Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, April 5, 2013

Evidence-Based Antitrust Enforcement in the Technology Sector

Posted by D. Daniel Sokol

Josh Wright (FTC) argues for Evidence-Based Antitrust Enforcement in the Technology Sector.

ABSTRACT: This article is based on a presentation of remarks presented on February 23, 2013 at the inauguration of the ICT Competition Laboratory, the Competition Law Center, Beijing, China. This represents my first public statements as a Commissioner and generally concerns antitrust in high-tech markets. Specifically, I would like to discuss the concept of "evidence-based" antitrust enforcement, the importance of its application to the technology sector, and some recent experiences involving the Federal Trade Commission's enforcement efforts in high-tech markets.

April 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Conducting Empirical Legal Scholarship Workshop, May 22-24, 2013

Posted by D. Daniel Sokol

Conducting Empirical Legal Scholarship Workshop, May 22-24, 2013 On Wednesday, May 22, 2013 through Friday, May 24, 2013, Lee Epstein and Andrew Martin will be teaching their annual Conducting Empirical Legal Scholarship workshop. This workshop will be held in Los Angeles, and is co-sponsored by USC Gould School of Law and Washington University Law.

There is more information available about the workshop here: http://law.usc.edu/EmpiricalWorkshop

The Conducting Empirical Legal Scholarship workshop is for law school and social science faculty interested in learning about empirical research. The instructors provide the formal training necessary to design, conduct, and assess empirical studies, and to use statistical software (Stata) to analyze and manage data. Participants need no background or knowledge of statistics to enroll in the workshop. Topics to be covered include research design, sampling, measurement, descriptive statistics, inferential statistics, and linear regression. Please visit the website for all logistical details.

April 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Standard Setting Organizations Can Help Solve the Standard Essential Patents Licensing Problem

Posted by D. Daniel Sokol

Kai-Uwe Kuhn (DG Comp), Fiona Scott Morton (DOJ), & Howard Shelanski (FTC) discuss how Standard Setting Organizations Can Help Solve the Standard Essential Patents Licensing Problem.

ABSTRACT: Intellectual property rights were established in both the United States and Europe to protect inventors, to stimulate innovation, and to benefit consumers. We are concerned that specific circumstances affecting some industries like the information and communication technology ("ICT") sector may limit the effectiveness of intellectual property rights in achieving these goals. In particular, in the case of standard essential patents ("SEPs"), ambiguities in the definition of licensing restrictions as well as weaknesses in the process of intellectual property enforcement appear to contribute to what economists call "holdup" problems that may threaten innovation incentives and harm consumers.

While these problems are generally difficult to resolve, intellectual property policies of standard setting organizations ("SSOs") could play a special role by setting up intellectual property rights ("IPR") policies that would limit hold-up more effectively. In this article we propose reforms to the current intellectual property policies that we believe would greatly improve efficiency in patent licensing.

April 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Price Competition Under Subsidization: Applications to Medicare Reform

Posted by D. Daniel Sokol

Awi Federgruen, Columbia Business School - Decision Risk and Operations and Lijian Lu, Columbia University - Columbia Business School discuss Price Competition Under Subsidization: Applications to Medicare Reform.

ABSTRACT: We consider price competition models for oligopolistic markets, in which a significant part of the product or service price is paid by a third party, as a subsidy. The consumer is, therefore, impacted by the net price, defined as the difference between the nominal price and the subsidy, while the firms earn the full nominal price, partially paid by the subsidizing third party and the remainder by the consumer. When choosing among the various competing options, the consumer trades off the net price paid with various other product or service attributes, as in standard price competition models. The subsidy may be exogenously specified and pre-announced to the competing firms. Alternatively, it may be endogenously determined, as a function of the set of nominal prices selected by the competing firms, for example the lowest or the second lowest price.

We first characterize the equilibrium behavior under a general subsidy scheme of the above type; this in a base model, where we assume that the consumer choice model is of the general MultiNomialLogit (MNL) type. We also derive comparison results for the price equilibria that arise under alternative subsidy schemes. We proceed to apply our results to the Medicare insurance market, both in terms of its existing structure, as well as in terms of various proposals to redesign the program, in particular the Wyden-Ryan plan. We show that implementation of the latter plan in 2010 would have reduced the capitation rates, on average by 18.5% and enabled savings of 16.2% in the governments' costs. These numbers are significantly larger than traditional estimates obtained under the assumption that the plans' premia and market shares would not be affected by the new capitation rate scheme. For beneficiaries continuing to opt for the traditional Medicare plan, the average monthly cost is roughly $64. Finally, we discuss extension of our model to Mixed MultiNominal Logit demand systems and prospect theoretical price competition models.

April 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 4, 2013

The Use and Threat of Injunctions in the Rand Context

Posted by D. Daniel Sokol

James D. Ratliff,Compass Lexecon and Daniel L. Rubinfeld, University of California at Berkeley - School of Law, NYU Law School analyze The Use and Threat of Injunctions in the Rand Context.

ABSTRACT: We model a dispute between the owner of a standard-essential patent and implementer of the standard over which the patentee's license offer is reasonable and nondiscriminatory (RAND). An injunction is not rule out, yet that threat does not lead to holdup. A key element is that the implementer always has as a last-resortthe ability to accept license terms that are either certified by a court as RAND or mutually agreed upon by the patentee and implementer.

April 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition Law and Personal Data: Preliminary Thoughts on a Complex Issue

Posted by D. Daniel Sokol

Damien Geradin, Tilburg University - Tilburg Law and Economics Center (TILEC); University of Michigan Law School; Covington & Burling and Monika Kuschewsky, Covington & Burling offer Competition Law and Personal Data: Preliminary Thoughts on a Complex Issue.

ABSTRACT: With the advent of the Internet, and the development of new business models, companies increasingly hold large amounts of personal data about their employees and their customers. While there is a plethora of literature on the data privacy challenges created by the Internet and these new business models, this paper explores the limits placed by EU competition law on the acquisition and processing of personal data. There is a dearth of literature, and no real precedent, addressing this question. Hence, this paper is a first attempt to address the interface between personal data and competition law. We hope that it will trigger further analysis and debate on what will increasingly become an important policy question.

It is common knowledge that a fast growing number of companies, such as, for instance, telecommunications operators, banks, credit card companies, large retailers, Internet service providers, search engine providers, and social networks, collect large amounts of personal data. Other companies specialise in the processing and selling of these data.

In particular, personal data are at the core of the Internet. Companies, such as Google or Facebook, have developed services and business models whose success heavily rely on the acquisition and treatment of personal data. Such data allow these companies to improve the quality of their services and make them more attractive to users. They also enable them to monetise their services through targeted (also referred to as “behavioural”) advertising. The volume, but also the quality of the personal data acquired is thus key competitive differentiators in the Internet economy. Online service users certainly benefit from the ability of their providers to use personal data they may have acquired in terms of better services (more relevant search results, etc.) and more targeted advertising. The acquisition of large volumes of data by “first mover” providers may, however, raise barriers to entry and thus deprive users from the benefits of competition. There is also a risk that online service providers may seek to prevent other companies from acquiring the data they need to compete, hence perpetuating their lead.

Against this background, this paper is divided into four sections. Section II further elaborates on the critical importance of the acquisition of personal data for most key Internet players (which are referred to hereafter as “online service providers”). Section III analyses the extent to which certain practices aiming at collecting data or at depriving access to such data to competitors can be anticompetitive and constitute a breach of EU competition rules. It also analyses whether EU competition law could be used to force dominant companies to share their data with competitors so as to stimulate competition on one or several markets. Finally, Section IV concludes.

April 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Recent Developments in EU Merger Control

Posted by D. Daniel Sokol

Gotz Drauz, Paul McGeown and Benjamin Record (all Wilson Sonsini) describe Recent Developments in EU Merger Control.

ABSTRACT: During the period examined, the Commission declined to apply the efficiency defence in a case where, as a result, the deal was prohibited (Deusche Borse). Originating from the US, the "Gross Upward Pricing Pressure Index" analysis (GUPPI) was conducted for the first time and commitments were requested from the parties to secure approval (H3G Austrian telecoms case). In several technology cases, deals were cleared without commitments after a detailed analysis of the merging parties’ ability and incentives to pursue a profitable. foreclosure strategy The legislative battle ground in 2013 is likely to be the possible extension.

April 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Abuses of Dominance in Developing Countries: A View from the South, with an Eye on Telecoms

Posted by D. Daniel Sokol

Simon Roberts, University of Johannesburg and Javier Tapia, Universidad de Chile - Centre for Regulation and Competition address Abuses of Dominance in Developing Countries: A View from the South, with an Eye on Telecoms.

ABSTRACT: Developing countries in the 'south' typically have a greater prevalence of entrenched dominant firms than economies of the large open economies of the north. This is due to various factors including scale and network economies relative to the size of the local markets, compounded by transport and logistics obstacles, the on-going influence of well-connected business groups and families, as well as the legacy of state support. The chapter takes Chile and South Africa as comparative case studies of how competition authorities have faced up to the challenges of assessing and addressing possible abuses of dominance. These countries have broadly similar economies in terms of the level of development, the importance of resource-based industries, and their relative isolation from other industrial countries. They are also similar in their competition institutions, with investigative bodies and independent specialist tribunals. Notwithstanding differences in the legal provisions, each has sought to apply effects-based tests to firm conduct – although with differences that have impacted on the outcomes. The chapter critically reflects on the record, against local expectations and the international debates, and provides concrete examples of the use of completion law in the telecommunication markets.

April 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Developments in Anti-Monopoly Agreement Enforcement and Suggestions Regarding Compliance Programs in China

Posted by D. Daniel Sokol

John Yong Ren & Jet Zhisong Deng (T&D Associates) discuss Developments in Anti-Monopoly Agreement Enforcement and Suggestions Regarding Compliance Programs in China.

ABSTRACT: High profile cases, such as the LCD Panel Case and the Maotai Case announced in January 2013, have cast more limelight on China's anti-monopoly enforcement. China's Anti-Monopoly Law is entering its fifth year since taking effect on August 1, 2008. While regulations, rules, and actual cases are still in development, it is expected that these cases and others will further shape antitrust law not only in China, but also in antitrust practices around the world. Given this activity and importance, China's growing anti-monopoly enforcement poses a serious challenge to companies doing business in China, i.e., how to design an efficient antitrust compliance program that minimizes the legal risks?

April 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 3, 2013

Cartel Enforcement Comes of Age in China—The National Development and Reform Commission's LCD Panels Decision

Posted by D. Daniel Sokol

Philip Monaghan (Mayer Brown) discusses Cartel Enforcement Comes of Age in China—The National Development and Reform Commission's LCD Panels Decision.

ABSTRACT: On January 4, 2013, China's National Development and Reform Commission ("NDRC") published a decision under the Price Law imposing financial penalties of RMB 353 million (approximately U.S.$57 million) on six Korean and Taiwanese manufacturers of LCD panels-Samsung Electronics, LG Display, Chimei, AU Optronics, Chunghwa Picture Tubes, and HannStar Display. The watershed ruling-the first extraterritorial application of Chinese cartel law with financial penalties almost 57 times greater than penalties previously imposed by a Chinese antitrust authority-signals a new and aggressive turn in behavioral antitrust enforcement for NDRC. I consider below the context for and implications of this revolution in Chinese cartel law practice.

April 3, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition, Equity and Quality in Healthcare

Posted by D. Daniel Sokol

Maija Halonen-Akatwijuka, University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) and Carol Propper, University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) address Competition, Equity and Quality in Healthcare.

ABSTRACT: In this paper we focus on the implications of consumer heterogeneity for whether competition will improve outcomes in health care markets. We show that competition generally favours the majority group as higher quality for the majority is an effective way to increase the quality signal and attract patients. A regulator who is concerned about equity may protect the minority group by not introducing competition. Alternatively, if the minority group is favoured by the providers under monopoly, competition can improve equity by forcing the providers to increase quality for the majority group.

April 3, 2013 | Permalink | Comments (0) | TrackBack (0)

Tacit Patent Pooling

Posted by D. Daniel Sokol

Erik Hovenkamp (Northwestern ) discusses Tacit Patent Pooling.

ABSTRACT: We define tacit patent pooling as a non-contractual arrangement in which producers freely utilize one another's patented technologies without charging license fees or filing infringement claims. This differs greatly from the standard notion of (explicit) patent pooling considered in the literature, which typically involves patent holders who set license fees collectively in order to profit from the elimination of double marginalization. In particular, explicit pooling is intended to increase licensing revenues, while tacit pooling is intended to avoid licensing altogether. Tacit pooling is commonly profitable for small firms in innovative industries plagued by patent thicket problems, such as small software publishers.

We show that tacit pooling may be a profitable cooperation strategy in a prisoner's dilemma game whose equilibrium involves aggressive cross-licensing in the shadow of litigation, as well as costly "disguising" of potential infringements. This practice is always socially desirable, as it reduces transaction and litigation costs, and it promotes idea sharing among inventors. We analyze how various phenomena may affect the scope and stability of tacit pooling. Large patent acquisitions may in principle be welfare enhancing if they serve to facilitate tacit pooling, but these efficiencies can be offset if firms regularly invest heavily in secondhand patents. The availability of injunctive relief as an infringement remedy will tend to forestall tacit pooling arrangements in concentrated markets, as its value as an exclusionary device will commonly outweigh the gains from tacit pooling, leading firms to prefer aggressive litigation strategies. The desire to facilitate tacit pooling may incentivize acquisition of patents that are ultimately never asserted, helping to explain the "patent paradox," which questions why many firms invest heavily in patents that ostensibly yield negative returns.

April 3, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition Law in Japan

Posted by D. Daniel Sokol

Simon Vande Walle, University of Tokyo - Graduate Schools for Law and Politics and Tadashi Shiraishi, University of Tokyo - Graduate Schools for Law and Politics discuss Competition Law in Japan.

ABSTRACT: This article gives an overview of competition law in Japan, with a particular focus on recent case law and developments. We have attempted to touch upon most major aspects of competition law in Japan, including its historical background, substantive rules, and enforcement mechanisms. We also discuss the application of Japanese competition law to cross-border cases. Finally, we reflect on the role and awareness of competition law in Japan and conclude.

April 3, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 2, 2013

Antitrust Settlements: The Culture of Consent

Posted by D. Daniel Sokol

Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia, New York University School of Law and Joshua D. Wright, George Mason University School of Law, FTC have posted Antitrust Settlements: The Culture of Consent.

ABSTRACT: The beginning of a shift toward a more regulatory and less litigation-oriented regime of antitrust enforcement was observable by the mid-1990s, if not earlier. The transition toward this more bureaucratic approach by antitrust enforcement agencies is the subject of our analysis. Consent decrees create potential for an enforcement agency to extract from parties under investigation commitments well beyond what the agency could obtain in litigation — commitments that may impair rather than improve competition and thereby harm consumers. The consequences of such consent decrees, that is, are borne not only by the parties that are subject to them, but also by consumers and by non-parties who glean the agency’s enforcement position from the terms of those decrees. Moreover, consent decrees signal to foreign competition authorities that such commitments are appropriate and, consequently, the FTC and the Division lose the ability they might otherwise have to convince other agencies to minimize their own departures from the appropriate standard. We proffer that the culture of consent at antitrust agencies both in the United States and abroad has had an untoward effect upon the agencies’ selection of cases to bring and, more certainly, upon the remedies the agencies obtain in settlement agreements.

April 2, 2013 | Permalink | Comments (0) | TrackBack (0)

A Survey of Evidence Leading to Second Requests at the FTC

Posted by D. Daniel Sokol

Darren S. Tucker, Federal Trade Commision has a very interesting paper on A Survey of Evidence Leading to Second Requests at the FTC. Highly recommended.

ABSTRACT: This study examines the theories of harm and types of evidence associated with in-depth merger investigations at the FTC during a recent four-year period and, based on this examination, offers practical guidance regarding the factors that appear to be most relevant at the initial phase of an FTC merger investigation. In addition, the study examines whether and to what extent the FTC’s approach to the Second Request decision changed subsequent to the release of the 2010 Merger Guidelines. The FTC’s assessment of defenses frequently asserted by merging parties and the average length of time to conduct investigations are also presented.

This study is based on information extracted from non-public memoranda written by agency staff recommending the issuance of Second Requests. Results are provided by industry where possible.

By providing data on the FTC’s initial-phase merger enforcement decisions, this study may help practitioners focus their arguments on topics likely to be of interest to career staff at the FTC and avoid emphasizing topics that, although cited in the Merger Guidelines, receive little attention in FTC memoranda discussing whether to issue a Second Request. These results, when viewed in conjunction with prior studies, may also offer insight on how the importance of certain forms of evidence varies at different stages of an investigation.

Please note that notwithstanding the formatting of the article, it has not yet been finalized and the current page numbers do not represent the final page numbers. The final article will appear in Volume 78, Issue 3 of the Antitrust Law Journal.

April 2, 2013 | Permalink | Comments (0) | TrackBack (0)

Measuring Unilateral Effects in Partial Acquisitions

Posted by D. Daniel Sokol

Duarte Brito, New University of Lisbon, Ricardo Ribeiro, Universidade do Porto - Faculdade de Economia (FEP) and Helder Vasconcelos, Universidade do Porto - Faculdade de Economia (FEP) are Measuring Unilateral Effects in Partial Acquisitions.

ABSTRACT: Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose an empirical structural methodology to examine quantitatively the unilateral impact of partial acquisitions involving pure …financial interests and/or effective corporate control on prices, market shares, …firm profi…ts and consumer welfare. The proposed methodology can deal with differentiated products industries, with both direct and indirect partial ownership interests and nests full mergers (100% fi…nancial and control acquisitions) as a special case. We provide an empirical application to several acquisitions in the wet shaving industry.

April 2, 2013 | Permalink | Comments (0) | TrackBack (0)

Deterring Financial Crime—Reconciling and Improving Upon the Diverging Approaches of U.S. Antitrust and Financial Regulation

Posted by D. Daniel Sokol

Gordon Schnell (Constantine Cannon) provides thoughts on Deterring Financial Crime—Reconciling and Improving Upon the Diverging Approaches of U.S. Antitrust and Financial Regulation.

ABSTRACT: As they appeared before the U.S. Senate Banking Committee last month, financial regulators seemed more than a bit discomfited when asked about the last time they took a big bank to trial. It was a rhetorical question more than anything. And the media played it up as another example of what some see as the government's "too-big-to-fail" approach to regulating the banking sector. In fact, there was more to it than that. The Committee's not-so-subtle rebuke underscored a fundamental divide in how financial crime is being regulated in the United States. It is not about any kind of selective willingness to push a case to trial. Few cases go to trial these days, particularly when the government gets involved.

Rather, it is about how differently the U.S. treats financial crime depending on whether it falls within the arena of antitrust or financial regulation. Only with the former has the government shown any kind of zeal to put the individual wrongdoers behind bars. Indeed, seeking criminal sanctions and jail time has become the driving force in the Obama administration's redoubled efforts to stamp out illegal cartel activity. But when the banks have been implicated for their various mortgage machinations and other acts of financial malfeasance, nary a noise is made about any criminal prosecution. To the contrary-it is most often just a fiscal slap on the wrist and they are on their way.

April 2, 2013 | Permalink | Comments (0) | TrackBack (0)

Collusion Detection in Procurement Auctions

Posted by D. Daniel Sokol

Ilya Morozov, National Research University Higher School of Economics and Elena A. Podkolzina, National Research University Higher School of Economics address Collusion Detection in Procurement Auctions.

ABSTRACT: This paper proposes a method of bid-rigging detection, which allows us to reveal cartels in procurement auctions without any prior knowledge of the market structure. We apply it to data on highway construction procurements in one of the Russian regions and show that five suppliers demonstrated passive bidding behavior, which is consistent with the so called ‘rotating bidding’ scheme of collusion. The suggested methodology can be potentially used by both researchers and anti-trust agencies for cartel disclosure in various markets.

April 2, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, April 1, 2013

Antitrust Law Professors On the Move - Version 1

Posted by D. Daniel Sokol

This is the first version of antitrust/competition law professors who are on the move for a visit or permanent move for the 2013-14 academic year.  Please let me know if I have missed anybody.

Entry Level Hires
Gus Hurwitz - University of Nebraska
Marek Martyniszyn - Queen's University Belfast
Angela Zhang - King's College

April 1, 2013 | Permalink | Comments (0) | TrackBack (0)

Antitrust Fines in Times of Crisis

Posted by D. Daniel Sokol

Natalia Fabra, Universidad Carlos III de Madrid - Departamento de Economia and Massimo Motta, Universitat Pompeu Fabra analyze Antitrust Fines in Times of Crisis.

ABSTRACT: In a model in which firms can go bankrupt because of adverse market shocks or antitrust fines, we find that even large corporate fines may not be able to induce deterrence. Managerial penalties are thus needed. If the policy may be changed according to the state of the business cycle, then the optimal outcome can always be achieved through antitrust fines that are more severe in good times and more lenient in bad times. A time-independent policy may result in either too many bankruptcies or under-deterrence as compared to the optimal policy.

April 1, 2013 | Permalink | Comments (0) | TrackBack (0)