Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, February 8, 2013

IP, Antitrust and Looking Back on the Last Four Years

Posted by D. Daniel Sokol

Renata Hesse (DOJ) has given a speech IP, Antitrust and Looking Back on the Last Four Years.

February 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Bertrand Competition with an Asymmetric No-Discrimination Constraint

Posted by D. Daniel Sokol

Jan Bouckaert (U Antwerp), Hans Degryse (KU Leuven), Theon van Dijk (Lexenomics) analyze Bertrand Competition with an Asymmetric No-Discrimination Constraint.

ABSTRACT: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.

February 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Multi-Product Firms and Product Quality

Posted by D. Daniel Sokol

Kalina Manova, Stanford University - Department of Economics; NBER and Zhiwei Zhang, Nomura Holdings, Inc. (NHI) - Nomura Securities Co., Ltd.; International Monetary Fund address Multi-Product Firms and Product Quality.

ABSTRACT: This paper proposes that quality differentiation is an important feature of the operations of multi-product firms. We develop a model in which manufacturers vary product quality across their product range by using inputs of different quality levels. Firms' core competency is in varieties of superior quality that generate higher sales despite being more expensive. Using detailed customs data for China, we establish four new stylized facts consistent with this model. First, firms earn more bilateral and global revenues from their more expensive products. Second, exporters focus on their top expensive goods, drop cheaper articles and earn lower revenues in markets where they sell fewer varieties. Third, companies' sales are more skewed towards their core expensive goods in destinations where they offer less items. Finally, export prices are positively correlated with input prices across products within a firm. Our results have important implications for the aggregate and distributional effects of trade reforms and exchange rate movements.

February 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Mergers and Innovation in the Pharmaceutical Industry

Posted by D. Daniel Sokol

William S. Comanor, University of California, Los Angeles and Frederic M. Scherer, Harvard University - Harvard Kennedy School (HKS) explore Mergers and Innovation in the Pharmaceutical Industry.

ABSTRACT: Conflicting trends confound the pharmaceutical industry. The productivity of pharmaceutical innovation has declined in recent years. At the same time, the cohort of large companies who are the leading engines of pharmaceutical R&D has become increasingly concentrated. The concurrent presence of these trends is not sufficient to determine causation. In response to lagging innovation prospects, some companies have sought refuge in mergers and acquisitions to disguise their dwindling prospects or gain R&D synergies. On the other hand, the increased concentration brought on by recent mergers may have contributed to the declining rate of innovation. In this paper, we consider the second of these causal relationships: the likely impact of the recent merger wave among the largest pharmaceutical companies on the rate of innovation. In other words, have recent mergers, which may have been taken in response to lagging innovation, represented a selfdefeating strategy that only made industry outcomes worse?

February 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, February 7, 2013

Ex-Ante Margin Squeeze Tests in the Telecommunications Industry: What Is a Reasonably Efficient Operator?

Posted by D. Daniel Sokol

Germain Gaudin, TELECOM ParisTech - Department of Economics and Social Sciences and Claudia Saavedra, Regulatory Affairs - Orange ask Ex-Ante Margin Squeeze Tests in the Telecommunications Industry: What Is a Reasonably Efficient Operator?

ABSTRACT: We study the implementation of ‘reasonably efficient operator’ margin squeeze tests by National Regulatory Authorities in European telecommunications markets. We provide a theoretical framework in which we show how regulatory authorities deal with the asymmetries between the entrants and the incumbent by adjusting the ‘equally efficient operator’ margin squeeze test used in competition policy. Using this framework, we build a benchmark of implementation choices by inspecting authorities’ guidelines, market analyses and decisions. We find that some implementation choices are very similar across the authorities’ decisions, whereas some others are dealt with quite heterogeneously.

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition, Concentration and Foreign Capital in the Polish Banking Sector (Prior and During the Financial Crisis)

Posted by D. Daniel Sokol

Malgorzata Pawlowska, National Bank of Poland describes Competition, Concentration and Foreign Capital in the Polish Banking Sector (Prior and During the Financial Crisis).

ABSTRACT: The aim of the study is to estimate the level of competition and concentration in the Polish banking sector in 1997-2009 (prior the financial crisis and during the crisis). In this paper the Panzar and Rosse model (P-R) and the Lerner index (LI) have been used for the evaluation of competition. Concentration in the Polish banking industry was analysed by using concentration indices (k bank concentration ratios (CR5) and the Herfindahl-Hirschman indices (HHI)).

Empirical analysis shows that the degree of competition in the Polish banking market in the period between 1997-2007 followed a slight upward trend. Results demonstrated also a slight decrease in competition in 2008-2009, caused by financial crisis. This results are confirmed by the Panzar and Rosse model (P-R) and the Lerner index (LI).

The same channels (prior the financial and during the crisis) which had an impact on changes in the competition of banking sectors in the euro zone countries, had an impact on the Polish banking sector due to the involvement of the capital from the euro zone. It might also mean that that increase of foreign participation stimulated competitive pressures. Furthermore, foreign capital was positively correlated with concentration indices.

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Antitrust and the 'Filed Rate' Doctrine: Deregulation and State Action

Posted by D. Daniel Sokol

Herb Hovenkamp (Iowa) examines Antitrust and the 'Filed Rate' Doctrine: Deregulation and State Action.

ABSTRACT: In its Keogh decision the Supreme Court held that although the Interstate Commerce Act did not exempt railroads from antitrust liability, a private plaintiff may not recover treble damages based on an allegedly monopolistic tariff rate filed with a federal agency. Keogh very likely grew out of Justice Brandeis's own zeal for regulation and his concern for the protection of small business — in this case, mainly shippers whom he felt were protected from discrimination by filed rates. The Supreme Court's Square D decision later conceded that Keogh may have been “unwise as a matter of policy,” but reaffirmed it on the ground that Congress had had ample opportunity to overturn it but had not done so.

Under the doctrine consumer overcharge actions challenging a “filed” rate will be dismissed. The rate need not have been actively reviewed for accuracy or public interest considerations — indeed, it need not have been reviewed at all in any meaningful sense. The doctrine operates as a rule against collateral attack: once filed, a rate may not be collaterally attacked in the courts. However, an objector may be able to ask the regulatory agency to review a rate within its jurisdiction. Of course, that proceeding would not be in antitrust and would not provide treble damages and attorney's fees as an inducement.

The doctrine becomes more complex and even less rational under partial deregulation. Today, for example, some rates must be “filed” with the overseeing agency although the agency has little power to adjust the rates except in extraordinary circumstances.

Supreme Court analysis of filed rates has focused on rates filed with federal agencies. Several lower court decisions have extended the doctrine to rates filed with state regulators, generally without distinguishing the issues. Extending the doctrine to state agencies raises the troublesome issue that rate filings may serve to confer an effective antitrust immunity in situations where antitrust’s “state action” doctrine would not apply. The filed rate doctrine does not contain anything equivalent to the “authorization” or “active supervision” requirements that the state action doctrine compels. For example, a state provision may authorize an exclusionary tariff, giving no thought to competitive consequences. The state agency in turn may approve such requests with little or no evaluation. While the provision in question would not survive scrutiny under the state action doctrine, the tariff filing itself may have effective immunity under the filed rate doctrine. The Third Circuit’s McCray decision applied the filed rate doctrine to price fixing among title insurers, expressly rejecting the argument that application required the defendant’s to show “meaningful review” by the state regulator.

The filed rate doctrine should not be applied as an additional bar to antitrust enforcement. Rather, application of the antitrust laws should rest, as it usually does, on the power of the agency to immunize conduct and the extent and nature of its supervision.

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Dusseldorf Institute for Competition Economics (DICE) Heinrich-Heine-University seeks Associate Professor of Empirical Industrial Economics

Posted by D. Daniel Sokol

I received the following emasil from Tomaso Duso, advertizing a position. This is a great position with excellent colleagues.

We opened an associate professor position (with tenure) in empirical industrial economics at DICE (http://www.dice.hhu.de/en.html). More information about the opening can be found here:

http://www.uni-duesseldorf.de/home/fileadmin/redaktion/ZUV/Dezernat_3/Schulung/Niemann/040213-12_B_13_Englisch.pdf

Unfortunately, the deadline for application is quite short term (February 28, 2013).
Moreover, we expect the candidate to begin at earliest in October 2013 and not on April 1st 2013.

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition and Ideological Diversity: Historical Evidence from US Newspapers

Posted by D. Daniel Sokol

Matthew Gentzkow, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER), Jesse M. Shapiro, University of Chicago, National Bureau of Economic Research (NBER) and Michael Sinkinson, University of Pennsylvania - Business & Public Policy Department explore Competition and Ideological Diversity: Historical Evidence from US Newspapers.

ABSTRACT: We use data on US newspapers from the early 20th century to study the economic incentives that shape ideological diversity in the media. We show that households prefer like-minded news, and that newspapers seek both to cater to household tastes and to differentiate from their competitors. We estimate a model of newspaper demand, entry and political affiliation choice in which newspapers compete for both readers and advertisers. We find that economic competition enhances ideological diversity, that the market undersupplies diversity, and that incorporating the two-sidedness of the news market is critical to evaluating the effect of public policy.

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 6, 2013

How Do Judges do with merger cases?

Posted by D. Daniel Sokol

The Ambev/Grupo Modelo merger in the news the past week comes at a great time for my antitrust mergers class. Yesterday we made it through Whole Foods/Wild Oats with some help from Paul Friedman of Dechert* who litigated the case for the parties. What the students have come to appreciate is that judges: 1. like the structural presumption (this is why I predict that courts will never adopt the 2010 Merger Guidelines with the same vigor as they did the 1992 Merger Guidelines); 2. Judges get confused by competing economic experts; 3. Judges like a good story; 4. documents tell a good story more than econometrics to judges; 5. cross-examination tells a good story better than econometrics to judges, which leads me to my big conclusion -- 6. there are two types of merger analysis -- that done before the agencies and a somewhat distinct merger analysis before courts.  In the former economics plays a much larger role than the latter. 

Next on the agenda for the class: Thursday (tomorrow) we cover Genzyme/Novazyme and next Tuesday Oracle/Peoplesoft.

* Between Staples/Office Depot last Thursday (with Jim Fishkin helping out with class) and Whole Foods/Wild Oats on Tuesday the students have come to appreciate that the Dechert antitrust team is really good.

February 6, 2013 | Permalink | Comments (2) | TrackBack (0)

Retail Payment Systems: Competition, Innovation, and Implications

Posted by D. Daniel Sokol

Wilko Bolt, De Nederlandsche Bank (Dutch Central Bank) analyzes Retail Payment Systems: Competition, Innovation, and Implications.

ABSTRACT: Efficient payment services underpin the smooth operation of the economy. Competition and innovation are key drivers for payment market efficiency in both the short and long run. This paper gives an overview and tries to assess the key determinants that affect pricing, competition and the incentives to innovate in the payment market. While the payment landscape is changing rapidly, it is not yet clear what business model will survive.

February 6, 2013 | Permalink | Comments (0) | TrackBack (0)

For a Rigorous 'Effects Based' Analysis of Vertical Restraints Adopted by Dominant Firms: An Analysis of the EU and Brazilian Competition Laws: Comment

Posted by D. Daniel Sokol

Seth B. Sacher, Federal Trade Commission has written For a Rigorous 'Effects Based' Analysis of Vertical Restraints Adopted by Dominant Firms: An Analysis of the EU and Brazilian Competition Laws: Comment.

ABSTRACT: In a recent working paper, Damien Geradin & Caio Marioda Silva Pereira Neto argue that the Brazilian competition system would greatly benefit from the adoption of guidelines like the European Commission Guidance Paper, which offers a legal and economic methodology to implement an “effects-based approach” to vertical restraints adopted by a dominant firm. This paper notes that while their proposed effects based analysis is far superior to per se treatment of vertical restraints, this framework can be further improved by careful attention to the challenges raised by the so-called “Chicago School” regarding the impact of vertical restraints. Further, whether it would be advisable for Brazil to write formal guidances regarding its policy toward vertical restraints should be evaluated in light of both the nature of Brazilian competition laws and the flexibility of the Brazilian economy.

February 6, 2013 | Permalink | Comments (0) | TrackBack (0)

Banking Competition and Soft Budget Constraints: How Market Power Can Threaten Discipline in Lending

Posted by D. Daniel Sokol

Stefan Arping, University of Amsterdam - University of Amsterdam Business School; Tinbergen Institute has written on Banking Competition and Soft Budget Constraints: How Market Power Can Threaten Discipline in Lending.

ABSTRACT: In imperfectly competitive credit markets, banks can face a tradeoff between exploiting their market power and enforcing hard budget constraints. As market power rises, banks eventually find it too costly to discipline underperforming borrowers by stopping their projects. Lending relationships become "too cozy", interest rates rise, and loan performance deteriorates.

February 6, 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

Dennis L. Gartner, University of Bonn - Faculty of Law & Economics and Jun Zhou, Bonn University, Department of Economics, Tilburg Law and Economics Center (TILEC) 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.

February 6, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 5, 2013

Dominant and Efficient – On the Relevance of Efficiencies in Abuse of Dominance Cases

Posted by D. Daniel Sokol

Hans Wolfgang Friederiszick, ESMT European School of Management and Technology, E.CA Economics and Linda Gratz, E.CA Economics, Ludwig Maximilians University of Munich - Munich Graduate School of Economics (MGSE) describe Dominant and Efficient – On the Relevance of Efficiencies in Abuse of Dominance Cases.

ABSTRACT: The European Commission’s policy on the relevance of efficiency considerations in abuse of dominance cases (Article 102 TFEU) is not well settled. In an attempt to give guidance on that matter we address that topic from two different angles: First, we review EC soft law provisions and recent decisions. Based on this review we find that efficiency defences are of limited importance under the current practice. They are of relevance in the growing number of IT related cases but not in others. Second, for the example of low price strategies, we then explore business practitioners’ views on the relevance of pro- and anti-competitive motives. Based on a survey among EMBA students we find that low price strategies are indeed frequently used. The motives are diverse though, often procompetitive and in line with antitrust compliance, i.e. low price strategies are rarely considered advisable for leading firms. Policy conclusions are drawn.

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

The Emergence of Forensic Economics in Competition Law: Foundations for a Sociological Analysis

Posted by D. Daniel Sokol

Ioannis Lianos, University College London - Faculty of Laws discusses The Emergence of Forensic Economics in Competition Law: Foundations for a Sociological Analysis.

ABSTRACT: The emergence of the role of forensic economics in competition law and policy the last four decades has been a major episode in the professionalization of economics and its increasing interaction with the legal sphere. Yet, there have only been very few studies examining from a sociological perspective the impact of forensic economics on the development of the research agenda of industrial economics and more generally the production of economic knowledge. The aim of this study is to critically examine how the emergence of forensic economics may impact on the production and evaluation of economic knowledge. The hypothesis to be investigated is that the production of economic knowledge, 'in the context of application' (that is, 'following the codes of practice relevant to a particular discipline and problem solving which is organized around a particular application') across a heterogeneous environment characterized by the presence of multiple institutions (e.g. Universities, government agencies, non-governmental organizations, private consultancies) affects the research agenda and the epistemic validity of the discipline of economics. The research will focus on an area of economics, with a significant 'context of application', the field of applied Industrial Organization (IO) or competition economics. It will also concentrate on the analysis of the impact of private economic consultancies, as opposed to other institutions. The objective is to reflect on the theoretical foundations of a sociological analysis of forensic economics and more broadly on the relationship of academic economic 'science' and economic science produced in the context of application (regulatory science), in this case economics applied in the field of competition law and policy. After examining the emergence of forensic economics as a separate field (2), we will examine the reality of forensic economics from the perspective of various theoretical approaches in sociology.

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

Concurrences Antitrust Writing Awards and Ranking 2013 - Vote Now!

Posted by D. Daniel Sokol

Concurrences will give out antitrust writing awards for the academic and business categories for specific works and a ranking of the best professional publications. See here for details.

From the site: 

The Antitrust Writing Awards’ goal is to promote antitrust scholarship and competition advocacy by recognizing and awarding the best articles published in the antitrust law and law & economics fields in the last 12 months. The Awards feature two different categories of articles: Academic and Business. The Academic Articles category comprises articles published in academic journals, whereas the Business Articles category features articles published in professional magazines or newsletters. The articles are selected by a jury and by readers.  The jury consists of a Board, an Academic and a Business Steering Committees composed of the leading academics and counsels. Readers contribute to the selection process by voting for articles. Click here to see the Jury.

To ensure transparency, but also impartiality and expertise in the processing of the Awards, publications are assessed following an international peer-reviewed evaluation process.  Members of the Board and of the Steering Committees are chosen from world-renowned antitrust enforcers, counsels and academics who are committed to judging the Awards fairly.  Click here to see the Rules.

The Institute of Competition Law - the publisher of the Journal Concurrences and the e-Competitions Bulletin - and George Washington University Law School Competition Law Center, are organizing these first of their kind Antitrust Writing Awards with the support of partners.

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

Attention Rivalry among Online Platforms and Its Implications for Antitrust Analysis

Posted by D. Daniel Sokol

David Evans (U Chicago, UCL, Global Economics Group) has posted Attention Rivalry among Online Platforms and Its Implications for Antitrust Analysis.

ABSTRACT: Many online businesses, including most of the largest platforms, seek and provide attention. These online attention rivals provide products and features to obtain the attention of consumers and sell some of that attention, through other products and services, to merchants, developers and others who value it. The multi-sided business of seeking and providing attention is fluid with rivalries crossing boundaries defined by the features of the products and services. It is also dynamic. Rivals introduce new products and services, some involving drastic innovation, frequently. Online attention rivals impose competitive constraints on each other. Product differentiation tempers the significance of these constraints in particular situations. But the relevant differentiation mainly involves aspects of the attention that is procured and sold rather than, necessarily, particular features of the products and services used for acquiring and delivering that attention. Antitrust analysis should consider these competitive constraints in evaluating market definition, market power, and the potential for anticompetitive effects. Most importantly, antitrust analysis should focus on competition for seeking and providing attention rather than the particular products and services used for securing and delivering this attention. The existence of competition among attention rivals does not imply that antitrust should reduce the vigor with which it examines mergers and exclusionary practices among these platforms. It just needs to look for problems in the right places.

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

The role of ‘freedom’ in EU competition law

Posted by D. Daniel Sokol

Pinar Akman (University of East Abglia Law) has an interesting new article on The role of ‘freedom’ in EU competition law. When I think of Freedom and someone in the UK, I think of George Michael's 1990 hit of th same name (sorry Pinar). Pinar's work is really good and worth reading.

February 5, 2013 | Permalink | Comments (1) | TrackBack (0)

The Dormant Commerce Clause, Anticompetitive State Regulation, Competition and Consumers

Posted by D. Daniel Sokol

Kexin Li (American Antitrust Institute) discusses The Dormant Commerce Clause, Anticompetitive State Regulation, Competition and Consumers.

ABSTRACT: The purpose of this working paper is to examine anticompetitive state regulations under the dormant Commerce Clause in light of competition policy and consumer welfare. The paper is organized into three sections: (1) introduction of the dormant Commerce Clause and the problem of anticompetitive state regulations; (2) introduction of the state action doctrine as a hurdle for antitrust law to reach such regulations; and (3) argument that the dormant Commerce Clause can be used to regulate such regulations using two recent Ninth Circuit decisions as an example.

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