Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, August 16, 2013

Static vs. dynamic impacts of unbundling: Electricity markets in South America

Posted by D. Daniel Sokol

Dominik Schober (ZEW) has written on Static vs. dynamic impacts of unbundling: Electricity markets in South America.

ABSTRACT: Ownership unbundling and third party access are discussed as two options of unbundling in both the literature and political discussions. Focusing on the South American electricity sector, I contrast static and dynamic impacts of ownership unbundling and third party access regimes on customer prices. Substantially different results are found using dynamic rather than static analysis. In particular, negative short term effects of ownership unbundling found in static models are approximately cancelled out by subsequent positive impacts in the dynamic model. Third party access seems to allow for similar benefits while avoiding the (restructuring) costs of ownership unbundling. Previously estimated static models thus appear to suffer from either omitted variable biases or endogeneity problems of static non-difference models.

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

Financial Mergers and Their Consequences

Posted by D. Daniel Sokol

F.M. Scherer (Harvard) has posted Financial Mergers and Their Consequences.

ABSTRACT: This paper analyzes the massive merger wave that has led to substantially increased concentration of banking activity in the United States. One consequence is the rise of banks "too big to fail." The structural changes have also been associated with a striking change in financial institutions' share of all U.S. corporate profits along with employee compensation out of line with norms for individuals of comparable ability. Data on concentration in well-defined banking markets are quite scarce, but fragmentary evidence suggests considerable monopoly pricing power in some product markets. Mergers that lead to concentration have for decades been the focus of antitrust activity. But a review of the record shows an emphasis on mergers that raise local banking market concentration and nearly total neglect of other important lines on which data are lacking. If antitrust actions were to be taken against the concentration of power! in those lines, offsetting advantages in the form of realized scale economies would have to be weighed. A review of the most recent evidence suggest that difficult tradeoffs might be confronted.

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

Why does the Anti-Monopoly Law Bring Worries?

Posted by D. Daniel Sokol

D. Daniel Sokol (Florida) and Christine Varney (Cravath) have a column in Forbes China that asks Why does the Anti-Monopoly Law Bring Worries?

In the op-ed (in Chinese), we note that China has to decide the goal of the AML - is it to be based on political considerations or consumer welfare. We note both the successes and the limitations of the first five years of the AML.

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

The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry

Posted by D. Daniel Sokol

Jason Allen, Bank of Canada, Robert Clark, HEC Montreal and Jean-Francois Houde, Wharton and NBER discuss The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry.

ABSTRACT: We examine the relationship between concentration and price dispersion using variation induced by a merger in the Canadian mortgage market. Since interest rates are determined through a search and negotiation process, consolidation eliminates a potential negotiation partner, weakening consumers bargaining positions. We combine reduced-form techniques to estimate the mergers distributional impact, with a structural model to measure market power across consumers with different search costs. Our results show that competition benefits only consumers at the bottom and middle of the transaction price distribution. Estimates from a search and negotiation model attribute these differences to the presence of large search frictions.

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

Thursday, August 15, 2013

Domestic and International Research Joint Ventures: The Effect of Collusion

Posted by D. Daniel Sokol

Ricardo Flores-Fillol, Universitat Rovira i Virgili, Guiomar Ibanez-Zarate, Universitat Rovira i Virgili and Bernd Theilen, Centre de Recerca en Economia Industrial i Economia Publica have posted Domestic and International Research Joint Ventures: The Effect of Collusion.

ABSTRACT: We analyze the effect of research joint ventures (RJVs) on consumer welfare in an international context when collusion can occur. The main novelty of our analysis is to study the differentiated effect of domestic and international RJVs. The recent literature shows that RJVs with collusion harm consumers. However, our results introduce a qualification to this statement: international RJVs with collusion might be beneficial for consumers when internationalization costs are high. The EU and US competition policy advises against RJVs that facilitate collusion on the grounds of their expected negative effects. Our results suggest that antitrust authorities should distinguish between domestic and international RJVs and, in certain cases, be more benevolent with international RJVs.

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

Airline networks, mergers, and consumer welfare

Posted by D. Daniel Sokol

Kai Huschelrath (ZEW) and Kathrin Muller (ZEW) study Airline networks, mergers, and consumer welfare.

ABSTRACT: We study the consumer welfare effects of mergers in airline networks. Based on the development of a general classification of affected routes, we apply a difference-indifferences approach to exemplarily investigate the price effects of the America West Airlines - US Airways merger completed in 2005. We find that although average prices increased substantially on routes in which both airlines competed either on a non-stop or one-stop basis prior to the merger, substantial average price reductions observed for routes without any premerger overlap suggest that the merger led to a net increase in consumer welfare.

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

ABA Section of Antitrust Law Antitrust and Intellectual Property Conference October 10, 2013 Stanford University Law School

Posted by D. Daniel Sokol

Antitrust and Intellectual Property Conference

When

October 10, 2013

Where

  • Stanford University Law School
  • 559 Nathan Abbott Way
  • Stanford, CA 94305-8602
  • United States of
    America
Primary Sponsors
  • Important to Know

Deadline for Hotel Reservations: Tuesday, September 17, 2013
Deadline for
Early Bird Registration & Cancellations: Thursday, September 19,
2013
Deadline for Online Registration: Wednesday, October 9, 2013
05:00
p.m. CST

Rates
  • Section Member Rate:
    $650.00
  • Academic Non-Sec Mem:
    $225.00
  • Academic Sec Mem:
    $125.00
  • DOJ Non-Section Member:
    $225.00
  • DOJ Section Member:
    $125.00
  • FTC Non-Section Member:
    $225.00
  • FTC Section Member:
    $125.00
  • Gov Agency Non-Sec Mem:
    $225.00
  • Gov Agency Sec Mem:
    $125.00
  • IPL Section Member:
    $650.00
  • Law Student Rate:
    $0.00
  • Non-Profit Non-Sect Mbr:
    $225.00
  • Non-Profit Section Member:
    $125.00
  • Non-Section Member:
    $850.00
  • Paralegal/Legal Assistant:
    $200.00
  • University Faculty/Alumni:
    $125.00

 

  • Greetings!

 

The biennial Antitrust and Intellectual Property Conference, co-sponsored with the Section of
IP Law, is a flagship Section program. This one-day program in the Silicon Valley will focus multiple panels of industry, government and academic luminaries on issues of most importance to those who advise companies about their intellectual property. Plan to attend this conference for a deep exploration of the key issues and risks related to patent aggregation, standard essential patents, as well as other issues inherent in the enforcement of intellectual property rights.

 

Lemley_mark

Pfeiffer_alfred
Sokol_daniel
Mark Lemley
Stanford Law School
Stanford, CA
Conference
Co-Chair
Alfred C. Pfeiffer, Jr.
Latham & Watkins LLP
San Francisco,
CA
Conference Co-Chair
D. Daniel Sokol
University of Florida College of Law
Gainesville,
FL
Conference Co-Chair

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

Who benefits from resale-below-cost laws?

Posted by D. Daniel Sokol

Noriaki Matsushima, Institute of Social and Economic Research, Osaka University and Akira Miyaoka, Graduate School of Economics, Osaka University ask Who benefits from resale-below-cost laws?

ABSTRACT: We investigate the effect of banning resale-below-cost offers. There are two retailers with heterogeneous bargaining positions in relation to a monopolistic manufacturer. Each retailer sells two goods: one procured from the monopolistic manufacturer and the other, from a competitive fringe. In equilibrium, banning resale-below-cost offers can decrease the retailers' prices. The ban can benefit the weak retailer in terms of bargaining position and increase the total consumer surplus, although it harms the dominant retailer and the monopolistic manufacturer. Contrary to the basic scenario, when the weak retailer is horizontally separated, the ban benefits the monopolistic manufacturer.

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

Can the FTC be a fair umpire?

Posted by D. Daniel Sokol

David Balto asks Can the FTC be a fair umpire?

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

Public and private enforcement of competition law: A differentiated approach

Posted by D. Daniel Sokol

Kai Huschelrath (WZB) and Sebastian Peyer (University of East Anglia) have posted Public and private enforcement of competition law: A differentiated approach.

ABSTRACT: We investigate the relationship between public and private enforcers introducing a more differentiated approach. In contrast to the existing literature, we take into account that the costs and benefits of detection and prosecution and, thus, the usefulness of each enforcement mode may change with a variation of the type of anticompetitive conduct. We define a set of parameters that determine the costs and benefits of both types to enforce the antitrust laws and discuss implications for European competition law and policy.

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

Wednesday, August 14, 2013

Competition policy and cartel size

Posted by D. Daniel Sokol

Iwan Bos (Maastricht University) and Joseph E. Harrington Jr. (Wharton) theorize about Competition policy and cartel size.

ABSTRACT: This paper examines endogenous cartel formation in the presence of a competition authority. Competition policy makes the most inclusive stable cartels less inclusive. In particular, small firms that might have been cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable cartels, competition policy can either increase or decrease their inclusiveness. Highly inelastic market demand is sufficient for the presence of a competition authority to cause the least inclusive stable cartels to increase in size.

August 14, 2013 | Permalink | Comments (0) | TrackBack (0)

Efficient Entry in Competing Auctions

Posted by D. Daniel Sokol

James Albrecht, Pieter Gautier, Susan Vroman (Department of Economics, Georgetown University) examine Efficient Entry in Competing Auctions.

ABSTRACT: In this paper, we demonstrate the e¢ ciency of seller entry in a model of competing auctions. We generalize the competitive search literature by simultaneously allowing for nonrival (many on one) meetings and private information. We consider both the case in which buyers learn their valuations before visiting a seller and the case in which they learn their valuations after visiting the seller. We also allow for seller heterogeneity with respect to reservation values.

August 14, 2013 | Permalink | Comments (0) | TrackBack (0)

The Antitrust Revolution: Economics, Competition, and Policy, Sixth Edition

Posted by D. Daniel Sokol

John E. Kwoka, Jr. (Northeastern) and Lawrence J. White (NYU) have come out with The Antitrust Revolution: Economics, Competition, and Policy, Sixth Edition.

BOOK ABSTRACT: Fully updated to reflect important developments in antitrust economics, The Antitrust Revolution, Sixth Edition, examines the critical role of economic analysis in recent antitrust case decisions and policy.

The case studies--more than half of which are entirely new--are written by prominent economists who participated in the proceedings of that case. Revised overview essays introduce the economics and law that are associated with the four sections: Horizontal Structure, Horizontal Practices, Vertical and Related Market Issues, and Network Issues.

New to this edition: Appendices for several chapters now provide readers with greater depth in theoretical or empirical treatment of the issues in those chapters.

August 14, 2013 | Permalink | Comments (0) | TrackBack (0)

Signalling Rivalry and Quality Uncertainty in a Duopoly

Posted by D. Daniel Sokol

Helmut Bester (Free University of Berlin) and Juri Demuth (Free University of Berlin) explore Signalling Rivalry and Quality Uncertainty in a Duopoly.

ABSTRACT: This paper considers price competition in a duopoly with quality uncertainty. The established firm (the `incumbent') offers a quality that is publicly known; the other firm (the `entrant') offers a new good whose quality is not known by some consumers. The incumbent is fully informed about the entrant's quality. This leads to price signalling rivalry because the incumbent gains and the entrant loses if observed prices make the uninformed consumers more pessimistic about the entrant's quality. When the uninformed consumers' beliefs satisfy the `intuitive criterion' and the `unprejudiced belief refinement', prices signal the entrant's quality only in a two-sided separating equilibrium and are identical to the full information outcome.

August 14, 2013 | Permalink | Comments (0) | TrackBack (0)

Broadband prices in the European Union: competition and commercial strategies

Posted by D. Daniel Sokol

Joan Calzada (Faculty of Economics, University of Barcelona) and Fernando Martinez (Competition Commission and Faculty of Economics, University of Barcelona) analyze Broadband prices in the European Union: competition and commercial strategies.

ABSTRACT: This paper analyses the determinants of broadband Internet access prices in a group of 15 EU countries between 2008 and 2011. Using a rich panel dataset of broadband plans, we show the positive effect of downstream speed on prices, and report that cable and fibre-to-the-home technologies are available at lower prices per Mbps than xDSL technology. Operators’ marketing strategies are also analysed as we show how much prices rise when the broadband service is offered in a bundle with voice telephony and/or television, and how much they fall when download volume caps are included. The most insightful results of this study are provided by a group of metrics that represent the situation of competition and entry patterns in the broadband market. We show that consumer segmentation positively affects prices. On the other hand, broadband prices are higher in countries where entrants make greater use of bitstream access and lower when they use more intensively direct access (local loop unbundling). However, we do not find a significant effect of inter-platform competition on prices.

August 14, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 13, 2013

Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines

Posted by D. Daniel Sokol

DOJ Antitrust has filed to block the US Airways/American Airlines merger. I guess some divestitures of gates at Reagan National were not enough.

August 13, 2013 | Permalink | Comments (0) | TrackBack (0)

The Impact of Persistent Shocks and Concave Objective Functions on Collusive Behavior

Posted by D. Daniel Sokol

Johannes Paha (University of Giessen) discusses The Impact of Persistent Shocks and Concave Objective Functions on Collusive Behavior.

ABSTRACT: The model proposed in this paper explains three stylized facts derived from case evidence: Cartel formation is more likely (i) when the industry has been hit by a negative profitability shock under the condition that (ii) this shock is rather persistent. (iii) This pattern is independent from the type of the shock, i.e. cost shocks, demand shocks etc. The paper analyzes the incentive for cartel formation when the industry switches between a good state with high profits and a bad state with low profits. The transition between states is modeled by a Markov-process that allows for transitory or persistent shocks. The decision maker incurs opportunity costs of collusion and chooses the conduct of a firm in order to maximize the present value of a concave objective function. The model shows that depending on the value of the opportunity costs and the discount factor collusion can be stable in no, one, or both states of the industry. When collusion is stable in only one state, this is the good state when industry conditions are transitory. When industry conditions are persistent, collusion is stable in the bad state.

August 13, 2013 | Permalink | Comments (0) | TrackBack (0)

China’s Anti-Monopoly Law: The First Five Years -- Symposium Recap

Posted by D. Daniel Sokol

Thank you to all of our guest reviewers.  You can read the posts of the various speakers via links below:

Allan Fels (Australia New Zealand School of Government)
Xu Guangyao (University of Tianjin)
Catriona Hatton (Baker Botts)
Liyang Hou (Koguan Law School, Shanghai Jiao Tong University)
Ping Lin (Lingnan University)
Mitsuo Matsushita (University of Tokyo)
D. Daniel Sokol (University of Florida)

August 13, 2013 | Permalink | Comments (0) | TrackBack (0)

Xu on China’s Anti-Monopoly Law: The First Five Years

Posted by Xu Guangyao

Antimonopoly law is not rooted in the Chinese traditional economy or culture, and people seldom had much knowledge about it when the Antimonopoly Law of China was enacted 6 years ago. The majority of undertakings had probably never even heard its name. The antimonopoly authorities were organized after the enactment of the law so their staff - as well as the judges of the courts - were not veru well prepared when the law was enforced on 1st August 2008, one year after its enactment. As a result, it is not strange that the early enforcement of this law has been criticized by both the public as well as the academic circle. There are indeed many defects and even mistakes both in the legislations and their application.

But the last two years have witnessed a relatively rapid progress in the number of cases, and some of them even involved advanced questions in the study of the antimonopoly law. For example, in the “Qihoo Technology Co Ltd v. Tencent Technology Co. Ltd.” case the court of first instance gave a quite extensive reasoning about the definition of the relevant market in the internet industry, although there may be something wrong with their use of the SSNIP test as the basis of their definition. There have also been several cases relating to maintenance of resale price.

The secondary legislations of the authorities have also increased quickly since 2011, and the Supreme Court adopted its judicial interpretation in 2012 to resolve the most urgent problems of litigation. So there have been rich new materials to support a systematic review of 5-years of enforcement of the Antimonopoly Law, and this book is the first and the only comprehensive achievement in this respect. The book includes articles on monopoly agreement and abuse of dominant position which summarize the basic provisions of the law and relevant secondary legislations, as well as providing a general overview of cartel cases that took place in the past 5 years. It also introduces economic and legal theories concerning antimonopoly analysis of restrictive practices such as information exchange, maintenance of resale price and refusal to deal. The first aspect will supply important clues for the readers to further their study, and save the time needed to search cases trialed in various courts or implemented by the authorities, and will show a full view of Chinese antimonopoly law to both foreign and domestic undertakings and commentators, while the second aspect will strengthen the ability of the authorities and courts to implement the law appropriately. In addition, the authors come from various fields related to antimonopoly law, including professors, officials, employees of undertakings, practitioners and judges, both domestic and foreign, and this makes the books an assembly of different points of view which supply broad reflections of the questions discussed. Therefore this book is bound to be one of the most important books which have been published ever since the beginning of the antimonopoly law study in 1990s.

But a more precise evaluation of this book depends on an idea of the function of the “5-year-view”. In my opinion, as mentioned above, there are indeed many problems in the legislation and its enforcement, and therefore the focus of the review should have been placed on concrete problems both in the legislations and the decisions of the courts and authorities. For example, the discussion on cartel cases should not have been limited to an introduction to the names of the cases and the fines imposed, but ought to analyze the proving of the existence of the agreements, and the confirmation of restricting and eliminating competition, etc. In the article about maintenance of resale price, detailed evaluation on the three reasons given by the Development and Reform Commission of Sichuan Province for its decision should not have been omitted - quite the contrary, this was a very precious opportunity to make clear the antimonopoly analysis toward this kind of practices because none of the three reasons was sufficient to prove the correctness of the decision. The decision may have been right for other reasons perhaps even in light with the theories contained in the article itself. The lack of this analyzing ability has caused many confusions and mistakes in both the regulations and the decisions made, and it should have been the fundamental object of this book to clarify or correct them. Many of them could have been resolved if some of the authors had paid more attention to combining theories and analyses with the case materials that they present.

August 13, 2013 | Permalink | Comments (0) | TrackBack (0)

Sokol on China’s Anti-Monopoly Law: The First Five Years

Posted by D. Daniel Sokol

Adrian Emch and David Stallibrass should be commended for putting together such an informative book.  If you really want to understand antitrust developments in China, buy a copy of China’s Anti-Monopoly Law: The First Five Years.  There are a mix of writers - competition authorities, academics and professionals among economists and lawyers.  Each brings a unique perspective to the challenges of Chinese antitrust.

After five years, we have an emerging sense of the critical issues thus far in the Chinese system as well as issues that remain unsettled.

If you read only one chapter, the first chapter by Huang Yong (UIBE Law) and Richean Li (Qualcomm) is the best of a really good collection.  They outline the current institutional structure of Chinese antitrust and explain the limitations of the current system.  Their chapter reinforces my own thoughts on the system - in short, the current institutional structure with three agencies in untenable.  There needs to be some sort of consolidation of antitrust authority.  This trend towards consolidation recently has included the UK, the Netherlands and Brazil.  

A number of chapters describe another theme to the Chinese system - there are competing goals under the AML -- industrial policy on the one hand and a competition economics based approach (with an unclear welfare standard) on the other.  This tension needs to be solved going forward.  In order to create a workable and effective competition system in terms of both process and analysis, the goal of the system must be clear.  A number of the chapters touch on the multiple goals, including those by Ng, Deng & Leonard and Hao Qian.  On this topic of multiple goals, the very last chapter by Wang Xiaoye provides a brutally honest assessment of the China Telecom and China Unicom case and its implications on the Chinese system.  Given some of the recent enforcement actions regarding RPM,the chapter by Dennis Lu and Guofu Tan hopefully can inject some much needed analysis into the debate.   I also really enjoyed the chapter by Stalibrass on the sort of economic analysis that can be practiced in a socialist market economy that is still in a relatively early stage of economic understanding of Industrial Organization economics.

Cake

The picture of the cake (above) is from the 5 year anniversary party hosted on August 1 in Beijing by  Norton Rose Fulbright, Charles River Associates and MLex. 

AML Sokol

At the AML party, I had a chance to talk with a number of old friends and make some new ones.  In the picture above, I am chatting with Professor Ping Lin (Lingnan University - Economics) and Joe Krauss (Hogan Lovells). Ping and I finally got to meet in person after many lengthy email conversations.  Joe was my first ever guest speaker in one of my antitrust classes.  He discussed international merger control in my 2007 international and comparative antitrust law and economics class at the University of Wisconsin.

 

 

 

 

 

August 13, 2013 | Permalink | Comments (0) | TrackBack (0)