Friday, June 17, 2016
Michael Carrier, Rutgers explores Pleading Standards: The Hidden Threat to Actavis.
ABSTRACT: In FTC v. Actavis, the Supreme Court issued one of the most important antitrust decisions in the modern era. It held that a brand drug company’s payment to a generic firm to settle patent litigation and delay entering the market could violate the antitrust laws.
Since the decision, courts have analyzed several issues, including causation, the role of the patent merits, and whether “payment” is limited to cash. But one issue — the pleading requirements imposed on plaintiffs — has slipped under the radar. This issue has the potential to undercut antitrust law, particularly because settlements with payment and delayed entry today typically do not take the form of cash. The complexity of non-cash conveyances increases the importance of the pleading stage.
For that reason, it is concerning that several courts have imposed unprecedented hurdles. For example, the district court in In re Effexor XR Antitrust Litigation failed to credit allegations that a generic delayed entering the market because a brand promised not to introduce its own “authorized generic” that would have dramatically reduced the true generic’s revenues. The same judge, in In re Lipitor Antitrust Litigation, dismissed a complaint despite allegations that the generic delayed entry in return for the brand’s forgiveness of hundreds of millions of dollars in potential damages in separate litigation.
This essay first introduces the Supreme Court’s Actavis decision. It then discusses the pleading standards articulated by the Court in Bell Atlantic v. Twombly and Ashcroft v. Iqbal. Turning to the cases that applied excessively high pleading requirements, it next focuses on the Effexor and Lipitor cases. Finally, it analyzes the settlement cases that applied a more justifiable analysis.
The essay concludes that the imposition of excessive standards, as was done by the Effexor and Lipitor courts, threatens to overturn established pleading standards and undercut the landmark Actavis decision. Such a result would significantly weaken the antitrust analysis of potentially anticompetitive settlements.
The Structural Presumption and the Safe Harbor in Merger Review: False Positives, or Unwarranted Concerns?
John Kwoka, Northeastern asks The Structural Presumption and the Safe Harbor in Merger Review: False Positives, or Unwarranted Concerns?
ABSTRACT: The structural presumption against mergers in highly concentrated markets has had a controversial history. The debate has centered on the error rates – and especially, the rate of false positives – from reliance on a simple structural standard for presuming a merger to be anticompetitive. This article introduces the first systematic evidence into that debate. It also uses that evidence to examine the empirical validity of the so-called “safe harbor”–the range of concentration where mergers are presumed unlikely to harm competition. The evidence is based on a substantial compilation of carefully studied mergers whose competitive outcomes are matched to data on concentration, the change in concentration due to the merger, and the number of remaining significant competitors after each merger. Statistical tests confirm that the current threshold in the Horizontal Merger Guidelines correctly identifies anticompetitive mergers with a high degree of accuracy, as indeed would somewhat tighter standards. Corollary findings include indications that a count of remaining significant competitors produces a slightly higher rate of correct predictions, and that the concentration-based safe harbor is at best rough guidance since there are any number of anticompetitive mergers in that zone. Data on recent merger enforcement practice are contrasted with these findings.
Thursday, June 16, 2016
NY State Bar Association Antitrust Section Mergers Committee "High-Tech Mergers" Wednesday, June 22, 2016
Kristelia A Garcia, University of Colorado Law School advocates Facilitating Competition by Remedial Regulation.
ABSTRACT: In music licensing, powerful music publishers have begun — for the first time ever — to withdraw their digital copyrights from the collectives that license those rights, in order to negotiate considerably higher rates in private deals. At the beginning of the year, two of these publishers commanded a private royalty rate nearly twice that of the going collective rate. This result could be seen as a coup for the free market: Constrained by consent decrees and conflicting interests, collectives are simply not able to establish and enforce a true market rate in the new, digital age. This could also be seen as a pathological form of private ordering: Powerful licensors using their considerable market power to impose a supracompetitive rate on a hapless licensee. While there is no way to know what the market rate looks like in a highly regulated industry like music publishing, the anticompetitive effects of these withdrawals may have detrimental consequences for artists, licensees and consumers. In industries such as music licensing, network effects, parallel pricing and tacit collusion can work to eliminate meaningful competition from the marketplace. The resulting lack of competition threatens to stifle innovation in both the affected, and related, industries.
Normally, where a market operates in a workably competitive manner, the remedy for anticompetitive behavior can be found in antitrust law. In music licensing, however, some concerning behaviors, including both parallel pricing and tacit collusion, do not rise to the level of antitrust violations; as such, they cannot be addressed by antitrust law. This is no small irony. At one point, antitrust served as a check on the licensing collectives by establishing consent decrees to govern behavior. Due to a series of acquisitions that have reduced the music publishing industry to a mere three entities, the collectives that are being circumvented by these withdrawals (and whose conduct is governed by consent decrees) now pose less of a competitive concern than do individual publishing companies acting privately, or in concert through tacit collusion. The case of intellectual property rights, which defer competition for creators and inventors for a limited period of time, is particularly challenging for antitrust.
Running contrary to conventional wisdom, this Article posits that regulation — not antitrust — is the optimal means of enabling entry and innovation in the music licensing market. While regulation is conventionally understood to restrict new entry and to interfere with competition, this Article demonstrates that where a market becomes highly concentrated, regulation can actually encourage competition by ensuring access to key inputs at competitive rates. While not without its drawbacks, including an increase in the cost of private action, remedial regulation in music licensing corrects anticompetitive behavior and ensures ongoing access to content and fair payment to artists, while supporting continued innovation in content distribution.
Emerging Trends in US Antitrust and EU Competition Law: a Comparative Perspective 14-15 October 2016
Emerging Trends in US Antitrust and EU Competition Law:
a Comparative Perspective
Over the past few years important policy changes have taken place in the US antitrust and EU competition law regimes. Such emerging trends raise the question of the degree of convergence between the two main competition law jurisdictions in the world. In the field of vertical agreements, for instance, following the land-mark ruling of the US Supreme Court in Leegin in 2007, Resale Price Maintenance (RPM) has been subject to the rule of reason; since that time, US Federal Courts have generally rejected claims concerning the illegality of RPM clauses included in vertical agreements. On the contrary, in Europe RPM clauses remain restrictions by object, and in the last few years these types of clauses have been actively prosecuted and fined by a number of National Competition Authorities (e.g. German Bundeskartellamt). Secondly, the Damages Directive adopted in December 2014 represents an attempt to strengthen private enforcement of EU competition rules as well as an attempt to catch up with private enforcement of US antitrust law. Thirdly, during recent years both the US Federal Trade Commission (FTC) and the European Commission have investigated the abusive behavior of firms operating in innovation markets which own substantial market power and reviewed merger cases involving firms operating in these industries. While in some cases (e.g. Google case), the FTC and the EU Commission followed diverging approaches, in others the two antitrust authorities have achieved similar conclusions. For instance, the FTC and the European Commission have analyzed the behavior of firms owning Standard Essential Patents (SAPs) under Section 5 FTC Act and Article 102 TFEU. The FTC´s decisions in Bosch and Google-Motorola and the European Commission´s decisions in Samsung and Motorola are worth comparing, in order to assess the standard applied by two antitrust authorities in this field.
The first Annual Conference of ENTraNCE for Executives aims at gathering academics, practitioners, officials from NCAs and representatives of firms to discuss recent developments in US antitrust and EU competition law, in order to assess the degree of convergence and divergence between the two main antitrust jurisdictions.
The fee to attend: 250 Euros.
The fee is waived for ENTraNCE donors, Academics (Professors and PhD students) and officials from NCAs.
ENTraNCE Annual Training
In cooperation with
The Robert Schuman Centre for Advanced Studies (RSCAS) of the European University Institute (EUI) is pleased to announce the call for applications of the first edition of the Annual Training of ENTraNCE for Executives.
The Annual Training provides participants with an advanced state-of-the-art overview of recent developments in competition law and economics, as well as State aid control. Members of ENTraNCE Scientific Committee, senior officials from the European Commission and other international organizations and practising lawyers are among the Annual Training lecturers. The Annual Training builds upon the experience gained in the past years by the RSCAS in organising ENTraNCE for Judges.
Structure of the Training
The first edition of the Annual Training will take place between September 2016 and June 2017. The programme combines an intensive residential training held at the EUI campus in Florence, and a series of e-learning activities.
The residential training is composed of 60+ hours of lectures divided in 4 blocks, each one lasting 2.5 days (from Thursday to Saturday morning).
Online activities will take place via a dedicated online platform. At the beginning of the course each participant will receive a username and password to access the platform. Via the online platform, the participants will be able to get access to preparatory reading materials for the residential training blocks in Florence. In addition, they will participate in an online forum of discussion on recent news in the field of competition policy. Finally, in each block of the online activities, participants will be required to fulfill certain assignments. Assignments could include, for instance, discussing and proposing alternative solutions for past, current or mock cases.
The Annual Training targets junior representatives of National Competition Authorities (NCAs), law firms, companies and economics consultancies who wish to deepen their knowledge in the field of competition law and economics. It is an advanced multi-disciplinary programme, which requires a sound background knowledge of either competition law or industrial economics.
The cost of participation in the full Annual Training 2016-2017 is €5,000. A special fee of €3,000 is foreseen for participants who would like to follow only two blocks of the Training of their choice, without taking part in the online activities.
Participants not coming from NCAs or ENTraNCE for Executives Donors can apply for the entire course at a fee of €10,000, or for two blocks at a fee of €6,000.
The tuition fees do not cover travel and accommodation costs in Florence during the residential blocks of training. However, lunches, coffee breaks, shuttle bus service and a number of social activities are provided.
How to apply
Online registration is open until 31 July 2016.
Patent Strategies and Competition Law in the Pharmaceutical Sector: Implications for Access to Medicines
Duncan Matthews, Queen Mary University of London - School of Law and Olga Gurgula, Queen Mary University of London, School of Law Patent Strategies and Competition Law in the Pharmaceutical Sector: Implications for Access to Medicines.
ABSTRACT: Competition policy is an under-utilised tool. Policy coherence between the IP system and competition must be strengthened in order to promote innovation and access to health technologies. Article 8(2) of the TRIPS Agreement provides flexibilities for governments to adopt competition law measures to prevent abuse of intellectual property rights, including IP rights related to the life sciences, namely the pharmaceutical industry and the biotechnology sector. Post-TRIPS, some countries have implemented competition laws but in practice are not using these effectively. This is particularly striking in the pharmaceutical sector, where abuses of intellectual property rights, such as reverse payment agreements and strategic patenting, risk allowing pharmaceutical companies to extend their market monopoly by blocking the entry of both generic and innovative medicines and, as a result, stifling competition and harming consumers. Nevertheless, these practices lack adequate attention by competition authorities. Such anti-competitive practices create particular challenges for the developing world as they can lead to significant barriers to innovation and access. Used effectively, competition policy can be in the best interests of society. It is conducive to freedom of choice and lower prices while, potentially, also serving as an important driver for innovation and access.
Elena Carletti, Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS), Steven Ongena, University of Zurich - Department of Banking and Finance, Jan-Peter Siedlarek, Federal Reserve Banks - Federal Reserve Bank of Cleveland and Giancarlo Spagnolo, Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF analyze The Impact of Merger Legislation on Bank Mergers.
ABSTRACT: We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.
Wednesday, June 15, 2016
This month, the Antitrust Chronicle brings you a special edition on Cartels & Concerted Practices, from A to Z. Articles in this months AC feature discussions on issues related to hybrid settlement cases in the European Union, price signaling, private damages in different jurisdictions and the impact, so far, of the Yates Memorandum on the DOJs investigations and prosecutions of individuals involved in cartels.
The articles address changes to cartel enforcement in several different jurisdictions. Are these changes fundamental? Evolutionary or even revolutionary? These developments are critical as antitrust authorities mature and hone their cartel enforcement, learning from their mistakes and success. Stay tuned; there is more to come.
By Marieke Datema & Chris Bryant – This article examines some of the issues that have arisen in relation to the European Commission’s…
By Lilly Fiedler & Nicholas Frey – This article discusses the state of the law and the increased regulatory interest in price signaling.…
By Robert E. Bloch, Kelly B. Kramer & Stephen M. Medlock – This paper suggests that the Yates Memorandum marks a significant…
By Pierre Crémieux, Marissa Ginn & Marc Van Audenrode – This article compares and contrasts the well-established system of private action that prevails in…
Nearly 16 Years of the Leniency Program in Brazil: Breakthroughs and Challenges in Cartel Prosecution
By Amanda Athayde Linhares Martins & Andressa Lin Fidelis – Since 2003, the prosecution of hardcore cartels has been a top…
By Paula W. Render – In 1978, when Congress deregulated the airline industry, there were 10 airlines that provided scheduled national and…
By Kyle Le Croy – This paper summarizes the recent judgment of Court of Justice of the European Union in the Cement…
By Rosa M. Abrantes-Metz – While investigations into Treasury auctions, FX, ISDAfix, and others are still ongoing, and more recently additional focus…
Yesterday Hannah and I dropped off our older two girls at Camp Ramah Darom in Clayton, Georgia. This is the first time the girls have gone to a sleep-away camp. We feel an emptiness in our souls. The house (with only one child left with us for the next four weeks) seems too quiet. We love our girls and want them to have a great experience that allows them to gain independent thinking, self confidence and to have fun with kids from around the region. Still, we miss them terribly.
To deal with the quiet house, we decided to have a dance party with our youngest daughter. She loved dancing to the catchy "What does the fox say."
Quelles garanties pour la procédure d’engagements en droit de la concurrence de l’Union européenne ?
Frédéric Marty & Mehdi Mezaguer ask Quelles garanties pour la procédure d’engagements en droit de la concurrence de l’Union européenne?
ABSTRACT: Alongside with the effects-based approach, the negotiated procedures constitute the second main pillar of the EU competition policy modernisation. This modernisation aims at enhancing the legal certainty of all the enforcement stakeholders, by reducing the false-positive risks and by limiting the risk of decision annulments in the judicial control process. It also aims at generating efficiency gains, especially procedural ones. Nowadays, the recourse to commitments procedures appears as overwhelmingly dominant in energy sector cases and also in the software industry ones. This dominance raises several concerns. Remedies may be sometimes seen as disproportionate, insufficiently related to the theory of damage, or harmful in terms of stakeholders’ fundamental rights. For instance, the commitments procedures are seen as limiting the scope of the Commission’s decision judicial review. Our article analyses these risks and maps out some options to master them.
Melissa A. Schilling New York University (NYU) - Department of Management and Organizational Behavior explains Towards Dynamic Efficiency: Innovation and Its Implications for Antitrust.
ABSTRACT: There is growing consensus that the goal of antitrust enforcement should be to manage for dynamic efficiency, i.e., an appropriate balance between short-run static efficiencies such as reducing costs and maximizing consumer surplus, and the longer term gains that arise from innovation. However, determining how to incorporate innovation into efficiency goals is complicated; innovation typically entails great uncertainty, long time horizons, and interdependencies across projects. This means there are no easy solutions for estimating the welfare impact of any given innovation investment or strategy. We can, however, use what we know about how firms manage the innovation process, including how they choose and value projects and ration their capital to meet their short and long-term needs, to gain insight into how we can best foster firms’ incentives to innovate in ways that improve long-run economic welfare. I provide some illustrative examples for how these insights can be incorporated into antitrust enforcement.
Kai Huschelrath, Centre for European Economic Research (ZEW) and Florian Smuda, Centre for European Economic Research (ZEW) offer The Appeals Process in the European Commission's Cartel Cases: An Empirical Assessment.
ABSTRACT: The appeals process is an important mechanism to correct legal errors and to improve existing laws and regulations. We use the data of 467 firm groups that participated in 88 cartels convicted by the European Commission between 2000 and 2012 to study both the characteristics of firm groups filing an appeal and the factors that determine their successfulness in terms of fine reduction. Applying a discrete choice and a two‐stage hurdle model, we find that while some characteristics — particularly the reform of the fine guidelines — only affect the probability of filing an appeal, other factors, such as the size of the fine imposed, in connection with characteristics such as ringleader, repeat offender, or leniency applicant, influence both the probability and the success of an appeal. We build on these results to derive conclusions for both firms and public policymakers.
Franco Mariuzzo, University of East Anglia (UEA) - Centre for Competition Policy and Peter L. Ormosi, University of East Anglia (UEA) - Centre for Competition Policy; Norwich Business School ask Post-merger Price Variation Matters, So Why Do Merger Retrospectives Ignore It?
ABSTRACT: The price effect of past mergers has been extensively researched over the past two decades. The overwhelming majority of these studies estimate the over-time average price effect of the merger. Merger guidelines agree that mergers should be approved if market dynamics, such as entry, eliminate negative welfare effects. Estimating price averages ignores key information about the post-merger dynamics of prices and is unable to identify if post-merger prices eventually revert to pre-merger levels. We provide evidence from a set of Monte Carlo experiments to show how serious this problem might be. Firstly, potentially all the studies that concluded - estimating post-merger over-time averages - that the merger led to a price increase, could have been wrong, and in fact the merger price increase disappeared within a reasonable time. Similarly, up to half of the studies that concluded that the merger did not increase prices could have been wrong in their conclusion.
Tuesday, June 14, 2016
Anca D Chirita, Durham University, Durham Law School explores The Rise of Big Data and the Loss of Privacy.
ABSTRACT: This paper explains why ‘big data’ matters and why privacy is now lost as a social norm. The European Data Protection Supervisor initially suggested a consumer protection approach to data owned by monopolists. It relied on the essential facility doctrine of intervention where a smaller entrant is foreclosed because it cannot access the data owned by the monopolist. Both the report and the doctrine are now of little help to competition authorities. Instead, the paper will evaluate the legal framework to clarify the scope of application of the data protection rules and elucidate whether competition intervention has any merit in its own right. Articles 7 and 8 of the EU Charter of Fundamental Rights and the former Directive 95/46/EC will be mentioned before the paper fully engages with the recent developments in the area of data protection. In particular, drawing on the risks associated with data processing in both Directive EU/2016/680 and Regulation EU/2016/679, the paper seeks to determine how price discrimination can actually happen in the form of abuse of personal data. The latter carries an economic significance, as through the misuse of such data, consumers can be left worse off when bargaining or shopping online. Further risks associated with the processing of personal data concern health, which could, in turn, raise life insurance premium rates. In other cases, personal data can reveal a particular economic situation, personal preferences or interests, reliability, or behaviour, which could make price discrimination much easier.
Marianela Lopez-Galdos, GW has written on Arbitration and Competition Law: Integrating Europe Through Arbitration.
ABSTRACT: The analysis presents an insightful study of how the use of arbitration to solve antitrust-related disputes is contributing to the integration of the European Union (EU). The paper delves into the question of whether competition can be subjected to arbitration by reviewing the US, EU, and national case law. The analysis explores the relationship between arbitration and the modernised competition policy as enforced by the European Commission. The paper concludes that arbitration is a useful tool to contribute to the optimal enforcement of competition policy and ultimately to further the integration of the EU.
Daniel Herold, University of Giessen and Johannes Paha, Dept. of Economics (VWL I) are Predicting Cartel Formation.
ABSTRACT: This paper analyzes 42 cartel cases prosecuted by the European Commission from 2010 to 2013. To provide insights on cartel formation the case study examines the industries' evolution preceding the cartels' set-up. Five parameters are included, namely, demand, capacities, intensity of competition, prices and regulatory characteristics. Cartel formation is not necessarily triggered by events negatively impacting the firms' profitability as was suggested by (Grout Sonderegger 2005), however, profit shocks and the resulting (expected) disturbance in the market seem to trigger collusive behavior. Factors that are commonly deemed to destabilize cartels, like entry of new competitors, may foster cartel formation. We explain this finding in a theoretical framework which allows for situations where the Participation Constraint of the cartel is more restrictive than the Incentive Constraint.
Benjamin E. Hermalin, University of California, Berkeley and Michael L. Katz, University of California, Berkeley - Economic Analysis & Policy Group ask What's So Special about Two-Sided Markets?
ABSTRACT: An unusual feature of two-sided markets is that there is no consensus regarding what they are. Our approach to deriving a definition is to identify examples that have been found to represent an interesting phenomenon in common and then reverse engineer the outcomes to determine the drivers of what are perceived to be the distinguishing or interesting features of equilibrium. In our view, the central focus of the two-sided-markets literature has been on identifying and analyzing cross-platform externalities. We identify two critical features that give rise to such externalities at the margin: idiosyncratic matching and inefficient rationing.
Sharat Ganapati, Joseph S. Shapiro, Reed Walker study Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing.
ABSTRACT: This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are sufficient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We find that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. This suggests that marginal cost pass-through is incomplete, with estimates centered around 0.7. Our confidence intervals reject both zero pass-through and complete pass-through. We find heterogeneous incidence of changes in input prices across industries, with consumers bearing a smaller share of the burden than standards methods suggest.