Antitrust & Competition Policy Blog

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

Thursday, March 15, 2018

A General Model to Assess Unilateral Price Effects of Horizontal Mergers with Vertical Relations

Harald Bergh, Oslo Economics, Arne Rogde Gramstad, Oslo Economics, and Jostein Skaar, Oslo Economics offer A General Model to Assess Unilateral Price Effects of Horizontal Mergers with Vertical Relations.

ABSTRACT: Horizontal mergers sometimes involve changes in vertical relations between merging firms as well as between merging and non-merging firms. Vertically integrated non-merging firms may for instance lose sales to independent downstream firms if a downstream firm is acquired by another vertically integrated firm. Thus, the price response from outside firms could go in the opposite direction of that of the merging parties. Consequently, estimates of unilateral price effects are incorrect if these structural changes are not accounted for. We extend the standard framework of unilateral price effects with linear demand to account for any change in vertical ties between firms following a merger in an n product market.

March 15, 2018 | Permalink | Comments (0)

Wednesday, March 14, 2018

Recent Developments in EU Competition Policy: an economic perspective by Tommaso Valletti, Chief Competition Economist, European Commission, Monday 19 March 2018

Centre of European Law

The Dickson Poon School of Law

Lunchtime Lecture

Recent Developments in EU Competition Policy: an economic perspective by Tommaso Valletti, Chief Competition Economist, European Commission

Richard Whish QC (Hon), Emeritus Professor, King's College London in the Chair

Monday 19 March 2018

Parliament Chamber

Inner Temple

Register here


Tommaso Valletti is the Chief Economist at the European Commission, DG Competition. He is Professor of Economics at Imperial College Business School, and also Professor of Economics at the University of Rome Tor Vergata. He has previously taught at the London School of Economics, Telecom ParisTech/Ecole Polytechnique and Turin. He has a magna cum laude degree in Engineering from Turin and holds a MSc and a PhD in Economics from the London School of Economics. Tommaso is a Fellow of CEPR and of ENCORE. He was a member of the panel of academic advisors of Ofcom, the UK communications regulator, as well as a member of the panel of academic advisors of the UK Competition Commission. He was a board director of Consip, the Italian Public Procurement Agency.

Tommaso will discuss the economic analysis related to recent major competition cases of the European Commission, such as the merger cases Dow / DuPont and Deutsche Boerse / London Stock Exchange, as well as the abuse of dominance cases Google Shopping and Qualcomm (Exclusivity payments).


NB Chatham House Rule will apply to this event

March 14, 2018 | Permalink | Comments (0)

The dynamics of online hotel prices and the EU case

Andrea Mantovani (Department of Economics, University of Bologna); Claudio Piga (Keele Management School); Carlo Reggiani (Department of Economics, School of Social Sciences, University of Manchester) explain The dynamics of online hotel prices and the EU case.

ABSTRACT: This paper analyses the dynamics of hotel prices listed on in the period 2014-16. This period is characterised by the most important antitrust decisions regarding the use of price parity clauses by online travel agencies (OTAs) in the EU. First, we document the dynamics of hotel prices on in tourism regions of three EU member states: France, Italy, and Spain. The evidence suggests that prices decreased in 2015, the year in which the major antitrust decisions took place, whereas they bounced back in 2016. Second, we provide both a comprehensive explanation of the previous evidence and a rationalisation based on a theoretical model of the OTA sector. Overall, our overarching analysis of the price dynamics on allows to explain both the impact of removing price parities and the possible response of the OTAs.

March 14, 2018 | Permalink | Comments (0)

The Democrats' 'Better Deal' Is Neither Better Nor a Deal

Daniel A. Crane, University of Michigan Law School and Thibault Schrepel, University of Paris-Saclay have published The Democrats' 'Better Deal' Is Neither Better Nor a Deal.

ABSTRACT: In July 2017, U.S. Congressional Democratic leadership released a policy plank entitled “Better Deal” in which they proposed a radical reinvention of antitrust law. As a partisan blueprint for a populist political agenda, the Better Deal may have some appeal, but most of its ideas are either ill-conceived or poorly structured.

March 14, 2018 | Permalink | Comments (0)

Vertical Market Power in Interconnected Natural Gas and Electricity Markets

Levi Marks ; Charles F. Mason ; Kristina Mohlin ; and Matthew Zaragoza-Watkins write on Vertical Market Power in Interconnected Natural Gas and Electricity Markets.

ABSTRACT: New England is at the leading edge of an energy transition in which natural gas is playing an increasingly important role in the US electricity generation mix. In recent years, the region’s wholesale natural gas and electricity markets have experienced severe, simultaneous price spikes. While frequently attributed to limited pipeline capacity serving the region, we demonstrate that such price spikes have been exacerbated by some gas distribution firms scheduling deliveries without actually owing gas. This behavior blocks other firms from utilizing pipeline capacity, which artificially limits gas supply to the region and drives up gas and electricity prices. The firms observed to withhold pipeline capacity also own non-gas electricity generation assets in New England that benefit from their gas-fired competitors paying higher fuel input costs. We estimate that capacity withholding increased average gas and electricity prices by 38% and 20%, respectively, over the three-year period we study. As a result, customers paid $3.6 billion more for electricity. While the studied behavior may have been within the firms’ contractual rights, the significant impacts in both the gas and electricity markets show the need to consider improvements to market design and regulation as these two energy markets become increasingly interlinked.

March 14, 2018 | Permalink | Comments (0)

New Evidence, Proofs, and Legal Theories on Horizontal Shareholding

Einer Elhauge, Harvard ponders New Evidence, Proofs, and Legal Theories on Horizontal Shareholding.

ABSTRACT: This Article shows that new economic proofs and empirical evidence provide powerful confirmation that, even when horizontal shareholders individually have minority stakes, horizontal shareholding in concentrated markets often has anticompetitive effects. The new economic proofs show that, without any need for coordination or communication, horizontal shareholding will cause corporate managers to lessen competition to the extent they care about their vote share or re-election odds and will cause executive compensation to be based less on firm performance and more on industry performance. The new empirical evidence consists of cross-industry studies which confirm that, just as the proofs predict, increased horizontal shareholding increases the distortion of executive compensation and the gap between corporate profits and investment. I also provide new analysis demonstrating that critiques of earlier empirical studies showing adverse price effects for airlines and banking are generally invalid and that addressing the valid subset of those critiques actually increases the estimated price effects. I further demonstrate that the various excuses for delaying enforcement action are meritless. Finally, I provide new legal theories for tackling the problem of horizontal shareholding. I show that when horizontal shareholding has anticompetitive effects, it is illegal not only under Clayton Act §7, but also under Sherman Act §1. In fact, the historic trusts that were the core target of antitrust law were horizontal shareholders. I further show that anticompetitive horizontal shareholding also constitutes an illegal agreement or concerted practice under EU Treaty Article 101, as well as an abuse of collective dominance under Article 102.

March 14, 2018 | Permalink | Comments (0)

Tuesday, March 13, 2018

Prophylactic Merger Policy

Herbert J. Hovenkamp, Penn discusses Prophylactic Merger Policy.

ABSTRACT: One important purpose of the antitrust merger law is to arrest certain anticompetitive practices or outcomes in their “incipiency.” Many Clayton Act decisions involving both mergers and other practices had recognized the idea as early as the 1920s. In Brown Shoe the Supreme Court doubled down on the idea, attributing to Congress a concern about a “rising tide of economic concentration” that must be halted “at its outset and before it gathered momentum.” The Supreme Court did not explain why an incipiency test was needed to address this particular problem. Once structural thresholds for identifying problematic mergers are identified there is no need to condemn mergers that fall below that threshold. In the future merger law could always be brought to bear if the relevant numbers became larger.

But this does not mean that incipiency tests are unimportant. They properly have a different use than the one that the Supreme Court identified. A better use of incipiency tests is to prevent certain bad outcomes early when antitrust rules make it difficult or impossible to prevent them later. Today most mergers are challenged before they occur. As a result, the feared post-merger conduct has not occurred either and the evidence pertains to predicted rather than actual effects. This makes it important to place some limits on merger law’s prophylactic reach. First, the language of §7 requires causation -- a showing that the merger is what is likely to facilitate that feared anticompetitive conduct. Second, we need to be satisfied that this conduct, if it should occur, will be both anticompetitive and difficult to reach through direct application of the antitrust laws. Third, the merger must raise a significant risk that the conduct will occur. Finally, as with all merger cases, there must not be offsetting gains that serve to justify the merger notwithstanding these threats to competition.

This paper then applies these considerations in several areas: mergers threatening coordinated interaction; merges to monopoly and those facilitating anticompetitive unilateral effects; vertical mergers threatening input foreclosure or some instances of price discrimination; exclusionary IP acquisitions from outside inventors; and mergers of very small but highly innovative firm. The paper particularly focuses on some high profile transactions, including the AT&T/Time Warner acquisition, which the Justice Department has challenged, and the contemplated partial asset acquisition involving Disney and 21st Century Fox. We also examine the impact of the FCC’s decision rolling back net neutrality, which increases competitive concerns in this area, whether or not the acquisition falls under the jurisdiction of the FCC’s power to evaluate mergers. We also examine the recent Intellectual Ventures decision, now subject to appeal, which involves an allegedly anticompetitive acquisition of patents.

March 13, 2018 | Permalink | Comments (0)

Competition and Product Misrepresentation

Daniel Goetz (Rotman School of Management) studies Competition and Product Misrepresentation.

ABSTRACT: This paper examines the effect of competition on product quality when product quality is unobserved before purchase. Using a dataset that records the actual broadband internet speed consumers receive as well as the speed the provider claims is being delivered, I find that an additional broadband competitor raises the ratio of actual to claimed speeds for incumbents by between 23 and 32 percent within the first 6 months, but that this effect attenuates after 18 months. This increase is due to improvements in the actual speed, and not just reductions in the claimed speed. I recover the causal effect of competition on product misrepresentation by leveraging the launch of a broadband-capable satellite in mid-2012 and exploiting exogenous variation in the suitability for satellite internet across U.S. counties. I provide suggestive evidence that the reduction in firms’ strategic misrepresentation of their products led to reduced misallocation of consumers across internet plans.

March 13, 2018 | Permalink | Comments (0)

Innovation-Based Tech Standards Under Growing Threat

David Kappos, Cravath has a new op-ed on Innovation-Based Tech Standards Under Growing Threat.

March 13, 2018 | Permalink | Comments (0)

The Use of Economic Analysis in Global Antitrust, April 10, 2018, 3pm-4:30pm, Georgetown University Law Center

The Use of Economic Analysis in Global Antitrust



Roger P. Alford, Deputy Assistant Attorney General, Antitrust Division (tbc)

Reiko Aoki, Commissioner, JFTC

Roger Featherston, Commissioner, ACCC

Paul Johnson, T.D. MacDonald Chair in Industrial Economics (Chief Economist), Canadian Competition Bureau



Professor Daniel Sokol, University of Florida Levin College of Law


Date and Time

April 10, 2018




Georgetown University Law Center

Sport & Fitness Lobby

Hotung International Law Building

600 New Jersey Avenue, NW, Washington, DC 20001


Sponsored by the Institute of International Economic Law - Georgetown Law  / Georgetown University

March 13, 2018 | Permalink | Comments (0)

Evaluating Market Consolidation in Mobile Communications

Christos Genakos ; Tommaso M. Valletti ; and Frank Verboven are Evaluating Market Consolidation in Mobile Communications.

ABSTRACT: We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators’ prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user prices. Furthermore, they also lead to higher investment per mobile operator, though the impact on total investment is not conclusive. Our findings are not only relevant for the current consolidation wave in the telecommunications industry. More generally, they stress that competition and regulatory authorities should take seriously the potential trade-off between market power effects and efficiency gains stemming from agreements between firms.

March 13, 2018 | Permalink | Comments (0)

Voting For a Cartel as a Sign of Cooperativeness

Jorit Jillet examines Voting For a Cartel as a Sign of Cooperativeness.

ABSTRACT: This paper tests the hypothesis that a (partial) reason why cartels – costly non-binding price agreements – lead to higher prices in Bertrand Pricing Game-experiments could be because participants who form these kinds of agreements are more cooperative and pick higher numbers in general. To test this hypothesis we run an experiment where participants play two consecutive Bertrand oligopoly games: first a standard version without the opportunity to make price agreements; followed by a version where participants can vote, by majority, on whether to have a costly nonbinding agreement to pick the highest number. We find no statistically significant difference between the numbers picked in the first game by participants who vote for and against an agreement in the second game. We do confirm that having a price agreement leads to higher numbers being picked on average. Additionally we find that participants who vote for or against the price-agreement behave differently in response to the existence of the price agreement. In particular, participants who vote for a price agreement react more positively to the price agreement. The difference in numbers picked in the second game between situations with and without a price agreement is larger for participants who voted in favour of the agreement. Voters who voted for the price agreement are more cooperative than voters who voted against but only in situations where there is a price agreement.

March 13, 2018 | Permalink | Comments (0)

Monday, March 12, 2018

Apparent Competition in Two-Sided Platforms

Gokhan Guven; Eren Inci; and Antonio Russo explore Apparent Competition in Two-Sided Platforms.

ABSTRACT: We study a platform’s design of membership and transaction fees when sellers compete and buyers cannot observe the prices and features of goods without incurring search costs. The platform alleviates sellers' competition by charging them transaction fees that increase with sales revenue, and extracts surplus via membership fees. It prices consumers' membership below its cost to encourage their search. Examples include malls and online marketplaces. Most malls do not charge for parking while most lease contracts include percentage rents as well as fixed rents. Online marketplaces charge sellers for membership and per transaction while letting consumers access website for free.

March 12, 2018 | Permalink | Comments (0)

Sequential Innovation, Naked Exclusion, and Upfront Lump-Sum Payments

Jay Pil Choi and Christodoulos Stefanadis identify Sequential Innovation, Naked Exclusion, and Upfront Lump-Sum Payments.

ABSTRACT: We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator's equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader-follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lumps-sum payments in exclusivity contracts (by all suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the incumbent supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation.

March 12, 2018 | Permalink | Comments (0)

On the Dilution of Market Power

Sergey Kokovin (National Research University Higher School of Economics); Mathieu Parenti (National Research University Higher School of Economics); Jacques-Francois Thisse (National Research University Higher School of Economics); and Philip Ushchev (National Research University Higher School of Economics) provide thoughts On the Dilution of Market Power.

ABSTRACT: We show that a market involving a handful of large-scale firms and a myriad of small-scale firms may give rise to different types of market structure, ranging from monopoly or oligopoly to monopolistic competition through new types of market structure. In particular, we find conditions under which the free entry and exit of small firms incentivizes big firms to sell their varieties at the monopolistically competitive prices, behaving as if in monopolistic competition. We call this result the dilution of market power. The structure of preferences is the main driver for a specific market structure to emerge as an equilibrium outcome

March 12, 2018 | Permalink | Comments (0)


Reinaldo Diogo Luz and Giancarlo Spagnolo have a new paper on LENIENCY, COLLUSION, CORRUPTION, AND WHISTLEBLOWING.

ABSTRACT: Leniency policies offering immunity to the first cartel member that blows the whistle and self-reports to the antitrust authority have become the main instrument in the fight against price-fixing conspiracies around the world. In public procurement markets, however, bid-rigging schemes are often accompanied by corruption of public officials. In the absence of coordinated forms of leniency (or rewards) for unveiling corruption, a policy offering immunity from antitrust sanctions may not be sufficient to encourage wrongdoers to blow the whistle, as the leniency recipient will then be exposed to the risk of conviction for corruption. This article assesses the extent of this problem by describing and discussing the antitrust and anti-corruption provisions present in a few selected countries, under both common law and civil law regimes. For each of these countries, we try to evaluate whether the legal system presents any solution to limiting the risk that legal provisions against corruption undermine the effectiveness of leniency programs against bid rigging in public procurement. Legal harmonization, coordination, and co-operation on procedural and substantive issues, and inter- and intra-jurisdictions, seem essential to solve this problem. Given the size of public procurement markets and their propensity for cartelization, specific improvements in legislation appear necessary in all the countries considered. Explicitly introducing leniency policies for corruption, as has been done recently in Brazil and Mexico and is being experimented in the United States, is only a first step. The antitrust experience has taught us that to achieve their goals of inducing whistleblowing, these policies must be carefully designed and sufficiently generous with (only) the first reporting party, they should not be discretional, they must be backed by robust sanctions, and they must be consistently implemented. Hence, the road ahead appears a long one. To increase the effectiveness of leniency in multiple offense cases, we suggest, besides extending automatic leniency to individual criminal sanctions, the creation of a “one-stop point” enabling firms and individuals to report different crimes simultaneously and receive leniency for all of them at once if they are entitled to it. As long as individual criminal charges are not covered by a coordinated and nondiscretional leniency program, there is little hope that these provisions will induce any improvement in the fight against corrupting cartels. A more effective way to fight such cartels may then be offering Qui Tam rewards to nonaccomplice whistleblowers, as is already done with apparent success by several law enforcement agencies in the United States.

March 12, 2018 | Permalink | Comments (0)

Friday, March 9, 2018

Selling Gasoline as a By-Product: The Impact of Market Structure on Local Prices

Haucap, Justus ; Heimeshoff, Ulrich and Siekmann, Manuel discuss Selling Gasoline as a By-Product: The Impact of Market Structure on Local Prices.

ABSTRACT: We use a novel data set with exact price quotes from virtually all German gasoline stations to empirically investigate how a temporary variance in local market structure induced by restricted opening hours of specific players affects price competition. We find that, during their hours of opening, they have a significant negative price effect on nearby competitors.

March 9, 2018 | Permalink | Comments (0)

Assessing Anticompetitive Practices in Two-Sided Markets: A Comparative Analysis of four Antitrust Proceedings against

Caccinelli, Chiara ; Toledano, Joëlle are Assessing Anticompetitive Practices in Two-Sided Markets: A Comparative Analysis of four Antitrust Proceedings against

ABSTRACT: This paper aims to shed light on the economic tools, as well as the legal-economic reasoning, which are used by different European antitrust authorities to assess the allegedly anticompetitive practices of a platform operating in a two-sided market (2SM). First of all, we show that despite the flourishing literature on 2SM economics, antitrust authorities are still facing major challenges when taking decisions concerning two-sided platforms (2SPs). We suggest that in the lack of a sound economic theory on the effects of abusive behaviour in 2SMs, antitrust authorities have a discretionary power as to what to retain or ignore of a 2SP’s business model. Secondly, we perform a cross-country, comparative analysis of four recent competition proceedings against the 2SP and highlight conceptual and practical divergences among antitrust authorities which are bound by and applying a common European legislation towards the same transnational company. Finally, we review the effects of the different authorities’ decisions and draw some conclusions as to the effectiveness and appropriateness of the measures which are currently implemented towards 2SPs.

March 9, 2018 | Permalink | Comments (0)

A Blessing in Disguise? Market Power and Growth with Financial Frictions

Joachim Jungherr and David Strauss ask A Blessing in Disguise? Market Power and Growth with Financial Frictions.

ABSTRACT: Firm market power raises growth in the presence of financial frictions. The reason is that self financing becomes more effective if firm earnings are higher. We test this mechanism using Korean manufacturing data 1963-2003. We find that more concentrated sectors grow faster. This positive empirical relationship between concentration and growth gets weaker as credit becomes more abundant. Using a simple growth model, we study counterfactuals. The observed rise of concentration in Korea until the mid-1970s has increased manufacturing value added 1963-2003 on average by at least 0:6% per year. The effect of firm market power on worker welfare is ambiguous.

March 9, 2018 | Permalink | Comments (0)

Thursday, March 8, 2018

Antitrust in the Financial Sector: Hot Issues & Global Perspectives, Wednesday, May 2, 2018 from 5:00 PM to 8:00 PM (EDT)

Event Details

05.00 - 05.15pm

Coffee & Registration 

05.15 - 05.30pm

Welcome Remarks

Richard TAFFET | Partner, Morgan, Lewis & Bockius, New York  

James KEYTE | Director, Fordham Competition Law Institute, New York  

05.30 - 05.50pm

Opening Remarks

Andrew FINCH | Principal Deputy Assistant Attorney General Antitrust Division, US DOJ, Washington, DC  

05.50 - 06:50 pm

The Amex Decision: Turning the Tables? 

Beau BUFFIER | Chief, Antitrust Bureau, NYS Office of the Attorney General

Jonathan JACOBSON | Partner, Wilson Sonsini Goodrich & Rosati, New York

Jonathan ORSZAG | Senior Managing Director, Compass Lexecon, New York

Moderator: James KEYTE | Director, Fordham Competition Law Institute, New York

06.50 - 07.50 pm

Fintechs: How to Ensure a Level Playing Field for All?

Ryan ZAGONE | Director of Regulatory Relations, Ripple, New York*

Kathy CARD BECKLES  | General Counsel, JP Morgan Chase, New York*

Frances MURPHY  | Partner, Morgan, Lewis & Bockius, Brussels/London

Moderator: Michael SALINGER Senior Academic Adviser, Charles River Associates, Boston

 07.45 - 08:00 pm

Closing Remarks 

Bruce HOFFMAN  | Director of Bureau of Competition, Federal Trade Commission, Washington, D.C. 

Panel Sponsors

Morgan, Lewis & Bockius

Charles River Associates

Compass Lexecon

March 8, 2018 | Permalink | Comments (0)