Wednesday, February 25, 2015
Bill Baer (DOJ) has provided Workshop on Examining Health Care Competition Opening Remarks
Briefing on Big Data, Privacy, and Antitrust Wednesday, March 18, 2015 8:30 – 11:45 am George Mason University School of Law
Wednesday, March 18, 2015 from 8:30 – 11:45 am
George Mason University School of Law
Increasingly, there is a call for competition authorities to take account of firms’ collection and use of consumer data—practices that have been the sole province of consumer protection—when reviewing mergers or conducting antitrust investigations. For example, although the Facebook-WhatsApp, Google-Nest, and Oracle-Datalogix mergers raised no traditional antitrust concerns, some argued for a new competition analysis that would take into account the abilities of the combined entities to collect and utilize consumer data. Indeed, a consortium of public interest groups recently asked the FTC to take a closer look at “increasing concentration” in the “big data digital marketplace.” Further, several commentators urged the FTC to examine privacy-related issues during its investigation into Google’s search practices. At the same time, it’s not at all clear that antitrust can or should accommodate these new non-competition concerns. Critics of conflating antitrust and privacy analysis contend that the use of big data enhances competition by improving service and facilitating entry. What’s more, antitrust analysis traditionally has focused on markets for goods and services that are sold to consumers, not on internally-used resources like data. Would consumers be better served with the continued divorcement of privacy and competition concerns? Or should modern antitrust be more accommodating to privacy concerns in the era of big data? Join the LEC for a morning of lively discussion on this topic. FTC Commissioner Maureen Ohlhausen will set the stage by discussing her linked Antitrust Law Journal article "Competition, Consumer Protection and The Right [Approach] To Privacy.” A panel discussion on big data and antitrust, which includes some of the leading thinkers on the subject, will follow.
Ioannis Lianos, University College London - Faculty of Laws Frederic Jenny, ESSEC Business School Florian Wagner-von Papp, University College London Faculty of Laws Evgenia Motchenkova, VU University Amsterdam - Department of Economics; TILEC, and Eric David, Vaughan Avocats describe Judicial Scrutiny of Financial Penalties in Competition Law: A Comparative Perspective.
ABSTRACT: We proceed to a comparative analysis of the judicial scrutiny of financial penalties for competition law infringements in the following jurisdictions: European Union, United States, Germany, United Kingdom, France and Chile.
An Optimal and Just Financial Penalties System for Infringements of Competition Law: A Comparative Analysis
Ioannis Lianos, University College London - Faculty of Laws Frederic Jenny, ESSEC Business School Florian Wagner-von Papp, University College London Faculty of Laws Evgenia Motchenkova, VU University Amsterdam - Department of Economics; TILEC, and Eric David, Vaughan Avocats offer An Optimal and Just Financial Penalties System for Infringements of Competition Law: A Comparative Analysis.
ABSTRACT: The report examines optimal financial penalties from an economic and a comparative perspective. While emphasis is put on deterrence, we also examine some limits to the optimal enforcement theory employed by economists to design effective sanctions, in particular the principle of proportionality and the need for the penalty to be related to the harm caused and the wrong committed, the legal system integrating corrective justice concerns. The report delves into the tension between over-enforcement and under-enforcement and that between a more effects-based approach for setting financial penalties (sanctions) that would rely on economic methodologies and a case-by-case analysis to provide an accurate estimate of the harm caused by the anticompetitive conduct and a more "forms-based" approach that would rely on the use of proxies of percentages of the volume of commerce or the affected sales. The latter reduce the administrative costs of the authorities in designing appropriate sanctions but are less accurate than effects-based approaches. The report examines intermediary approaches put forward by the literature and their possible application to various competition law infringements (e.g. cartels, abuse of a dominant position). The final part of the report proceeds to a detailed comparative analysis of the financial penalties (sanctions) regimes for infringements of competition Law in the European Union, United States, Germany, United Kingdom, France and Chile, taking an empirical and a doctrinal perspective. Specific recommendations for the reform of the financial penalties system in Chile are also provided.
Tuesday, February 24, 2015
Ioannis Lianos, UCL examines The Principle of Effectiveness, Competition Law Remedies and the Limits of Adjudication.
ABSTRACT: The principle of effectiveness is closely related to the development of the emerging EU law on remedies. Its instrumental use has enabled the EU courts to restrict the principle of national procedural autonomy, when this was convenient in order to ensure the accomplishment of the aims set by EU competition law enforcement, and to establish EU-granted remedies, the most notable one being the right to claim competition law damages. The principle of effectiveness may also influence the design of injunctive relief by the European Commission, which should be adequate to ensure not only that the results of the violation of competition law are reversed, but also that there is no risk that the aims of competition law will be jeopardized in the future (general deterrence, specific deterrence and prophylactic/preventive aims). Left unbound, the principle of effectiveness may offer the opportunity to competition authorities to expand their remedial discretion and to re-design market processes and outcomes in accordance with the dominant interpretation of their statutory objectives. The point made in this paper is that, whatever one thinks of the appropriateness of an expansive view of remedial discretion, which is not, in our view, supported by the restrictive interpretation of the principle of effectiveness in EU law, remedial discretion is naturally limited by the specific function exercised by the remedial process chosen or, more contentiously, imposed by the nature of the dispute. Drawing on Fuller’s account of the existence of various forms of social ordering, each of them emerging in specific circumstances/context and having its own principles and limitations, the paper offers some reflections on the possible limits that the essence of each ideal type of social ordering sets to the expansive interpretative potential of the principle of remedial effectiveness. The polycentric nature of competition law disputes calls for flexibility in the choice of the adequate form of social ordering aiming to achieve the objectives set by the legislator. This breaks with the classic view of the adjudication model and hints to the prevalence, in a significant number of cases with a pronounced polycentric element, of what has been called the “structural adjudication” model, still distinct from the model of regulatory governance. The paper explores the nature of commitment decisions as an illustration of the difficulties of classification, without a proper consideration of the functions and respective limits of each form of social ordering. It does this by examining some recent cases, such as the ongoing Google saga at the European Commission or the Skyscanner judgment of the UK Competition Appeal Tribunal (CAT).
Ioannis Lianos, UCL has written on Brands, Product Differentiation and EU Competition Law.
ABSTRACT: The paper explores how EU competition law has integrated so far the concept of brands in different areas of enforcement. Although EU competition law has engaged in multiple instances with branding and product differentiation, brands do not yet constitute an operational concept in EU competition law. This is due to an important uncertainty as to the normative choices that need to be made with regard to the relation between brands and the formation of consumer preferences. The concerns raised by retailer power and the development of private labels also indicate that the existing economic theory on product differentiation may not also provide a complete picture on the effects of brands on the competitive process and ultimately on consumers. Competition law will also need to tackle the issues raised by the development of ‘social branding’ and the dialogic interaction between brand owners and consumers in the constitution of their brand identity.
David Balto has an op-ed on The FTC should release an interim report to help patent reform.
Gautam Gowrisankaran (Arizona), Aviv Nevo (Northwestern) and Robert Town (Wharton) have a great paper on Mergers When Prices Are Negotiated: Evidence from the Hospital Industry.
ABSTRACT: We estimate a bargaining model of competition between hospitals and managed care organizations (MCOs) and use the estimates to evaluate the effects of hospital mergers. We find that MCO bargaining restrains hospital prices significantly. The model demonstrates the potential impact of coinsurance rates, which allow MCOs to partly steer patients toward cheaper hospitals. We show that increasing patient coinsurance tenfold would reduce prices by 16 percent. We find that a proposed hospital acquisition in Northern Virginia that was challenged by the Federal Trade Commission would have significantly raised hospital prices. Remedies based on separate bargaining do not alleviate the price increases.
Yuriy Gorodnichenko, UC Berkeley & NBER, Viacheslav Sheremirov, FRB Boston and Oleksandr Talavera, Sheffield ask Price Setting in Online Markets: Does IT Click?
ABSTRACT: Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, we shed new light on how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. We document that although online prices are more flexible than offline prices, they continue to exhibit relatively long spells of fixed prices, large size and low synchronization of price changes, considerable cross-sectional dispersion, and low sensitivity to predictable or unanticipated changes in demand conditions. Qualitatively these patterns are similar to those observed for offline prices, which calls for more research on the sources of price rigidities and dispersion.
Monday, February 23, 2015
Karim Jamal, University of Alberta - Department of Accounting, Operations & Information Systems and Shyam Sunder, Yale University - School of Management explore Monopoly Versus Competition in Setting Accounting Standards.
ABSTRACT: Financial accounting standards are set by organizations granted a significant degree of monopoly power by various governments. While there has been considerable debate on the merits of national (e.g., US Financial Accounting Standards Board (FASB)) versus international (International Accounting Standards Board (IASB)) monopolies, little attention has been paid to the merits of using competing standard‐setting organizations (SSOs) for setting accounting standards. We compare the standard‐setting processes of the FASB/IASB to the processes of four technology‐oriented SSOs to assess the role of competition. We also provide a case study of monopoly and competitive standards in telephony. Both telephony and accounting yield some gains from coordination, and similar arguments are used (under the labels of comparability and consistency of accounting) in debates about granting a monopoly to their respective SSOs. Our results show that a group of volunteers competing with the government‐sanctioned monopoly of International Telecommunications Union transformed the telephone industry. Thanks to this standards competition, we enjoy free video internet calling and massive cost savings. Implications for accounting standard setting are discussed.
Pierre Larouche, Tilburg Law and Economics Center (TILEC); College of Europe - Bruges; Tilburg University - Tilburg Law School; Center on Regulation in Europe (CERRE), and Geertrui Van Overwalle, Leuven University have a new thought paper on Interoperability Standards, Patents and Competition Policy.
ABSTRACT: While the traditional literature and the policy statements concerning standardization as such emphasize the benefits of standardization, the intellectual property and competition law literature and policymaking has been more critical of standardization. Intellectual property is relevant, as the technology embedded in a standard is often protected with so-called Standard Essential Patents (SEPs). Similarly, competition law is relevant to the collective behaviour of private firms in creating and operating Standard-Setting Organisations (SSOs), and to their individual behaviour in notifying and licensing their intellectual property. In recent litigation, three issues have risen to the fore, popularized under the labels “patent ambush”, “patent holdup” and “patent thickets”. There is a risk that the discussion of standardization, in academic and policy circles, becomes reduced to these issues. The paper advocates a more holistic approach, and sets out avenues for future research, including an investigation of the consequences of a broader and more nuanced view of the various parameters of standardization, an analysis of the relationship between standards and innovation, and a review of the interplay between the private and public aspects of standardization.
Nathaniel Grow University of Georgia - Department of Insurance, Legal Studies, Real Estate describes Regulating Professional Sports Leagues.
ABSTRACT: Four monopoly sports leagues currently dominate the U.S. professional sports industry. Although federal antitrust law — the primary source of regulation governing the industry — would normally be expected to provide a significant check on anticompetitive, monopolistic behavior, it has failed to effectively govern the leagues due to both their well-entrenched monopoly status and the unique level of coordination necessary among their respective teams. Consequently, the four leagues today each in many respects enjoy unregulated monopoly status in what is estimated to be a $67 billion industry.
As one might expect, these leagues use their largely unchecked monopoly power to injure the public in various ways. By restricting expansion, leagues create an artificial shortage of franchises enabling their existing teams to extract billions of dollars in stadium subsidies from U.S. taxpayers. Similarly, by preventing their franchises from individually licensing their broadcast rights nationally or over the Internet, the leagues are able to demand significantly higher fees from television networks and consumers than would be obtainable in a competitive marketplace, while at the same time subjecting viewers to arcane and outdated blackout provisions.
Unfortunately, existing proposals in the academic literature to remedy this undesirable state of affairs are both impractical and unlikely to be effective. This article instead proposes a surprisingly overlooked solution: the creation of a federal sports regulatory agency. Because the U.S. professional sports leagues today effectively operate as natural monopolies — with nearly 150 years of history establishing that competing leagues cannot sustainably co-exist in a sport for any significant length of time — direct government regulation of the industry is warranted. Indeed, a specialized agency would be particularly well suited to ensure that the leagues’ activities are aligned with the public interest, while at the same time accommodating the industry’s unusual economic characteristics.
Maarten Pieter Schinkel, University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA), Lukas Toth, University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) and Jan Tuinstra, University of Amsterdam - Department of Quantitative Economics (KE); Tinbergen Institute have a fascinating paper on Discretionary Authority and Prioritizing in Government Agencies.
ABSTRACT: Government agencies typically have a certain freedom to choose among different possible courses of action. This paper studies agency decision-making on priorities in a principal-agent framework with multi-tasking. The agency head (the principal) has discretion over part of the agency's budget to incentivize his staff (agents) in the pick-up of cases. The head is concerned with society's benefits from the agency's overall performance, but also with the organization's public image as formed from pursuing high-profile cases and various non-case specific activities. Based on their talent and the contracts offered by the head, staff officials choose which type of task to pursue: complex major, yet difficult to complete cases with an uncertain outcome, or basic minor and simple cases with a high probability of success. The size of the agency's discretionary budget influences not only the scale, but also the type of tasks it will engage in. Social welfare is non-monotonic and discontinuous in the agency's budget. Small changes in the budget may cause extensive restructuring from major to minor tasks, or vice versa. A budget cut can increase welfare more than too little extra budget would. For lower binding budgets, the head continues to sub-optimally incentivize work on complex tasks, when the agency should have shifted down to simpler tasks. In determining the discretionary space of the agency head, the budget-setter can limit the extraction of resources, but thereby also reduces the benefits from the head's superior information on how to incentivize the officials. Antitrust authorities serve as one illustration of policy implications for institutional design, including optimal budgeting and agency mergers.
Sunday, February 22, 2015
Regulation, Antitrust and Promotion of Innovation? Challenges and experiences from communications to payment systems
Friday, February 20, 2015
The Parent-Subsidiary Relationship in EU Antitrust Law and the AEG Telefunken Presumption: Between the Effectiveness of Competition Law and the Protection of Fundamental Rights
Lorenzo Federico Pace, Università degli Studi del Molise - Facolta di Economia discusses The Parent-Subsidiary Relationship in EU Antitrust Law and the AEG Telefunken Presumption: Between the Effectiveness of Competition Law and the Protection of Fundamental Rights.
ABSTRACT: This paper discusses how the protection of fundamental rights has become an issue in European Antitrust Law especially with reference to the parent-subsidiary relationship and the so-called AEG Telefunken presumption.
Cedric Argenton, Tilburg Law and Economics Center (TILEC); Tilburg University - Center and Faculty of Economics and Business Administration and Eric Van Damme, TILEC and CentER, Tilburg University have an interesting paper on Optimal Deterrence of Illegal Behavior Under Imperfect Corporate Governance.
ABSTRACT: We study the optimal design of liability schemes (at the corporate or individual level) when the objective is to deter socially harmful corporate behavior without discouraging productivity enhancements. We assume that firms face agency problems between shareholders and managers (moral hazard) and that unlimited sanctions on individuals are not available. We show that pure corporate liability rules can induce the first-best outcome only if firms can condition compensation on detection and the enforcement system is good enough. In other circumstances, unless individual sanctions can be very high, optimal mechanisms typically impose both corporate and individual liability.
Markus Rohrig, Hengeler Mueller asks Nowhere to Hide? Extradition in Antitrust Cases from a European Perspective.
ABSTRACT: Earlier this year, Germany surrendered Romano Pisciotti, an Italian citizen charged with price fixing and bid rigging in the marine hose cartel, to the US Government. This is the first time the USA secured the extradition of a foreign individual on antitrust charges. This article explores the implications of the Pisciotti case on antitrust practitioners counselling clients in international cartel cases. It also highlights important implications for antitrust policy makers in Europe, especially, when considering the introduction of criminal sanctions—a hotly contested battleground in antitrust policy making today.