Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Saturday, January 19, 2013

2013 Antitrust Developments: United States

Posted by D. Daniel Sokol

Aidan Synnott & William Michael (Paul, Weiss) discuss 2013 Antitrust Developments: United States.

ABSTRACT: United States antitrust law has seen a number of significant developments in recent years—from American Needle to shifts in regulatory priorities—and 2013 promises to continue that trend. We cannot know exactly how U.S. antitrust law will or will not change in the coming year, but we can highlight some key events and cases to watch. The goal of this article is thus not to predict changes in antitrust law. Instead, we aim to identify critical questions that are on the horizon.

In the first section of this article, we identify some of the pending cases that have the greatest potential to change antitrust law in 2013. In the second, we discuss possible changes in regulatory enforcement.

January 19, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, January 18, 2013

Who's afraid of big bad banks? Bank competition, SME, and industry growth

Posted by D. Daniel Sokol

Robert Inklaar (U Groningen), Michael Koetter (Frankfurth School of Finance and Management), and Felix Noth (Goethe University) ask Who's afraid of big bad banks? Bank competition, SME, and industry growth.

ABSTRACT: We test how bank market power influences technical change and resource allocation of informationally opaque firms. We use a dataset with approximately 700,000 firm-year observations of German small and medium-sized enterprises (SME) to identify the effect of bank market power using the dependence on external finance per industry and the regional demarcation of the German banking market. Market power generally spurs aggregate SME growth. Banks need to realize sufficient margins to generate useful private information. Bank market power spurs both technical change and reallocation of resources, but it reduces SME growth in industries that depend heavily on external finance.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

Economies of Scale and Merger Efficiencies: Empirical Evidence from the Chilean Pension Funds Market

Posted by D. Daniel Sokol

Claudio A Agostini (Escuela de Gobierno, Universidad Adolfo Ibanez) provides a discussion of Economies of Scale and Merger Efficiencies: Empirical Evidence from the Chilean Pension Funds Market.

ABSTRACT: The financial services industry has been experiencing a strong concentration process all over the world during the last decade (Cetorelli, et. al, 2007; De Nicolo, et. al, 2003; Gelos and Roldos, 2004; Rhoades, 1996). As usual, one of the main concerns associated to the concentration of the industry is related to the possibility of exercising market power. As a result, antitrust authorities in several countries have required an in depth analysis of the efficiencies of each merger when concentration indexes are above the minimum thresholds required by mergers guidelines. The main goal of this paper is to evaluate the welfare implications of the merger of two medium Pension Fund Managers (AFP) in Chile that was approved in 2007 by the Antitrust Tribunal (Tribunal de Defensa de la Libre Competencia). To this end, we estimate the size of scale economies in this industry, we present a simple theoretical model of the competition in the industry and, based on this model, we simulate the merger.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

Lateral Move: Amelia Fletcher from OFT to University of East Anglia

Posted by D. Daniel Sokol

Amelia Fletcher, Cheif Economist at the OFT will join the University of East Anglia Centre for Competition Policy. See the press release here. This is a great move for UEA's Centre for Competition Policy. I think that without a doubt in terms of the size of the academic team in both competition economics and law, UEA has the deepest bench for competition of any UK university.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

U.S. Antitrust Enforcement in 2013: Where Are We Going, and Why?

Posted by D. Daniel Sokol

Kent Bernard (Fordham Law) asks U.S. Antitrust Enforcement in 2013: Where Are We Going, and Why?

ABSTRACT: U.S. antitrust law is like a huge cargo ship in at least two respects: It takes time to change direction, and you don't want to be in its way when it does. When we lift our eyes from the day-to-day cases and developments, certain trends come into sharper focus. Bigness is suspect again, but in some new and different ways than it was in the past.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

Taking Antitrust to Patent School: The Instance of Pay-for-Delay Settlements

Posted by D. Daniel Sokol

Rudy Peritz (NYLS) is Taking Antitrust to Patent School: The Instance of Pay-for-Delay Settlements.

ABSTRACT: The essay develops a new approach for antitrust analysis of pay-for-delay settlements in pharmaceutical patent infringement cases, an approach that shows them to be presumptively prohibited agreements in restraint of competition. The issue is timely in light of the Watson v FTC case now pending before the Supreme Court; the decision below is one in a line of antitrust cases concluding that the settlement agreements are legal per se so long as their pay-for-delay provisions fall “within the scope of the patent.” The essay explains why proper antitrust analysis calls for separate attention to the scope of the injunction remedy and then shows how antitrust approval of pay-for-delay provisions entails satisfaction of the Supreme Court’s traditional test for the injunction remedy in patent infringement cases set out in the landmark eBay decision. Along the way, the essay briefly describes how the economics of patent law, rightly understood, supports the eBay test’s application in the antitrust analysis of cases like Watson.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition, Gatekeeping, and Health Care Access

Posted by D. Daniel Sokol

Godager, Geir (Department of Health Management and Health Economics) Iversen, Tor (Department of Health Management and Health Economics) and Albert Ma, Ching-to (Department of Economics, Boston University and University of Oslo)b explore Competition, Gatekeeping, and Health Care Access.

ABSTRACT: We study the impact of competition on primary care physicians’specialty referrals. Our data come from a Norwegian survey in 2008-9 and Statistics Norway. From the data we construct three measures of competition the number of open primary physician practices with and without population adjustment, and the Herfindahl-Hirschman Index. We build a theoretical model, and derive two opposing effects of competition on gatekeeping physicians’ specialty referrals. The empirical results suggest that competition has negligible or small positive effects on referrals. Our results do not support the policy claim that increasing the number of primary care physicians reduces secondary care.

January 18, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, January 17, 2013

Performance of the life insurance industry under pressure: efficiency, competition and consolidation

Posted by D. Daniel Sokol

Jacob Bikker, De Nederlandsche Bank; University of Utrecht - Utrecht University School of Economics discusses Performance of the life insurance industry under pressure: efficiency, competition and consolidation.

ABSTRACT: A well-performing life insurance industry benefits consumers, producers and insurance firm stockholders alike. Unfavourable market conditions stress the need for life insurers to perform well in order to remain solvent. Using a unique supervisory data set, this paper investigates competition and efficiency in the Dutch life insurance market by estimating unused scale economies and measuring efficiency-market share dynamics during 1995-2010. Large unused scale economies exist for small and medium-sized life insurers, indicating that further consolidation would reduce costs. Over time average scale economies decrease but substantial differences between small and large insurers remain. A direct measure of competition confirms that competitive pressures are at a lower level than in other markets. We do not observe any impact of increased competition from banks, the so-called investment policy crisis or the credit crisis, apart from lower returns in 2008. Investigation of product submarkets reveals that competition is higher on the collective policy market, while the opposite is true for the unit-linked market, where the role of intermediary agents is largest.

January 17, 2013 | Permalink | Comments (0) | TrackBack (0)

Hotelling Models with Price-Sensitive Demand and Asymmetric Transport Costs: An Application to Public Transport Scheduling

Posted by D. Daniel Sokol

Adriaan Hendrik van der Weijde (VU University Amsterdam), Erik T. Verhoef (VU University Amsterdam) and Vincent A. C. van den Berg (VU University Amsterdam) discuss Hotelling Models with Price-Sensitive Demand and Asymmetric Transport Costs: An Application to Public Transport Scheduling.

ABSTRACT: We formulate a horizontal differentiation model with price-sensitive demand and asymmetric transport costs, in the context of transport scheduling. Two competitors choose fares and departure times in a fixed time interval. Consumers are distributed uniformly along the interval; their location indicates their desired departure time. In a standard Hotelling model, locations are chosen before prices. In our context, the opposite order is also conceivable, but we show that it does not result in a Nash equilibrium; the same is true for a game in both variables are chosen simultaneously. We also discuss Stackelberg game structures and second-best regulation. We conclude that the addition of price-sensitive demand results in equilibria in the traditional Hotelling model with price setting; there, services are scheduled closer together than optimal. We also show that it is possible to include asymmetric schedule delay functions. Our results show that departure times can be strategic instruments. Optimal regulatory strategies depend on the value of schedule delay, and on whether the regulator can commit.

January 17, 2013 | Permalink | Comments (0) | TrackBack (0)

Competitiveness and Stability of Collusive Behavior

Posted by D. Daniel Sokol

Toshihiro Matsumura, University of Tokyo - Institute of Social Science and Noriaki Matsushima, Osaka University - Institute of Social and Economic Research analyze Competitiveness and Stability of Collusive Behavior.

ABSTRACT: We investigate the relationship between the degree of competition and the stability of collusive behaviour, by introducing the element of relative performance in the objective functions of the firms. We show that an increase in the degree of competition destabilizes the collusion. This relation differs starkly in the standard symmetric Cournot and Bertrand duopoly models, with the former being more unstable than the latter.

January 17, 2013 | Permalink | Comments (0) | TrackBack (0)

"Competition Laws in Transitional Economies: A Plain-Language Approach?" on Jan 22nd - Registration is Now Open

Posted by D. Daniel Sokol

"Competition Laws in Transitional Economies: A Plain-Language Approach?" on Jan 22nd - Registration is Now Open

Competition Laws in Transitional Economies:  A Plain-Language Approach?
Begins: Jan 22, 2013  12:00 PM  
Ends:
Jan 22, 2013  01:30 PM

(All times are local per meeting location)
Co-Sponsored by the American Bar Association Section of Antitrust Law, International Committee

Please Note:

  • This is a non-CLE program
  • The timing for this program is listed in US Eastern Time

 

Over 100 emerging and transitional economies have adopted antitrust or competition laws. But have these laws been successful?  Has the international community developed adequate models for writing effective laws and provided sufficient assistance to new competition agencies?  Our panel of experts will explore ideas for approaches to the challenges of structuring and implementing competition laws, drawing on their own experiences in working with governments and competition agencies in transitional economies.

Speakers:

  • Eduardo Perez Motta, Chairman of the Mexican Federal Competition Commission, Chair of the International Competition Network
  • Eleanor Fox, NYU Law School
  • Timothy Hughes, FTC International Division
  • Michael Nicholson, Mission Economist, USAID; former FTC economist

 

Moderator:

  • Kenneth Davidson, American Antitrust Institute,  Former Consultant to Ministry of Commerce, Kingdom of Cambodia

January 17, 2013 | Permalink | Comments (0) | TrackBack (0)

DOES HEALTH INFORMATION TECHNOLOGY REDUCE COSTS?

Posted by D. Daniel Sokol

David Dranove (Northwestern), Christopher Forman (Georgia Tech), Avi Goldfarb (Toronto), and Shane Greenstein (Northwestern) ask DOES HEALTH INFORMATION TECHNOLOGY REDUCE COSTS?

ABSTRACT: We examine the relationship between the adoption of EMR and hospital operating costs. We first identify a puzzle that has been seen in prior studies: Adoption of EMR is associated with a slight cost increase. We draw on the literature on IT and productivity to demonstrate that the average effect masks important differences across time, locations, and hospitals. We find: (1) EMR adoption is initially associated with higher costs; (2) At hospitals with access to complementary inputs, EMR adoption leads to a cost decrease after three years; (3) Hospitals in unfavorable conditions experience increased costs even after six years.

January 17, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 16, 2013

State Aid and the European Economic Constitution

Posted by D. Daniel Sokol

Francesco de Cecco, Newcastle has a new book on State Aid and the European Economic Constitution.

BOOK ABSTRACT: Recent years have seen the rise of EU State aid law as a crucial component of the European economic constitution. To date, however, the literature has neglected the contribution of this area of EU law to the internal market. This book seeks to fill this gap in our understanding of the economic constitution by exploring the significance of State aid law in addressing questions that go to the core of the internal market project. It does so by examining the case law relating to three different activities that Member States engage in: market participation, market regulation, and funding for Services of General Economic Interest. Each of these areas offers insights into fundamental questions surrounding the economic constitution, such as the separation between the State and the market, the scope for Member States to engage in regulatory competition, and the tension between market and nonmarket concerns.

January 16, 2013 | Permalink | Comments (0) | TrackBack (0)

The use of natural experiments in merger analysis

Posted by D. Daniel Sokol

Malcolm Coate (FTC) explains The use of natural experiments in merger analysis.

ABSTRACT: Natural experiments have the potential to test economic theories that purport to predict the competitive effects of a proposed transaction. This article provides a review of natural experiment and other examples of direct effects’ evidence identified in Federal Trade Commission (FTC) merger investigations. Using reviews of staff analyses, it is possible to identify a number of quantitative and qualitative experiments supportive of unilateral effects, coordinated interaction or continued competition theories. The court decisions in Staples, Oracle, and Whole Foods play a role in structuring the review in unilateral effects investigations, and Judge Posner’s commentary on performance analysis is relevant in coordinated interaction cases. Other experiments show either no structure–performance relationship in a market or undermine a key characteristic of Guidelines analysis and imply that the merger in question is not anticompetitive. This natural experiment evidence, supplemented with validated customer complaints and hot document findings suggestive of experiments lost to time, is able to successfully predict the outcome of almost two thirds of the FTC merger challenge decisions. While structural analysis remains important when effects’ evidence is unavailable, testing theoretical models with direct effects’ evidence seems possible for the bulk of the FTC’s merger investigations. Empirical fact is more likely than theoretical analysis to improve the market review process.

January 16, 2013 | Permalink | Comments (0) | TrackBack (0)

Delays in Leniency Application: Is there Really a Race to the Enforcer's Door?

Posted by D. Daniel Sokol

Jun Zhou, Department of Economics, Bonn University, Tilburg Law and Economics Center (TILEC) and Dennis L. Gartner, ask Delays in Leniency Application: Is there Really a Race to the Enforcer's Door?

ABSTRACT: This paper studies cartels’ strategic behavior in delaying leniency applications, a take-up decision that has been ignored in the previous literature. Using European Commission decisions issued over a 16-year span, we show, contrary to common beliefs and the existing literature, that conspirators often apply for leniency long after a cartel collapses. We estimate hazard and probit models to study the determinants of leniency-application delays. Statistical tests find that delays are symmetrically affected by antitrust policies and macroeconomic fluctuations. Our results shed light on the design of enforcement programs against cartels and other forms of conspiracy.

January 16, 2013 | Permalink | Comments (0) | TrackBack (0)

Estimating the Price Effects of Mergers by Exploiting a Natural Experiment in Cross-Section Data

Posted by D. Daniel Sokol

Michael J. Doane, Competition Economics LLC, Luke Froeb, Vanderbilt University - Strategy and Business Economics, Gregory J. Werden, U.S. Department of Justice - Antitrust Division, David M. Zimmer, Western Kentucky University - Department of Economics describe Estimating the Price Effects of Mergers by Exploiting a Natural Experiment in Cross-Section Data.

ABSTRACT: Past mergers in the car rental industry have resulted in markets with the same number of brands but different numbers of owners of those brands. Consequently, data at a single point in time exhibit between-market variation much like the variation over time associated with mergers. We construct an estimator that isolates this between-market variation, and the predicted price effects of mergers are roughly what simple theoretical models predict. For markets with few incumbent brands, our natural experiment predicts significantly higher price effects than a prior study using a structural model.

January 16, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 15, 2013

The Abusive Nature of Price Squeeze in the EU

Posted by D. Daniel Sokol

Liyang Hou KoGuan Law School, Shanghai Jiao Tong University describes The Abusive Nature of Price Squeeze in the EU.

ABSTRACT: This article explores the abusive nature of price squeeze through investigating why a dominant undertaking subject to a price squeeze liability cannot be allowed to benefit from its competition advantages over vertical integration. As such a result, price squeeze obliges a dominant undertaking to subsidize non-vertically integrated competitors. This goes against a general principle that competition law protects only competition rather than inefficient competitors. The examination of the six price-squeeze cases within the context of EU competition law reveals that price squeeze cannot be fully explained by other closely related concepts, such as excessive pricing, predatory pricing and refusal to deal. Accordingly, this article develops a new theory for the abusive nature of price squeeze. This theory tells that price squeeze aims to maintain competition on a regulated market where a sector-specific regulator imposes both a duty to deal and a price regulation upon the dominant undertaking concerned.

January 15, 2013 | Permalink | Comments (0) | TrackBack (0)

Crossing the Streams of Price and Promotion Under the Robinson-Patman Act

Posted by D. Daniel Sokol

Richard M. Steuer, Mayer Brown LLP discusses Crossing the Streams of Price and Promotion Under the Robinson-Patman Act.

ABSTRACT: The Robinson-Patman Act is not likely to disappear anytime soon, despite repeated efforts at repeal, and the time has come to devote greater attention to moderizing its interpretation. Specifically, it is time to abandon the conventional wisdom that the value of price reductions and promotional assistance may not be aggregated in determining whether or not there has been discrimination. Instead, if the combined values of discounts and promotional assistance offered to each of two competing dealers are equivalent, those offers should not be held to violate the Act even if the individual values of the price and promotion components in each offer are not the same.

January 15, 2013 | Permalink | Comments (0) | TrackBack (0)

Power Markets Shaped by Antitrust

Posted by D. Daniel Sokol

Malgorzata M. Sadowska, University of Bologna and Bert Willems, Tilburg University analyze Power Markets Shaped by Antitrust.

ABSTRACT: In November 2011 Sweden abolished the uniform national electricity price and introduced separate price zones.This was the result of an antitrust settlement between the Commission and the Swedish network operator, which was accused of discriminating between domestic and export electricity transmission services and segmenting the internal market. Based on this case, we show how the Commission uses competition law enforcement to foster market integration in the energy sector. We find that, even though the Commission’s action under competition rules was contrived and lacked economic depth, the commitment package provides an economically sound, long term solution to network access and congestion management in Sweden. Such a quick and far-reaching change of Swedish congestion management could not have been achieved by Swedish policymakers or enforcement of the EU sector-specific regulation.

January 15, 2013 | Permalink | Comments (0) | TrackBack (0)

Happy 15th Birthday American Antitrust Institute

Posted by D. Daniel Sokol

The American Antitrust Institute is celebrating its 15th birthday. See here for its 15th anniversary booklet. AAI is a special institution. It is the only consumer voice dedicated to antitrust in the United States. It also has some outreach abroad. Some of my very best friends are AAI board members. Members of the advisory board have a strong passion for their advocacy, almost to the point of religious zeal for a progressive antitrust (one might say this is based on a vision of tikkun olam, or "healing the world"). Nevertheless, AAI is the one antitrust organization where top to bottom people are really nice to those with opposing viewpoints. This is set by tone at the top. Bert Foer, you are wonderful. I believe that the reason you are wonderful is best summed up by former George W. Bush Antitrust Division head Hew Pate in this NY Times article about Bert:

“A lot of Bert’s antitrust opinions are annoying,” said R. Hewitt Pate, the general counsel of Chevron and a former senior antitrust official in the Bush administration. “You disagree with him on the substance but you enjoy hanging out with him, and there are not enough people in Washington like that.”

I am not on the AAI Board.  Some of my views differ significantly from those of AAI.  I would, however, hope that those of you with deep pockets who share in AAI's vision think about contributing to AAI in a significant way either with your time or ideally with a nice large financial contribution.

January 15, 2013 | Permalink | Comments (0) | TrackBack (0)