Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, April 15, 2014

Competitive Cross-Subsidization

Zhijun Chen (Aukland) and Patrick Rey (Toulouse) analyze Competitive Cross-Subsidization.

ABSTRACT: This paper analyzes competitive pricing policies by multiproduct firms facing heterogeneous buying patterns. We show that cross-subsidization arises when firms have comparative advantages on different products but are equally efficient overall: Firms earn a profit from multi-stop shoppers by charging positive margins on their strong products but, as price competition for one-stop shoppers drives total margins down to zero, they price weaker products below cost. Banning below-cost pricing leads to higher profits and higher prices for one-stop shoppers, and may reduce consumer surplus as well as total social welfare.

April 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, April 14, 2014

Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers

Orley C. Ashenfelter (Princeton), Daniel Hosken (FTC), and Matthew C. Weinberg (Drexel) ask Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers.

ABSTRACT: In The Antitrust Paradox, Robert Bork viewed most mergers as either competitively neutral or efficiency enhancing. In his view, only mergers creating a dominant firm or monopoly were likely to harm consumers. Bork was especially skeptical of oligopoly concerns resulting from mergers. In this paper, we provide a critique of Bork’s views on merger policy from The Antitrust Paradox. Many of Bork’s recommendations have been implemented over time and have improved merger analysis. Bork’s proposed horizontal merger policy, however, was too permissive. In particular, the empirical record shows that mergers in oligopolistic markets can raise consumer prices.

April 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Heterogenous switching costs

Gary Biglaiser (University of North Carolina, Chapel Hill), Jacques Cremer Toulouse School of Economics (GREMAQ, CNRS and IDEI), and Gergely Dobos European Commission,(DG Competition) examine Heterogenous switching costs.

ABSTRACT: We consider a simple two period model where consumers have different switching costs. Before the market opens, there was an incumbent who sold to all consumers. We identify the equilibrium both with Stackelberg and Bertrand competition and show how the presence of low switching cost consumers benefits the incumbent, despite the fact that it never sells to any of them.

April 14, 2014 | Permalink | Comments (0) | TrackBack (0)

The Application of EU Competition Rules in the Transport Sector

Itai Rabinovici (DG Competition) analyzes The Application of EU Competition Rules in the Transport Sector.

ABSTRACT: The major legislative development in 2013 was the adoption of the Commission's proposal for a fourth railway package. Air transport was the focus of competition enforcement with the adoption of a commitments decision and three major merger decisions.

April 14, 2014 | Permalink | Comments (0) | TrackBack (0)

New Kid on the Block-Croatia's Path to Convergence with EU Competition Rules

Mirta Kapural, Croation Competition Authority discusses New Kid on the Block-Croatia's Path to Convergence with EU Competition Rules.

ABSTRACT: Rules and policies started to develop in Croatia in the field of competition more than fifteen years ago. They have aligned on European rules and policies as part of the accession process to the European Union. During that process, one significant hurdle has been the low level of understanding of competition within the judiciary, the administration, civil society, and even business.

April 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, April 11, 2014

Allan Fels AO and Mark Williams to University of Melbourne

Melbourne Law School has picked up two senior lateral hires - Allan Fels AO (from ANSZOG) and Mark Williams (from Hong Kong Polytechnic).  See the press release here.  They join Caron Beaton-Wells and Arlen Duke as part of the competition law core faculty.  This is a big pick-up for Melbourne and solidifies the school as the top competition law program in the the broader East Asia/Pacific Rim area.

In terms of four competition law specialists, this makes Melbourne one of the top schools anywhere in the world.* It also has, to my knowledge, the only dedicated competition law LLM program in the Pacific Rim.  See here for details. Melbourne also has a number of visiting professors from around the world who teach in the competition law program.

 

 

 

 

* I note that the University of Florida, among others, also has four - Harrison, Page, Sokol and Zheng.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

ABA Section of Antitrust Law presents Antitrust in Asia: China May 21 - 23, 2014

The ABA Section of Antitrust Law presents
 
 
See the conference brochure here.
 
The conference will present high-level discussion and debate on the key developments in China and elsewhere in Asia, and provide insights into U.S. litigation risks for Asian firms. You will hear:
 
·         Leaders of Asian competition agencies debate whether and how competition law and policy in Asia differs from how it is practiced elsewhere;
·         DG Shang Ming, Professor Huang Yong, and leading Chinese and U.S. practitioners discuss how MOFCOM reviews mergers – from process to analysis to remedies;
·         DG Xu Kunlin, Supreme People’s Court Judge Zhu Li, and others discuss substantive and procedural issues in NDRC’s enforcement, including in the high-tech sector;
·         DG Ren Airong, FTC Commissioner Maureen Ohlhausen, the General Counsel of Tencent, and others explain how they analyze issues at the intersection of antitrust and intellectual property law, including conduct involving standard-essential patents;
·         Supreme People’s Court Chief Judge Kong Xiangjun, Senior Judge Douglas Ginsburg, and others discuss private actions in Asia and the risks to Asian entities from private litigation in the United States and elsewhere;
·         Professor Bill Kovacic, German Federal Cartel Office and ICN Chair Andreas Mundt, and others discuss the application of international best practice to competition law in Asia;
·         Deputy Assistant Attorney General Leslie Overton, Michael Han, John Fingleton, and others discuss the interplay of competition and other policies; and
·         The General Counsel of Qualcomm and senior in-house counsel from BHP Billiton, General Electric, Intel, and Microsoft share insights on their experience in dealing with the challenges of Chinese and other Asian competition laws.
 
Other highlights include:
·         Keynote addresses by FTC Chairwoman Edith Ramirez and China Investment Corporation recent president Gao Xiqing;
·         Fundamentals of Chinese and U.S. competition law presented by experts including Professor Wang Xiaoye, Judge Douglas Ginsburg, and Professor Bill Kovacic; and
·         A session on careers in the competition law field with successful professionals from China and the United States.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Most-favoured-customer clauses and two-sided platforms

Daniel Zimmer (Bonn) and Martin Blaschczok describe Most-favoured-customer clauses and two-sided platforms.

ABSTRACT: Due to network effects, most-favoured-customer clauses (MFC clauses) in favour of two-sided platforms raise particular competition concerns. Article 101 and—in a case of a dominant position of the platform—Article 102 TFEU can apply in such cases. MFC clauses can be exempt under the Vertical Block Exemption Regulation from the application of Article 101(1) of the Treaty on the Functioning of the EU (TFEU). It appears doubtful whether the hard-core restraint of Article 4(a) of the Regulation includes MFC clauses in favour of two-sided platforms.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007

Rena M. Conti and Ernst R. Berndt discuss Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007.

ABSTRACT: We examine the impact of loss of U.S. patent exclusivity (LOE) on the prices and utilization of specialty drugs between 2001 and 2007. We limit our empirical cohort to drugs commonly used to treat cancer and base our analyses on nationally representative data from IMS Health. We begin by describing the average number of manufacturers entering specialty drugs following LOE. We observe the number of firms entering the production of newly generic specialty drugs ranges between two and five per molecule in the years following LOE. However, the existence of time-varying and unobservable contract manufacturing practices complicates the definition of "manufacturers" entering the market. We use pooled data methods to examine whether the neoclassical relationship between price declines and volume increases upon LOE holds among these drugs. First, we examine the extent to which estimated prices of these drugs undergoing LOE fall w! ith generic entry. Second, we estimate reduced form random effect models of utilization subsequent to LOE. We observe substantial price erosion after generic entry; average monthly price declines appear to be larger among physician-administered drugs (38-46.4%) compared to oral drugs (25-26%). Additionally, we find average prices for drugs produced by branded firms rise and prices for drugs produced by generic firms fall upon LOE; the latter effect is particularly large among oral drugs. In pooled models, volume appears to increase following generic entry, but this result appears to be largely driven by oral drugs. Molecule characteristics, number of manufacturers and 2007Q4 revenues are significant predictors of post-2007 drug shortages. We discuss second best welfare consequences of these results.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

The EU Merger Regulation Ten Years after the 2004 Review

Johannes Luebking (DG Competition) reviews The EU Merger Regulation Ten Years after the 2004 Review.

ABSTRACT: Nearly ten years after the last major overhaul of the EU Merger Regulation (Council Regulation (EC) No 139/2004), the European Commission has now taken new initiatives in the legislative field to further strengthen EU merger control, one of the central pillars of EU competition law. The objective of the initiatives is twofold: to make EU merger control more efficient and to ensure that it addresses all sources of possible competitive harm caused by corporate restructuring.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Kamakahi v. ASRM: The Egg Donor Price Fixing Litigation

Kimberly D. Krawiec, Duke University - School of Law has written on Kamakahi v. ASRM: The Egg Donor Price Fixing Litigation.

ABSTRACT: In April 2011, Lindsay Kamakahi caused an international stir by suing the American Society for Reproductive Medicine (ASRM), the Society for Assisted Reproductive Technology (SART), SART-member fertility clinics, and a number of egg donor agencies on behalf of herself and other oocyte donors. The suit challenged the ASRM-SART oocyte donor compensation guidelines, which limit payments to egg donors to $5,000 ($10,000 under special circumstances), as an illegal price-fixing agreement in violation of United States antitrust laws. Ensuing discussion of the case has touched on familiar debates surrounding coercion, commodification, and exploitation. It has also revealed many misconceptions about oocyte donation, the allegations in the case, and antitrust law’s application to the ASRM-SART oocyte donor compensation guidelines. Regardless of outcome, the suit is an important one that could signal a change in public attitudes about the propriety of mixing money with motherhood. It should — and will — be closely watched.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 10, 2014

Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at the Pen and Pad Briefing on the Justice Department and Federal Trade Commission Joint Antitrust Policy Statement on Sharing of Cybersecurity Information

Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at the Pen and Pad Briefing on the Justice Department and Federal Trade Commission Joint Antitrust Policy Statement on Sharing of Cybersecurity Information.

 

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

"Special" Treatment: State-Owned Enterprises Under Canada's Foreign Investment and Competition Laws

Sandy Walker (Dentons Canada LLP) discuss "Special" Treatment: State-Owned Enterprises Under Canada's Foreign Investment and Competition Laws.

ABSTRACT: Canada, like the United Kingdom and the United States, has witnessed a sharp decline in state ownership in the past few decades. However, investment by foreign state investors in Canada in recent years-in effect a foreign "nationalization"-has represented an interesting and significant deviation from this trend, particularly in the natural resources sector. Such investment has not gone unnoticed: the acquisition of Canadian resource companies by foreign state-owned enterprises and sovereign wealth funds has become the subject of heated political debate and extensive press attention in Canada over the last few years including the acquisition by Chinese SOE, CNOOC, of Canadian oil company, Nexen in 2013.

This wave of foreign state ownership has been remarkable not only because of the state status of the acquirers but also because the sources of foreign direct investment in Canada are no longer limited to Western countries (particularly the United States) but include a growing number of emerging economies such as China, Malaysia, Korea, Russia, Singapore and the Middle Eastern oil states. As illustrated in Table 1, which lists recent SOE investments in Canada, investment by SOEs in Canada has focused primarily on natural resources and, in particular, oil and gas. Also of note is that Chinese investment has expanded dramatically: cumulative foreign direct investment into Canada from China (both state and non-state) was U.S. $10.7 billion at the end of 2011, an increase of 3500 percent in the last decade. From 2011 to 2012, Chinese investment in Canada doubled to reach U.S. $21.3 billion, $15.2 billion of which can be attributed to the CNOOC-Nexen deal. SOEs are also investing in related industries, moving up the energy sector's "value chain;" for example, PetroChina had expressed interest in building Enbridge's Northern Gateway pipeline to transport Canadian oil to the west coast of Canada. It is also noteworthy that Chinese companies have increasingly invested in Canadian companies with assets in Canada rather than Canadian companies with assets outside of Canada (e.g., China National Petroleum Corporation's acquisition of PetroKazakhstan in 2005). The sometimes nationalist response by Canadians to SOE investments is in part a response to already existing concerns about foreign investment. These concerns rose to a fevered pitch in the wake of a spate of foreign (non-SOE) takeovers of Canadian icons beginning in the mid 2000s with the acquisitions of companies such as mining company Inco, aluminum producer Alcan, natural resources giant Falconbridge, and retailer Hudson's Bay Company (founded in 1670 in Canada). The loss of head office jobs (the so-called "hollowing out" of corporate Canada) and the elimination of Canadian companies as national champions were key themes of critics of these

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Negotiated Remedies in the Modernization Era: The Limits of Effectiveness

Damien M. B. Gerard, University of Louvain - CeDIE discusses Negotiated Remedies in the Modernization Era: The Limits of Effectiveness.

ABSTRACT: Over the past ten years, the nature, scope and design of remedies have taken a growing importance in the enforcement of competition law in the European Union. That evolution can be viewed as one of the many consequences of the process known as the modernization of EU competition law, understood as a comprehensive attempt to experiment with a utility-maximizing approach to the regulation of economic competition with substantive, procedural and institutional dimensions. In effect, modernization has notably entailed a revamp of enforcement strategies driven by effectiveness considerations. In turn, that effectiveness paradigm has led to a shift toward a “negotiated” form of enforcement by means of tools such as leniency, settlements and commitment proceedings. Commitments, in particular, have developed into the default mechanism to enforce the antitrust provisions of the EU Treaties outside of the field of “cartels,” where the two other instruments are steadily relied upon.

The shift toward negotiated enforcement has moved remedies to the core of antitrust adjudication. However, the effectiveness rationality driving negotiated procedures is as such inapt to ensure the design of efficient remedies, it was submitted, i.e., effectiveness has limits when it comes to define optimal remedies, which in turn affects the legitimacy of those negotiated remedies. In the EU context, these limits are magnified by the relaxation in commitment proceedings of these safeguards that have historically limited the Commission’s remedial discretion, as captured by the concepts of proportionality and due process. While there is a case for relaxing proportionality requirements in commitment cases, doing away with both concepts creates a gap that threatens the legitimacy of competition law itself. In turn, filling that gap requires a review of the sequencing of commitment proceedings and associated procedural rights, as well as the (re-)development of a credible alternative thereto, in order to salvage the voluntary character of commitments as a guarantee of proportionality and to turn commitment proceedings into a collaborative process capable of delivering optimal outcomes both from an effectiveness and an efficiency point of view.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Scottish Minimum Alcohol Pricing & EU Law

Angus MacCulloch, Lancaster University - Law School describes Scottish Minimum Alcohol Pricing & EU Law.

ABSTRACT: The SNP Government in Scotland introduced Minimum Price per Unit (MPU) for alcohol in the Alcohol (Minimum Pricing) (Scotland) Act 2012. A challenge to those provisions was brought by the Scotch Whisky Association and others in SWA and Others for Judicial Review of the Alcohol (Minimum Pricing) (Scotland) Act 2012 [2013] CSOH 70. This article examines the impact of the first phase of that legal challenge. The analysis is broadly in three parts: first, an analysis of the Commission Opinion on MPU which went on to have significance in the case itself; second, an analysis of the Outer House judgment itself; and, finally, a discussion of the policy choices which underlie some of the arguments advanced in the case and what they tell us about the balance between free movement and undistorted competition in the internal market.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Agricultural Cooperatives and the Law: Obsolete Statutes in a Dynamic Economy

Peter Carstensen, University of Wisconsin Law School explains Agricultural Cooperatives and the Law: Obsolete Statutes in a Dynamic Economy.

ABSTRACT: Farm cooperatives are important vehicles for the marketing of agricultural production. The Capper-Volstead Act's limited antitrust immunity and the Agricultural Marketing Agreement Act's authorization of cartels along with some other equally old statutes still structure much of the marketing process for cooperatives. The results are anti-competitive harms to both farmers and consumers. In addition, despite the very large scale and vast membership of some cooperatives, no state or federal law provides membership governance rights and information disclosure comparable to that imposed on similarly sized corporations. Current judicial interpretation has constrained some of the worst aspects of these statutory schemes, but only a fundamental revision of the legislation can address the full range of current issues.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Mexico’s Proposed Reform of Competition Law A Critique from Europe

Anne Perrot, Universite Paris 1 Pantheon-Sorbonne and Assimakis Komninos, University College London, Department of Law offer Mexico’s Proposed Reform of Competition Law A Critique from Europe.

ABSTRACT: On 19 February 2014, sweeping amendments to the Mexican Competition Act were presented, which include a number of problematic elements. Most alarmingly, the proposals refer to a newly introduced concept of "barriers to competition" and would make it a violation of competition law to create a "barrier to competition". They also intend to empower the Mexican competition authority to carry out market investigations leading potentially to behavioural and/or structural measures. The applicable test is again "barriers to competition", which is a flawed concept and would harm both competition on the merits and consumer welfare in Mexico, if adopted.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Abuse of Dominance: Exclusionary Pricing Abuses

Alison Jones, King's College London – The Dickson Poon School of Law and Liza Lovdahl Gormsen, University of Manchester address Abuse of Dominance: Exclusionary Pricing Abuses.

ABSTRACT: This chapter examines the way that EU competition law applies to exclusionary pricing abuses, focusing on predatory pricing, selective low pricing, margin squeeze, rebates and other forms of price discrimination. It considers whether the evolution in the jurisprudence reflects a less formalistic approach to Article 102 and a trend towards a more economic one, based on a consumer welfare objective. The Chapter concludes that in seeking to identify unlawful exclusionary behaviour, the judgments of the EU Courts seem, to date, to prefer a construction of Article 102 that will ensure that the process of competition and rivalry between firms is preserved and protected. The anti-competitive effects of a dominant firm’s conduct thus tend to be assumed where that conduct is capable of excluding equally efficient competitors or is liable to remove or restrict a buyer’s freedom to choose its sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition. Critics complain that the EU rules in this area may, in consequence, be over-inclusive and may unduly deter pro-competitive low cost pricing by dominant firms. Although the Commission, in its Guidance Paper and more recent decisions, has sought to meet this criticism, promising to focus more closely on the question of whether a pricing practice will exclude equally efficient competitors and cause consumer harm, it is too early to determine to what extent this new policy will result in a concomitant evolution in the jurisprudence of the Court of Justice.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?

David Besanko, Northwestern University - Kellogg School of Management, Ulrich Doraszelski, Harvard University - Department of Economics; University of Pennsylvania - Business & Public Policy Department, and Yaroslav Kryukov, Tepper School of Business, CMU ask The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?

ABSTRACT: We formally characterize predatory pricing in a modern industry-dynamics framework that endogenizes competitive advantage and industry structure. As an illustrative example we focus on learning-by-doing. To disentangle predatory pricing from mere competition for efficiency on a learning curve we decompose the equilibrium pricing condition. We show that forcing firms to ignore the predatory incentives in setting their prices can have a large impact and that this impact stems from eliminating equilibria with predation-like behavior. Along with the predation-like behavior, however, a fair amount of competition for the market is eliminated.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

A US Court Issues Formalistic Ruling on Reverse-Payment Settlements After 'Actavis' (GlaxoSmithKline/Teva Pharmaceuticals/Louisiana Wholesale Drug Company/King Drug Company)

Mike Carrier (Rutgers - Camden) explains A US Court Issues Formalistic Ruling on Reverse-Payment Settlements After 'Actavis' (GlaxoSmithKline/Teva Pharmaceuticals/Louisiana Wholesale Drug Company/King Drug Company).

ABSTRACT: In FTC v. Actavis, the Supreme Court held that a brand firm's payment to a generic to delay entering the market could violate the antitrust laws. In one of the first post-Actavis decisions, the New Jersey district court in In re Lamictal Direct Purchaser Antitrust Litigation issued a narrow, formalistic ruling on the question of what constitutes a payment. In the settlement at issue, GlaxoSmithKline agreed (in what is known as a no-authorized-generic provision) not to launch its own generic version of epilepsy- and bipolar-disorder-treating Lamictal during Teva’s 180-day exclusivity period, which the Hatch-Waxman Act reserves for the first generic to challenge a brand firm’s patent. This short article highlights two flaws in the opinion. First, the ruling was formalistic in concluding that Actavis was limited to cash payments. And second, the court invoked Actavis’s “five considerations” (which explained why antitrust immunity was not appropriate) as defenses the settling parties could offer. The article concludes that future courts would benefit from more directly focusing on the substance of brand conveyances to generics and more carefully following the Supreme Court’s guidance.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)