Department of Law Policy Recommendations on the Competition Law Issues of the Re-Use of Public Sector Information (PSI).

ABSTRACT: Based on a description of the structure and competitive relationships that characterize PSI markets, and in the light of some case studies and legal decisions from several EU Member States, this document addresses what legal rules a new Directive, amending Directive 2003/98/CE on the re-use of Public Sector Information, could introduce in order to both discourage anticompetitive business practices and make them easier to be detected and proved.

March 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 28, 2013

Questions of Legitimacy in the Europeanization of Competition Law Procedures of the EU Member States

Posted by D. Daniel Sokol

Kati Cseres, University of Amsterdam - Amsterdam Center for Law & Economics asks Questions of Legitimacy in the Europeanization of Competition Law Procedures of the EU Member States.

ABSTRACT: As less formal institutions such as the European Competition Network or the International Competition Network are becoming generators of soft law that may harden into national, EU or international law, the importance of legitimacy in agenda-setting and in the development of best practices, rules, and standards increases.

This paper discusses the legitimacy of the harmonization process which takes place in the European Competition Network(ECN) on the basis of Regulation 1/2003, with regard to the administrative procedures of the Member States the NCAs apply when they enforce EU competition rules. This harmonization process is seemingly the result of voluntary harmonization among the Member States but in fact it is being steered and dominated by the EU Commission. This paper will examine the role of the Commission in initiating harmonization of national administrative procedures and institutional settings of the Member States by analyzing the Report on the functioning of Regulation 1/2003 and the Commission Staff Working Paper accompanying the Report on the functioning of Regulation 1/2003 , as well as through the recent work of the European Competition Network’s Working Group on cooperation issues and due process. The paper will look at the centripetal and centrifugal effects Regulation 1/2003 had on the substantive and procedural rules as well as the institutions of the Member States’ competition law. The paper critically assesses the methods of voluntary convergence that is taking place among the Member States and the way the Commission extends harmonization of the administrative procedural rules as well as certain substantive rules in the EU Member States.

March 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Reverse Payments, Perverse Incentives

Posted by D. Daniel Sokol

Murat C. Mungan, Florida State University - College of Law has a paper on Reverse Payments, Perverse Incentives.

ABSTRACT: Issuing and enforcing prescription drug patents requires courts and legislatures to strike a delicate balance. A patent gives drug manufacturers a legal, if temporary, monopoly on sales of a drug; this encourages manufacturers to engage in costly research and development of new medicines. But not all patents issued by the Patent Office are ultimately deemed valid – generic drug manufacturers can infringe the patent, and, when sued, attack its validity in court on a variety of grounds, including obviousness. In recent years, patent holders have begun to settle these suits (which they initiated) by paying the alleged infringer. Not surprisingly, these reverse payment settlements (“RPSs”) have been challenged on antitrust grounds. The federal courts of appeals split over whether this practice is presumptively an illegal restraint of trade, and in December 2012 the Supreme Court agreed to decide the issue, granting a writ of certiorari in FTC v. Watson Pharmaceuticals. In light of the importance of the issue to both drug consumers and manufacturers, it is crucial to understand the economic effects of RPSs. Many courts, including the Second Circuit and the Eleventh Circuit, commentators and scholars have suggested that restricting RPSs would necessarily retard technological progress, by reducing the expected returns of becoming a patentee. In this Article, I show, with the help of a game-theoretical model, that this conclusion is unwarranted. Restricting RPSs has the effect of chilling generic entry when – and only when – the underlying patent is strong, or likely to be held valid and infringed. Therefore, restricting RPSs increases the expected returns of holding a strong patent by eliminating potential payments to generic entrants, while at the same time eliminating the possibility of monopoly profit-splitting between branded and generic manufacturers when the patent is weak. This reward shifting effect implies that restricting the use of RPSs is likely to foster more revolutionary innovations, which lead to stronger patents, while lowering R&D towards relatively obvious inventions, which lead to weaker patents. This reward shifting effect of restrictive rules on RPSs, to the best of my knowledge, has gone unnoticed in the past, and it should play an important role in the Supreme Court’s cost benefit analysis.

March 28, 2013 | Permalink | Comments (0) | TrackBack (0)

European Competition Law Annual 2010, Merger Control in European and Global Perspective

Posted by D. Daniel Sokol

European Competition Law Annual 2010, Merger Control in European and Global Perspective

BOOK ABSTRACT:

European Competition Law Annual - no. 1
European Competition Law Annual 2010
2010 Volume
Merger Control in European and Global Perspective
Edited by Philip Lowe and Mel Marquis

Every year, top-level market regulators, academics and legal and economic practitioners contribute to the Annual Competition Workshop organised at the European University Institute in Florence. The Co-Directors of the Workshop are Philip Lowe, Mel Marquis and Giorgio Monti.

Workshop participants address and critically analyse a particular set of topical issues in the field of competition law and policy. The proceedings are published in Hart's European Competition Law Annual series.

This is the fifteenth in the ECLA series. It encompasses numerous chapters that examine the field of merger control from a variety of perspectives. In these chapters the contributors discuss legal and economic issues of substantive analysis, procedure, comity and best practices, as well as matters relating to the litigation of merger cases, particularly before the European Courts. The discussion also benefits from the perspectives of policy makers and experts from Canada, China, Japan, Korea, the United States and other jurisdictions and regions.

Authors contributing to this book include:

John Boyce, Calvin Goldman, Andreas Mundt
Rachel Brandenburger, Klaus Gugler, Lars-Hendrik Roller
Jochen Burrichter, Barry Hawk, Tadashi Shiraishi
Maher Dabbah, Scott Hemphill, Irwin Stelzer
Thomas Deisenhofer, Seonghoon Jeon, James Venit
Gotz Drauz, William Kovacic,  Sven Volcker
Kirsten Edwards, Mel Marquis, Vanessa Yanhua Zhang
Adam Fanaki, Abel Mateus, Xinzhu Zhang



Philip Lowe is Director General of DG Energy of the European Commission. He was Director-General of DG Competition 2002 to 2010.
Mel Marquis is Part-time Professor of Law at the European University Institute and Professore a contratto at the University of Verona. He is an editor on the board of Mercato Concorrenza Regole and he has practised as an attorney in the United States and Belgium.

March 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Injunctive Relief and the Noerr-Pennington Doctrine: The Search for Clarity on a Muddied Pitch

Posted by D. Daniel Sokol

Thomas Dillickrath & David Emanuelson (Baker Botts) describe Injunctive Relief and the Noerr-Pennington Doctrine: The Search for Clarity on a Muddied Pitch.

ABSTRACT: The right to seek injunctive relief is one of the bulwarks of U.S. law. The right to petition the government to redress grievances is fundamental to the legal system, and is expressly protected by the First Amendment to the U.S. Constitution (Congress shall make no law restricting "the right of the people to petition the Government for a redress of grievances."). However, the ability to seek injunctive relief has, at times, come into conflict with the competition laws (both the Sherman and Clayton Acts), since it may serve to restrict competition or otherwise produce what may be seen as anticompetitive results.

The courts have attempted to deal with the tension between the antitrust laws and the right to petition government entities through the Noerr-Pennington doctrine. Noerr-Pennington provides immunity from liability to an antitrust defendant arising from individual or concerted conduct intended to legitimately seek redress for grievances that may have the effect of causing competitive harm. The literature discussing the contours of this doctrine would defoliate a large forest (or at least a terabyte's worth of virtual forest). But recently, the tension between the right to seek injunctive relief and potential antitrust liability has arisen in a new and intriguing context at the intersection of antitrust and intellectual property law. Both the U.S. Federal Trade Commission and several judicial forums have considered whether Noerr-Pennington immunity applies in the context of an entity holding Standard Essential Patents subject to a commitment to license on fair, reasonable, and non-discriminatory terms seeking an injunction against an infringing entity. As discussed below, the answer is unclear, and revolves around interpretation of the nature of a FRAND commitment and, perhaps more interestingly, the fundamental underpinnings of Noerr-Pennington immunity. While issues related to injunctive relief against an infringer of SEPs have reared their head in several jurisdictions, we suggest that the interplay between the Sherman and Clayton Acts and the U.S. Constitution may complicate the issue in a unique manner that increases uncertainty, and may ultimately end up making its way through the Courts of Appeals and even the Supreme Court.

In the discussion below, we begin with a summary of the continuing debate over the basis of Noerr-Pennington immunity. We then provide some context for those not familiar with the issues surrounding FRAND-encumbered SEPs (this issue was the subject, for example, of a recent FTC/DOJ workshop, held on December 10, 2012). With that background in mind, we assess the most recent developments at the intersection of these issues, and offer some tentative conclusions on what may happen in the future.

March 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition and Stability in European Banking: A Regional Analysis

Posted by D. Daniel Sokol

Hong Liu, University of Glasgow - Glasgow Business School, Philip Molyneux, Bangor University, Bangor Business School and John O.S. Wilson, University of St. Andrews explore Competition and Stability in European Banking: A Regional Analysis.

ABSTRACT: National measures of competition and macroeconomic activity have traditionally been used to examine performance and risk features across banks. Such measures may be inappropriate in cases where banks operate with a regional focus. In this paper we construct measures of competition and economic activity using regional data to examine bank stability in 10 European countries over the period 2000–8. The results suggest that an inverted U‐shaped relationship exists between regional bank competition and stability. Regional economic conditions are also found to play a significant role in determining the stability of European banks.

March 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 27, 2013

Supreme Court decision is out in Comcast case

Posted by D. Daniel Sokol

The Supreme Court has ruled in the Comcast v. Behrend antitrust case in favor of Comcast. You can find the decision here.

March 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Hospital Competition with Soft Budgets

Posted by D. Daniel Sokol

Kurt Richard Brekke, Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Luigi Siciliani,University of York (UK) and Odd Rune Straume, University of Minho - Economic Policies Research Unit (NIPE) analyze Hospital Competition with Soft Budgets.

ABSTRACT: We study the incentives for hospitals to provide quality and expend cost-reducing effoort when their budgets are soft, i.e., the payer may cover deficits or confiscate surpluses. The basic set up is a Hotelling model with two hospitals that differ in location and face demand uncertainty, where the hospitals run deficits (surpluses) in the high (low) demand state. Softer budgets reduce cost efficiency, while the effect on quality is ambiguous. For given cost efficiency, softer budgets increase quality since parts of the expenditures may be covered by the payer. However, softer budgets reduce cost-reducing effort and the profit margin, which in turn weakens quality incentives. We also find that profit confiscation reduces quality and cost-reducing effort. First best is achieved by a strict no-bailout and no-profit-confiscation policy when the regulated price is optimally set. However, for suboptimal prices a more lenient bailout policy can be welfare improving. When we allow for heterogeneity in costs and qualities, we also show that a softer budget can raise quality for high-cost patients (and therefore reduce 'skimping' on such patients).

March 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Antitrust, Legal Standards and Investment

Posted by D. Daniel Sokol

Giovanni Immordino Universita degli Studi di Salerno - Centre for Studies in Economics and Finance (CSEF) and Michele Polo, Bocconi University - Department of Economics have written on Antitrust, Legal Standards and Investment.

ABSTRACT: We study the interaction of a firm that invests in research and, if successful, undertakes a practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In this setting deterrence on actions interacts with deterrence on research. When the practice increases expected welfare the enforcer commits not to intervene by choosing a more rigid per-se legality rule to boost investment, moving to a more flexible discriminating rule combined with type-I accuracy for higher probabilities of social harm. Patent and antitrust policies act as substitutes in our setting; additional room for per-se (illegality) rules emerges when fines are bounded. Our results on optimal legal standards extend from the case of (uncertain) investment in research to the case of (deterministic) investment in physical assets.

March 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Should the Internet Exempt the Media Sector from the Antitrust Laws?

Posted by D. Daniel Sokol

Thomas Jeffrey Horton, University of South Dakota, School of Law and Robert H. Lande, University of Baltimore - School of Law ask Should the Internet Exempt the Media Sector from the Antitrust Laws?

ABSTRACT: This article examines whether the "old media" and the "new media", including the Internet, should be considered to be within the same relevant market for antitrust purposes. To do this the article first demonstrates that proper antitrust consideration of the role of non-price competition necessitates that “news” and “journalism” be analyzed in two distinct ways. First, every part of the operations of a newspaper (or other type of media source), including its investigative reporting and local coverage, should be assessed separately. We present empirical evidence collected for this study which demonstrates that the old media continues to win the vast majority of journalism awards. This and other evidence shows that the quality and variety of a number of specific old media functions are often so much better they should be considered distinct markets for antitrust purposes. Second, the evidence shows that the totality of what newspapers (or other media sources) do should be analyzed as a whole. This is because newspapers constitute a valuable form of “one stop shopping” for a diverse array of bundled journalism.

For both reasons newspapers often should continue to constitute separate markets for antitrust purposes. If antitrust decision makers accept arguments that the Internet should routinely be included within the same market as the traditional media, however, the media sector would become virtually exempt from the antitrust laws. This would be a prescription for disaster.

March 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Trade is Good for Competition, but Competition is Great for Trade

Posted by D. Daniel Sokol

Seth Sacher (FTC) argues Trade is Good for Competition, but Competition is Great for Trade.

ABSTRACT: It may seem obvious that good trade policy can promote competition. That is, by opening up a domestic economy to increased trade, additional competitive pressures may be placed on domestic producers, thereby decreasing domestic market power and improving industry performance in the form of lower prices, production that is more efficient and more innovation.

On the other hand, although it may appear less obvious, good competition policy can be a means for fostering good trade policies. A competitive domestic economy, as enhanced by appropriate competition policies, can be a good defense against protectionist sentiments. In other words, robust competition enhances domestic prosperity and international competitiveness, which are conducive to political conditions supportive (or at least less obstructive) of freer trade. Indeed, this note argues that the benefits of good trade policy for good competition policy may be overemphasized, while the benefits of good competition policy for good trade policy may not be fully appreciated.

March 27, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 26, 2013

Quantification of Antitrust Damages

Posted by D. Daniel Sokol

Frank P. Maier-Rigaud, IESEG School of Management, Department of Economics and Quantitative Methods; Lille - Economics & Management (LEM) - Centre National de la Recherche Scientifique; Organisation for Economic Co-operation and Development (OECD) - Competition Division; European Commission, DG Competition; Laboratory for Experimental Economics, University of Bonn; Max Planck Institute for Research on Collective Goods and Ulrich Schwalbe, University of Hohenheim have an interesting new paper on Quantification of Antitrust Damages. 

Recommended

ABSTRACT: If a damage claim is presented in court and compensation of harm suffered is sought, quantifying the level of damage suffered becomes necessary. An economically founded quantification of the damages caused by competition law infringements has increased in importance in particular through the advancement of private competition law damage actions in the EU. Damage claims are increasingly brought, in particular as follow-on claims, and it is very likely that this trend will continue in the future. If a damage claim is presented in court and compensation of the harm suffered is sought, quantifying the level of the damage suffered becomes necessary. On the basis of these developments several theoretical and applied studies investigating the fundamental economic principles and empirical-econometric methods to determine damages have been presented in the last few years with the aim to provide guidance to the courts on how the quantification of damages should be approached and what aspects have to be taken into consideration.

Estimates of the magnitude of damages caused by competition law violations show that they are quite substantial. The empirical literature concerned with estimating aggregate damages has so far, however, exclusively focused on cartel cases. Empirically estimating the total damages caused by all cartels is, however, conceptually very difficult, as the total number of cartels is unknown and only discovered cartels can be analysed. The damages caused by European and national cartels have therefore been estimated using simplifying assumptions. Presuming a certain detection rate it is possible to estimate the number of existing cartels. By further assuming a relationship between fines and damages caused, the harm inflicted by cartels in Europe was estimated. The estimation led to a lower bound of the yearly damages of approximately 16.8 billion €. Measured as a percentage of European GDP, total cartel damages are 0.15%. An upper bound for the yearly cartel induced damages lies at 261.22 billion €. This corresponds to 2.3% of EU GDP. These numbers show that cartel induced damages are quite substantial.

In this paper, the main conceptual and methodological aspects that are of relevance for an economically sound quantification of damages in the context of competition law infringements are presented. The paper is structured as follows. Section two discusses the conceptual foundations for the quantification of damages. First, the types of damages caused by cartels and the economic actors affected by cartel activities are characterized in detail. A distinction is made between damages for the overall economy in the form of inefficiencies or welfare losses and the individual damages, that also include redistribution from the consumers to the cartel, for instance due to abnormally high prices, and that are therefore typically larger than the economic welfare losses. Second, the repercussions of cartel induced price increases on the value chain as well on neighboring markets are spelled out. Third, damages caused by abusive behavior of dominant firms and the affected actors are described.

Section 3 deals with the methods employed in the quantification of damages in cartel as well as abuse of dominance cases. To estimate the damage, it is necessary to compare the factual situation with a hypothetical counterfactual scenario. The problem of choosing the appropriate counterfactual scenario is discussed as this has a crucial impact on the damage to be calculated. Also, the available economic and econometric methods for the calculation of damages, giving prominence in particular to comparator-based methods and approaches (yardstick or benchmarking) either relying on actual or on simulated, artificial markets are introduced. The quantification of damages in cases of abusive behavior is illustrated by an example of an exclusionary abuse. In addition, further aspects of damage quantification as e.g. compounding and discounting damages and the consideration of after-effects are discussed. Also, the precision of the available statistical methods and problems of causality and the remoteness of damages with respect to the infringement are discussed. The final section concludes with a summary of the main results and an outlook.

March 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Global Antitrust: Does It Have Limits?

Posted by D. Daniel Sokol

Tad Lipsky (Latham) asks Global Antitrust: Does It Have Limits?

ABSTRACT: Before 1985 there was only one mandatory suspensive premerger notification scheme of general applicability in the world—Hart-Scott-Rodino review in the United States ; now there are scores.

Similarly, antitrust challenges to monopolization were almost exclusively American until at least the early 1970s (about the time the European Commission first squared off against IBM Corp.), but“abuse of dominance” claims are now increasingly common not only in Europe but also in Australia, Canada, Japan, Mexico, South Africa, South Korea, and elsewhere, and they are a realistic threat to companies operating in almost any economically significant jurisdiction. Finally, aggressive prosecution of price fixing and analogous covert cartel behavior—long a hallmark of U.S. antitrust enforcement—now appears in waves of coordinated “dawn raids” upon suspected wrongdoers in Brazil, Canada, the European Union and its Member States, Japan, South Korea, Switzerland, and a steadily increasing number of other jurisdictions in addition to the United States. This spectacular global expansion of antitrust enforcement has never received much commentary outside the confines of the antitrust community—the antitrust bar, enforcement agency officials, the economists who assist in advocacy on behalf of parties engaged in antitrust disputes, as well as academics interested in antitrust issues and policies. Major antitrust matters do attain some higher visibility in the financial press and, more rarely, even in the mass media. Examples include EU and U.S. investigations of Google, the EU’s initial objections to the acquisition of McDonnell Douglas by Boeing (later resolved), and the clear conflict between the U.S. and EU over General Electric’s proposed acquisition of Honeywell International (which the parties ultimately abandoned). The main U.S. case against Microsoft was followed closely in the popular media, although years of drama ended with only a mild behavioral consent decree. A recent EU investigation of alleged abuse of dominance by Russian energy utility Gazprom led to front-page global coverage of powerful figures on both sides of the underlying dispute (over natural-gas prices)—Russian President Putin and EU Vice President and Competition Commissioner Joaquin Almunia.

On the whole, however, antitrust’s transition from an American sport to a global one has occurred well beneath the threshold of public attention and without media-worthy controversy.

March 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Bargaining Over Loyalty

Posted by D. Daniel Sokol

Dan Crane (Michigan) describes Bargaining Over Loyalty.

ABSTRACT: Contracts between suppliers and customers frequently contain provisions rewarding the customer for exhibiting loyalty to the seller. For example, suppliers may offer customers preferential pricing for buying a specified percentage of their requirements from the supplier or buying minimum numbers of products across multiple product lines. Such loyalty-inducing contracts have come under attack on antitrust grounds because of their potential to foreclose competitors or soften competition by enabling tacit collusion among suppliers. This article defends loyalty inducement as a commercial practice. Although it can be anticompetitive under some circumstances, rewarding loyal customers is usually procompetitive and price-reducing. The two most severe attacks on loyalty discounting—that loyalty discounts are often disguised disloyalty penalties and that loyalty clauses soften competition—are unlikely to hold as a general matter. Nor are arguments that customers only accede to loyalty inducements because of collective action problems generally true. Dominant buyers who face few collective action problems frequently use loyalty commitments to leverage their buying power and obtain lower prices.

March 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Interim Relief Before the EU Courts: Three Great Fundamentals—and Two Fundamentals That Need a Rethink

Posted by D. Daniel Sokol

Eric Barbier de La Serre, Jones Day discusses Interim Relief Before the EU Courts: Three Great Fundamentals—and Two Fundamentals That Need a Rethink.

ABSTRACT: Before the EU Courts, nearly all applications for interim relief-including those made in major competition law cases-are heard by a single Judge, who is either the President or his delegate. While this rule is also applied in many Member States, the audacity of vesting a single person with the power to suspend decisions adopted by the full College of the European Commission, sometimes after years of complex proceedings, is noteworthy. If a suspension is not sufficient to ensure effective judicial protection, the Presidents can even address direct orders to the Commission.

In almost every case, the Presidents decide on their own whether they must strike quick and hard or, on the contrary, hold their horses. Clearly this is not an easy task, which probably explains why the case law on interim relief displays a recurring tension between audacity and caution.

 

On the one hand, the Presidents sometimes do not shy away from using their impressive powers even when this means that they must make findings that are entirely at odds with the decision of the European Commission. One of the best examples of such audacity is the IMS Health case, in which the President of the (then) Court of First Instance ("CFI") found that it was urgent to suspend a Commission decision ordering interim measures, i.e., measures which by definition, in the Commission's view, needed to be applied urgently.

On the other hand, in many cases the Presidents appear to have been extremely cautious, in particular when they refused a suspension of the challenged decision that would have provisionally preserved the applicant's interests without causing any significant harm to the public interest or to third parties.

There are more orders reflecting the second trend-caution-than ones showing audacity. This unbalance has created some frustration among private litigants. The common wisdom in some legal circles has even become that "before the EU Courts one never gets interim relief."

In our view this statement is unfair and unduly pessimistic. It is clearly very difficult-in fact exceptional-to obtain interim relief before the EU Courts. This is true in general and in competition law cases in particular, as from mid-1999 to January 2013 the President of the General Court dismissed close to 80 percent of the applications for interim relief made in competition law cases. Yet, litigants should not despair. After all interim relief was granted in 20 percent of these cases, which is not insignificant. In addition, and above all, there are several aspects of the law on interim relief-at least three fundamentals-that make it a wise, open, and powerful piece of EU procedural law (II).

That being said, it is submitted that effective judicial protection would be significantly enhanced-without causing excessive harm to the public interest-if two problematic fundamentals of the case law were reconsidered and fixed (III). As a matter of law and practice, there may not be so much that needs to be changed to ensure more effective, and balanced, judicial protection.

March 26, 2013 | Permalink | Comments (0) | TrackBack (0)