Antitrust & Competition Policy Blog

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

Friday, January 5, 2018

13th Annual Conference of the Global Competition Law Center (College of Europe) - Brussels, 25-26 January 2018 Fairness in Competition Law and Policy: significance and implications

13th Annual Conference of the Global Competition Law Center (College of Europe) - Brussels, 25-26 January 2018

Fairness in Competition Law and Policy: significance and implications

The idea of fairness has recently re-entered the policy discourse underpinning competition law enforcement, in the EU and beyond. Of course, the term “unfair” can be found in the EU Treaty and the avoidance of consumers’ exploitation is the ultimate aim of competition principles. Still, the boundaries of fairness as a driver of competition enforcement appear unclear and, for some, dangerously flexible.  At the same time, whilst the application of competition rules has over the years been focusing on restrictions to the competitive process with the effect of harming consumers, a wave of cases recently brought or decided at EU and national level appear to be inspired by wide and somewhat elusive fairness considerations, including non-discrimination, neutrality, equality of opportunities, natural justice or avoidance of abuse of law. Reference can be made to cases relating to product design, IP licensing, geo-blocking, network neutrality, privacy concerns or fiscal justice. Leaving aside due process issues, the conference will explore how fairness may guide competition enforcement, what its significance may be in explaining recent trends and actual outcomes, and what implications can be observed or expected by relying on a fairness standard in the design of substantive principles. Associating lawyers and economists, practitioners and academics, the conference will therefore seek to explore the boundaries of fairness in a world where the rationality of markets has been profoundly shaken by recent crises.    

Program: https://cdn.evbuc.com/eventlogos/42372618/gclc2017annualconference28draftprogram18december201729.pdf

Registration: https://www.eventbrite.com/e/13th-annual-conference-of-the-gclc-fairness-in-competition-law-and-policy-significance-and-tickets-40026491313

Speakers include: Commissioner Margrethe Vestager, Advocate General Juliane Kokott, Judge Marc van der Woude, The Hon. Mr Justice Peter Roth, Johannes Laitenberger, Pinar Akman, Dirk Arts, David Bailey, Jacques Bourgeois, Lorenzo Coppi, Paul De Grauwe, Maurits Dolmans, Cani Fernandez, Eleanor Fox, Michal Gal, Anna Gerbrandy, Leigh Hancher, Helen Jenkins, Frederic Jenny, Assimakis Komninos, Christophe Lemaire, Thomas Luebbig, Massimo Merola, Nina Niejahr, Kristina Nordlander, Luis Ortiz Blanco, David Spector, Paolo Stancanelli, Jules Stuyck.

January 5, 2018 | Permalink | Comments (0)

Austria Asphalt: Only Full-function Joint Ventures Subject to Review Under the EUMR

Lars-Peter Rudolf has written on Austria Asphalt: Only Full-function Joint Ventures Subject to Review Under the EUMR.

ABSTRACT: The Court of Justice clarifies that a change from sole to joint control of an existing undertaking is notifiable under the EU Merger Regulation only if the resulting joint venture is full-function, i.e., performs on a lasting basis all the functions of an autonomous economic entity.

January 5, 2018 | Permalink | Comments (0)

Nerea: Eligibility as State Aid Beneficiary and the Concept of Undertaking in Difficulty

Maria Segura and Marianne Clayton have writte on Nerea: Eligibility as State Aid Beneficiary and the Concept of Undertaking in Difficulty.

ABSTRACT: Granting authorities must verify the eligibility conditions at the time the aid is granted, including whether the applicant is in difficulties, and cannot withdraw aid to a beneficiary which is later subject to collective insolvency proceedings.

January 5, 2018 | Permalink | Comments (0)

Thursday, January 4, 2018

An Enquiry Meet for the Case: Decision Theory, Presumptions, and Evidentiary Burdens in Formulating Antitrust Legal Standards

Steve Salop (Georgetown) has a fascinating paper on An Enquiry Meet for the Case: Decision Theory, Presumptions, and Evidentiary Burdens in Formulating Antitrust Legal StandardsHighly recommended!

ABSTRACT: Presumptions have an important role in antitrust jurisprudence. This article suggests that a careful formulation of the relevant presumptions and associated evidentiary rebuttal burdens can provide the “enquiry meet for the case” across a large array of narrow categories of conduct confronted in antitrust to create a type of “meta” rule of reason. The article begins this project by using decision theory to analyze the types and properties of antitrust presumptions and evidentiary rebuttal burdens and the relationship between them. Depending on the category of conduct and market structure conditions, antitrust presumptions lie along a continuum from conclusive (irrebuttable) anticompetitive, to rebuttable anticompetitive, to competitively neutral, and on to rebuttable procompetitive and conclusive (irrebuttable) procompetitive presumptions. A key source of these presumptions is the likely competitive effects inferred from market conditions. Other sources are policy-based - deterrence policy concerns and overarching policies involving the goals and premises of antitrust jurisprudence. Rebuttal evidence can either undermine the facts on which the presumptions are based or can provide other evidence to offset the competitive effects likely implied by the presumption. The evidentiary burden to rebut a presumption depends on the strength of the presumption and the availability and reliability of further case-specific evidence. These twin determinants can be combined and understood through the lens of Bayesian decision theory to explain how “the quality of proof required should vary with the circumstances.” The stronger the presumption and less reliable the case-specific evidence in signaling whether the conduct is anticompetitive versus procompetitive, the more difficult it will be for the disfavored party to satisfy the evidentiary burden to rebut the presumption. The evidentiary rebuttal burden generally is a burden of production, but also can involve the burden of persuasion, as with the original Philadelphia National Bank structural presumption, or typical procompetitive presumptions. If a presumption is rebutted with sufficient offsetting evidence to avoid an initial judgment, the presumption generally continues to carry some weakened weight in the post-rebuttal phase of the decision process. That is, a thumb remains on the scale. However, if the presumption is undermined, it is discredited and it carries no weight in the post-rebuttal decision process. The article uses this methodology to analyze various antitrust presumptions. It also analyzes the, burden-shifting rule of reason and suggests that the elements should not be rigidly sequenced in the decision process. The article also begins the project of reviewing, revising and refining existing antitrust presumptions with proposed revisions and refinements in a number of areas. The article invites other commentators to join the project by criticizing these proposals and suggesting others. These presumptions then could be applied by appellate courts and relied upon by lower court, litigants and business planners.

 

January 4, 2018 | Permalink | Comments (0)

Simulating Mergers in a Vertical Supply Chain with Bargaining

Gloria Sheu and Charles Taragin are Simulating Mergers in a Vertical Supply Chain with Bargaining.

ABSTRACT: We model a two-level supply chain where Nash bargaining occurs upstream, while firms compete in a differentiated products logit setting downstream. The parameters of this model can be calibrated with a discrete set of data on prices, margins, and market shares. Using a series of numerical experiments, we illustrate how the model can simulate the outcome of both horizontal and vertical mergers. In addition, we extend the framework to allow for downstream competition via a second score auction.

January 4, 2018 | Permalink | Comments (0)

Legislative Pivot of Section 3 of the Competition Act, 2002 and the Argument of 'Relevant Turnover' as Against 'Total Turnover': Key Takeaways from Excel Crop Care Ltd. v. Competition Commission of India (Supreme Court)

Shivam Goel, West Bengal National University of Juridical Sciences describes the Legislative Pivot of Section 3 of the Competition Act, 2002 and the Argument of 'Relevant Turnover' as Against 'Total Turnover': Key Takeaways from Excel Crop Care Ltd. v. Competition Commission of India (Supreme Court).

ABSTRACT: The Competition Act, 2002 is a regulatory legislation enacted to maintain free market so that the Adam Smith’s concept of invisible hand operates unhindered in the background. 

The Hon’ble Supreme Court of India took upon itself, in the matter of Excel Crop Care v. Competition Commission of India (2017), the task of answering certain crucial questions of law relating to the Competition Act, 2002 (hereinafter referred to as the “Act”), which came before the Hon’ble Court for adjudication. These questions can be accounted for as follows:

a. Section 3 of the Act having been notified on 20th May, 2009 is prospective or retrospective in operation? b. Is there any difference between collusive bidding and bid rigging? c. Whether penalty under Section 27(b) of the Act has to be on “total turnover” of the company covering all its products or it is relatable to “relevant turnover” viz. relating to the product in question in respect whereof the provisions of the Act are contravened?

This research paper is a lucid presentation of the answers given to the above mentioned questions by the Hon'ble Supreme Court of India.

January 4, 2018 | Permalink | Comments (0)

The Dark Matter in EU Competition Law: Non-Infringement Decisions in the New EU Member States Before and After Tele2 Polska

Alexandr Svetlicinii, University of Macau - Faculty of Law, Maciej Bernatt , University of Warsaw, Centre for Antitrust and Regulatory Studies, and Marco Botta, University of Vienna explore The Dark Matter in EU Competition Law: Non-Infringement Decisions in the New EU Member States Before and After Tele2 Polska.

ABSTRACT: Under Article 11 Regulation 1/2003 every National Competition Authority (NCA) of the EU Member States must notify the EU Commission about the opening of formal investigations for a potential infringement of Articles 101-102 TFEU and the envisaged decisions in that regard. The enforcement statistics for the first decade of Regulation 1/2003 indicates that the number of notified envisaged decisions is only about 50 per cent of the number of investigations opened under EU competition law. The authors explore the resulting “dark matter” in EU competition law by looking specifically at the non-infringement and closure decisions adopted by NCAs under national competition rules. The paper assesses the compatibility of such decisions with the powers of NCAs under Article 5 Regulation 1/2003, as interpreted in the CJEU’s Tele2 Polska case law. The paper shows how the CJEU’s interpretation of Article 5 Regulation 1/2003 has contributed to the development of the “dark matter” in the decentralized system of EU competition law enforcement, which affects the ability of the EU Commission to monitor the enforcement activities of the NCAs.

January 4, 2018 | Permalink | Comments (0)

Wednesday, January 3, 2018

GCR Awards 2018 nominations now open

GCR Awards 2018 nominations now open

From their website:

Global Competition Review is now accepting nominations for our eighth annual antitrust and competition law awards ceremony, which honours the world’s top lawyers, academics, economists and enforcers for their work.

Nominations are open until 5pm Pacific Time in the US on Monday 15 January. Practitioners and observers are welcome to nominate any case, law firm, lawyer, academic, economist or enforcement agency they believe deserves an award in the following categories:

Please note: for all nominated cases and decisions, a substantial amount of work relating to the matter must have been carried out between 1 January 2017 and 31 December 2017.

Team Awards

Merger control matter of the year – Americas: Creative, strategic and innovative competition work for a client on a landmark merger control matter in the Americas.

Merger control matter of the year – Europe: Creative, strategic and innovative competition work for a client on a landmark merger control matter in Europe. 

Merger control matter of the year – Asia-Pacific, Middle East and Africa: Creative, strategic and innovative competition work for a client on a landmark merger matter in Asia-Pacific, the Middle East or Africa.

Litigation of the year – Cartel defence: Creative, strategic and innovative litigation on behalf of a defendant in a private action for cartel damages.

Litigation of the year – Non-cartel defence: Creative, strategic and innovative litigation on behalf of a defendant in a non-cartel private action.

Litigation of the year – Cartel prosecution: Creative, strategic and innovative litigation on behalf of plaintiffs in a private action for cartel damages.

Litigation of the year – Non-cartel prosecution: Creative, strategic and innovative litigation on behalf of plaintiffs in a non-cartel private action.

Behavioural matter of the year – Americas: Creative, strategic and innovative work carried out in a non-merger matter before an enforcer in the Americas.

Behavioural matter of the year – Europe: Creative, strategic and innovative work carried out in a non-merger matter before an enforcer in Europe.

Behavioural matter of the year – Asia-Pacific, Middle East and Africa: Creative, strategic and innovative work carried out in a non-merger matter before an enforcer in Asia-Pacific, the Middle East or Africa.

Matter of the year: Merger control, cartel, unilateral conduct, litigation or any other competition matter worldwide. Creative, strategic and innovative work by teams of in-house and external lawyers and economists.

Enforcement Awards

Agency of the year – Americas: An agency in the Americas whose work in 2017 was particularly effective, strategic or innovative.

Agency of the year – Europe: An agency in Europe whose work in 2017 was particularly creative, strategic and innovative.

Agency of the year – Asia-Pacific, Middle East and Africa: An agency in Asia-Pacific, the Middle East or Africa whose work in 2017 was particularly creative, strategic and innovative.

Enforcement action of the year: The best decision or enforcement action from a competition authority or court in 2017.

Individual Awards

Academic Excellence Award: An academic competition specialist who has made an outstanding contribution to competition policy in 2017.

Economist of the year: A competition economist whose superior technical skill, practical judgment and excellence in client service in 2017 demonstrate that he or she is among the very best in the field.

Corporate counsel of the year: An in-house competition lawyer whose superior technical skill and practical judgment on behalf of his or her company in 2017 demonstrate that he or she is among the very best in the field.

Litigator of the year: A competition litigator whose superior technical skill, practical judgment and excellence in serving clients in court in 2017 demonstrate that he or she is among the very best in the field.

Dealmaker of the year: A lawyer whose superior knowledge, practical judgement and negotiation skills in merger clearance matters in 2017 demonstrate that he or she is among the very best in the field.

Lawyer of the year – Under 40: A competition lawyer under the age of 40 whose superior technical skill, practical judgement and excellence in client service in 2017 demonstrate that he or she is among the very best in the field.

Lawyer of the year: A competition lawyer whose superior skill, practical judgement and excellence in client service in 2017 demonstrate that he or she is among the very best in the field.

Firm Awards

Regional firm of the year – Americas: A firm based solely in North, South or Central America that has had an outstandingly successful 2017 in terms of the quality and quantity of its competition work.

Regional firm of the year – Europe: A firm based solely in Europe that has had an outstandingly successful 2017 in terms of the quality and quantity of its competition work.

Regional firm of the year – Asia-Pacific, Middle East and Africa: A firm based solely in Asia-Pacific, the Middle East and Africa that has had an outstandingly successful 2017 in terms of the quality and quantity of its competition work.

How to submit a nomination: All nominations should be sent to: GCRawards@globalcompetitionreview.com

To nominate a person, team or organisation for an award, please send us the following information via email:

  • Award category
  • Name of nominating party
  • Name of nominee or nominated matter; if a matter, please state the approximate beginning and end dates, and include the names of the attorneys and economists who worked on the matter
  • An explanation in no more than 200 words of why that matter, person, team or organisation deserves to win the award. We will not consider nominations that do not include an explanation.

For team awards, please name the full teams that worked on the matter, including other law firms and economic consultancies.

Voting

At the end of January, the GCR editorial team will announce the shortlisted nominees. Readers will then have the chance to vote for shortlisted candidates between Monday 29 January and Tuesday 20 February.

Awards ceremony

The winners in each category will be announced on Tuesday 10 April 2018 at the GCR Awards Dinner in Washington, DC. Register for this black-tie event here.

For team awards, the winner in each category will include all firms and individuals that worked on the nominated matter. This year’s GCR Lifetime Achievement Award winner will also be announced.

Please do not hesitate to contact us at GCRawards@globalcompetitionreview.com if you have any questions.

January 3, 2018 | Permalink | Comments (0)

What Past U.S. Agency Actions Say About Complexity in Merger Remedies, With an Application to Generic Drug Divestitures

Eric Emch, Bates White Economic Consulting, Thomas D. Jeitschko, Michigan State University - Department of Economics, and Arthur Zhou, Bates White Economic Consulting explore What Past U.S. Agency Actions Say About Complexity in Merger Remedies, With an Application to Generic Drug Divestitures.

ABSTRACT: We consider merger remedies of the U.S. Department of Justice’s Antitrust Division and the U.S. Federal Trade Commission between 2008 and 2017. Traditionally one distinguishes between structural and behavioral remedies—and structural remedies are generally considered to be more effective and easier to implement. Our analysis suggests that over time this distinction has become somewhat blurred and a better gradation of remedies may be tied to the complexity of the proposed remedy. Divestitures in the market for generic drugs, in particular, are particularly complex, even though the remedies are of a structural, and so their efficacy is hard to ascertain.

January 3, 2018 | Permalink | Comments (0)

The Platform Economy and Industrial Relations: Applying the Old Framework to the New Reality

Zachary Kilhoffer, Centre for European Policy Studies (CEPS), Karolien Lenaerts, CEPS, and Miroslav Beblavý, Centre for European Policy Studies (CEPS) address The Platform Economy and Industrial Relations: Applying the Old Framework to the New Reality.

ABSTRACT: How do platforms such as Uber and Deliveroo – and corresponding new modes of work – mesh with unions and European models of industrial relations? This paper investigates the intersection of the platform economy, industrial relations and social dialogue. It provides strong evidence that workers in the platform economy are organising into new employee associations (unions) and are also being brought into existing employee associations. None of the evidence surveyed indicates that platforms are organising into employer associations or being incorporated into existing employer associations. Anecdotal evidence suggests that actors in the platform economy are beginning to engage in tripartite dialogue. 


The authors conclude that:

i) no overarching framework exists for governing or facilitating social dialogue between the parties involved in the platform economy, and

ii) even if the existing framework is applied to parties in the platform economy, it offers a poor fit due to differences between platform workers and employees, and platforms and employers.

This research was carried out in the framework of a new project on Industrial Relations and Social Dialogue in the Age of the Collaborative Economy (IRSDACE), which is funded by the European Commission.

January 3, 2018 | Permalink | Comments (0)

Concurrences Antitrust Writing Awards 2018 - Voting is now Open

See here for voting for the Concurrences Writing Awards.

BEST ACADEMIC ARTICLES

The Academic Articles Awards reward the best articles published in peer-reviewed journals in 2017.

These Awards aim at promoting antitrust scholarship. Around 100 articles will be selected by the Editorial Committee. The Academic Steering Committee and the readers nominat 20 of these articles. The Board will finally elect 10 winning articles. Results will be announced at the Awards Gala Dinner on April 10, 2018.

BEST BUSINESS ARTICLES

The Business Articles Awards reward the best articles published in professional publications in 2017.

These Awards aim at promoting practical antitrust skills. Around 100 articles will be selected by the Editorial Committee. The Business Steering Committee and the readers nominat 20 of these articles. The Board will finally elect 10 winning articles. Results will be announced at the Awards Gala Dinner on April 10, 2018.

BEST SOFT LAW

The Best Soft Law is a selection of the most innovative non-enforcement tools such as guidelines, market studies and white papers published in 2017 by competition agencies.

This new feature aims to contribute to developing antitrust culture and awareness alongside the ICN work. The Editorial Committee select up to 20 soft laws. The Steering Committees then votes for the 10 most innovative soft law. The Best Soft Law selection will be announced on April 10, 2018 at the Awards Gala Dinner.

January 3, 2018 | Permalink | Comments (0)

Do Patents Work? Thickets, Trolls and Antibiotic Resistance

Nancy Gallini, UBC asks Do Patents Work? Thickets, Trolls and Antibiotic Resistance.

ABSTRACT: This paper connects ideas from recent literature on the economics of intellectual property (IP) to address the question: Did the strengthening and broadening of IP rights from important patent policy changes in the US promote greater innovation? The analysis rests on the theory of cumulative innovation, which shows that if IP rights on a pioneer invention extend to follow‐on research and impediments to contracting exist, then strengthening patents can actually reduce overall innovation. Recent empirical studies are consistent with the theory: patents can significantly deter follow‐on research in “complex” technology areas where contracting is difficult (computers, electronics, telecommunications) but not in drugs, chemicals and human genes. I outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling, patent thickets and the anti‐commons of fragmented ownership. I then apply the analysis to the antibiotics market, drawing on recent research, to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance. The literature provides persuasive evidence that the policy changes overreached in broadening and strengthening IP rights and reveals important patent reforms for improving the effectiveness of patent systems in the US and Canada.

January 3, 2018 | Permalink | Comments (0)

Tuesday, January 2, 2018

Search Engines and Data Retention: Implications for Privacy and Antitrust

Lesley Chiou, Occidental College - Department of Economics and Catherine E. Tucker, Massachusetts Institute of Technology (MIT) - Management Science (MS) have an excellent paper Search Engines and Data Retention: Implications for Privacy and Antitrust.

ABSTRACT: This paper investigates whether larger quantities of historical data affect a firm's ability to maintain market share in Internet search. We study whether the length of time that search engines retained their server logs affected the apparent accuracy of subsequent searches. Our analysis exploits changes in these policies prompted by the actions of policymakers. We find little empirical evidence that reducing the length of storage of past search engine searches affected the accuracy of search. Our results suggest that the possession of historical data confers less of an advantage in market share than is sometimes supposed. Our results also suggest that limits on data retention may impose fewer costs in instances where overly long data retention leads to privacy concerns such as an individual's "right to be forgotten."

January 2, 2018 | Permalink | Comments (0)

Machine Learning from Schools About Energy Efficiency

Fiona Burlig, University of Chicago, Christopher R. Knittel, Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER), David Rapson, University of California, Davis, Mar Reguant, Northwestern University - Department of Economics, and Catherine D. Wolfram, University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER) analyze Machine Learning from Schools About Energy Efficiency.

ABSTRACT: In the United States, consumers invest billions of dollars annually in energy efficiency, often on the assumption that these investments will pay for themselves via future energy cost reductions. We study energy efficiency upgrades in K-12 schools in California. We develop and implement a novel machine learning approach for estimating treatment effects using high-frequency panel data, and demonstrate that this method outperforms standard panel fixed effects approaches. We find that energy efficiency upgrades reduce electricity consumption by 3 percent, but that these reductions total only 24 percent of ex ante expected savings. HVAC and lighting upgrades perform better, but still deliver less than half of what was expected. Finally, beyond location, school characteristics that are readily available to policymakers do not appear to predict realization rates across schools, suggesting that improving realization rates via targeting may prove challenging.

January 2, 2018 | Permalink | Comments (0)

Competition, Innovation, and Competition Law: Dissecting the Interplay

Wolfgang Kerber, Philipps University Marburg - School of Business & Economics studies Competition, Innovation, and Competition Law: Dissecting the Interplay.

ABSTRACT: The digital revolution has reinvigorated the discussion about the problem how to consider innovation in the application of competition law. This raises difficult questions about the relationship between competition and innovation as well as what kind of assessment concepts competition authorities should use for investigating innovation effects, e.g., in merger cases. This paper, on one hand, reviews briefly our economic knowledge about competition and innovation, and claims that it is necessary to go beyond the limited insights that can be gained from industrial economics research about innovation (Schumpeter vs. Arrow discussion), and take into account much more insights from innovation research, evolutionary innovation economics, and business and management studies. On the other hand, it is also necessary to develop much more innovation-specific assessment concepts in competition law (beyond the traditional product market concept). Using the example of assessing innovation competition in merger cases, this article suggests to analyze much more systematically the resources (specialized assets) that are necessary for innovation. This concept is directly linked to the new discussion about the Dow/DuPont case in the EU and about data as necessary resource for (data-driven) innovation.

January 2, 2018 | Permalink | Comments (0)

Fixed-to-Mobile Substitution: Effects of Mobile Broadband Subscription on Fixed Broadband Termination

Leurcharusmee, Supanika ; Sirisrisakulchai, Jirakom ; Suriya, Komsan ; Keesookpun, Chutipong ; Srinuan, Pratompong examine Fixed-to-Mobile Substitution: Effects of Mobile Broadband Subscription on Fixed Broadband Termination.

ABSTRACT: Motivation, background and problem statement: Fixed and mobile broadband substitutability has recently been a debate in the telecom industry as the issue affects infrastructure investment decisions of service providers and service obligation regulation decision of telecom authorities. Previous studies have debated over both the definition of substitutability, measurement and the conclusions. Theoretically, substitution is the demand side concept measured using the cross-price elasticity. With a unique dataset, this study takes a simpler approach to examine the fixed-to-mobile substitution. Instead of examining the problem through the estimation of cross-price elasticity, this study estimates the impact of users’ mobile broadband subscription on their decision to terminate fixed broadband subscription. Data and methodology: The data used in this study are from the 2016 Telecom Consumption Survey of Thailand by the National Broadcasting and Telecommunications Commission of Thailand. This study estimates the fixed to mobile substitution using the concept of average treatment effect of mobile broadband usage on the fixed broadband termination. Without random assignment, the estimation of factors determining the fixed broadband termination decision, focusing on the mobile broadband subscription, faces the endogeneity problem. Therefore, we applied the endogenous switching Probit model to estimate the average treatment effect. Results and concluding remarks: From the survey, 1949 respondents subscribed to a fixed broadband service at home at one point. Among them, 85.48 percent remain subscribed to the service and 14.52 percent has canceled the service prior to 2016. The regression analysis shows that mobile broadband subscription has a positive significant effect on the decision to cancel fixed broadband service. The contribution of the study lies on the heterogeneity of the level of fixed to mobile substitution across different groups of internet users. For those who are online for less than 40 hours per day, mobile broadband is considered as a substitute for fixed broadband to a certain level. For those whose lifestyle requires a higher usage of internet, the results show no substitution. As telecom regulations normally target to help users with lower telecom accessibility rather than those with higher level of usage, the higher level of fixed and mobile substitution for individuals with low usage should imply the possibility to unify regulatory framework for fixed and mobile broadband markets.

January 2, 2018 | Permalink | Comments (0)

Monday, January 1, 2018

ROME ANTITRUST FORUM - Summary of the fourth annual meeting

Communiqué of 15 December 2017

ROME ANTITRUST FORUM

Summary of the fourth annual meeting

The Rome Antitrust Forum is an initiative co-organised by the Scuola Nazionale dell’Amministrazione (Rome) and the Law Department of the European University Institute (Florence). The purpose of the Forum is to bring together distinguished antitrust practitioners (both lawyers and economists), leading figures in antitrust enforcement from abroad and representatives of the Italian Competition Authority to discuss, on a non-attributable basis, the way in which the Italian system of antitrust enforcement operates. The Forum facilitates an exchange of views among participants in order to identify key challenges confronting antitrust enforcement in Italy. The Forum ends with some suggestions and recommendations which could lead to a more effective system of antitrust enforcement in Italy.

This year the Forum considered two issues: the role of commitment decisions in the practice of the Italian Authority and the challenges associated with the assessment of excessive prices as an abuse of a dominant position.

Below we set out some of the major questions that emerged from the discussions among the Forum participants. We conclude with some policy suggestions.

Commitment decisions: what is the practice of the Italian Competition Authority?  

Pursuant to the Italian Competition Act (Article 14, Law No. 287/1990), as further elaborated by the Authority’s 2012 Communication, commitments may be proposed by the undertakings concerned within three months from the formal opening of the investigation. This strict limit is meant to allow the Authority to save its scarce administrative resources, finding a solution short of a lengthy investigation. Resolving a case by way of commitments is also beneficial to firms, as it increases their legal certainty by shortening the procedure and spares them from a possible finding of infringement and from the associated stigma and reputational effects. However, this short deadline also has some drawbacks linked to the specificity of the Italian legal context. First of all, in contrast to EU practice, the opening of a procedure in Italy originates in a formal declaration by the Authority on the suspected infringements. Such a declaration precedes any dawn raid. Usually, dawn raids are conducted at the same time the parties are informed of the opening of a procedure. The three-month mandatory deadline for presenting commitments tends to reduce the incentives and opportunity of the Authority to immediately and carefully examine the evidence gathered in such a dawn raid. In the first three months of an investigation the Authority is much more inclined to dedicate its resources to identifying possible and suitable remedies to address the suspected infringements, rather than examining the evidence collected in a dawn raid. Furthermore, while the parties can ask for a postponement of the three-month deadline (which is granted in many instances), the Authority is obliged to consider commitments whenever they arrive, and is not allowed to unilaterally postpone them. In order to rebalance this situation, a proposal was made in the course of the discussion to introduce a formal communication whereby the Authority informs the parties of its preliminary investigative findings and signals its readiness to consider commitments if the parties propose them.

In the Italian procedure parties are not allowed to independently appeal the Authority’s decision to reject proposed commitments. This decision is only subject to judicial review together with the final decision finding an infringement. However, this limitation is questionable since, at that late stage, the fact that commitments were not accepted early in the procedure becomes irrelevant.

According to the Authority’s 2012 communication, commitments may be rejected when the suspected infringement is clearly serious, or where the proposed commitments are submitted late or where they are inadequate to address the agency’s concerns. Furthermore, a rejection is also possible when the Authority has a legitimate interest in adopting a decision on the case (e.g., where a new commercial practice emerges, where the sector is of great importance or where a precedent is needed). During the Forum discussion it was suggested that there may be a need to clarify where this interest lies, and to inform the affected parties accordingly in a decision containing the specific reasons for the rejection, so that the Courts may assess the matter in a timely manner.

Furthermore, in a multiparty setting, it is often not in the interest of the Authority to accept commitments from only a few of the parties involved, i.e., where the proceedings would continue vis-à-vis others that decide not to present any. However, since the Italian case law allows for such ’hybrid’ cases, a communication by the Authority — suggesting for example that the agency would in principle not be willing to accept commitments unless they are offered by all parties concerned and explaining any exceptions to this general approach — could provide some needed clarification.

In order to assess whether commitment decisions should have a bearing on follow-on damages actions, one should consider the following. Sometimes the firm tries to avoid a lengthy and costly procedure, knowing that the suspected infringement described in the Authority’s decision opening the procedure is a correct description of the firm’s behavior. In such instances, accepted commitments could in principle be deemed a prima facie indication of the infringement, should a damage action be brought as a follow-on case. In other cases, a risk-averse firm may propose commitments in order not to be found responsible for an infringement that it does not believe it has committed. Given this ambiguity as to whether the conduct at issue was indeed anticompetitive, it would seem inappropriate for a court to regard the existence of a commitment decision of the Authority as an indication of an infringement. It is worth noting that, according to recent EU case law (Case C-547/16), a national court is required to regard a commitment decision of the European Commission as an ‘indication’ or as ‘prima facie evidence’ of the ‘anticompetitive nature’ of an agreement (or implicitly, in a unilateral conduct case, the anticompetitive nature of the conduct). The exact scope of this jurisprudence is not yet entirely clear. However, since, as already explained, the Italian Authority generally has not engaged in a thorough investigation when it adopts a commitment decision, and since its concerns therefore remain hypothetical at that stage, it is in any case highly doubtful that the above-mentioned case law is applicable in the specific context of commitment decisions adopted by the Italian Authority.

Exploitative abuses: the experience of the Italian Authority with excessive prices

According to economic theory, antitrust authorities should intervene against excessive prices in exceptional circumstances and in particular in the case of either: 1) hold up, i.e. when a dominant company exploits the sunk costs of its customers to the point that they are barely able to remain in the downstream market; or 2) standard essential patents, i.e. when patents are included in a standard and their holders commit to license on FRAND terms. This restraint in intervening against excessive prices has a number of justifications. In particular, intervening against excessive prices may dampen competition by reducing the expected returns from innovation and, as a result, restrain innovations from ever reaching the market.  More fundamentally, however, it is unclear from an economic point of view what is an excessive or an ‘unfair’ price, and an interventionist approach is therefore prone to costly type I errors.

Since the prohibition against excessive prices is present in both the EU and domestic laws (albeit with slightly different standards of appreciation, i.e. ‘fairness’ in EU law and ‘excessively burdensome’ in Italian law), the possibility of enforcing it cannot be ruled out altogether. As a result, the Forum sought to identify the best ways to interpret the prohibition. First of all, the main conclusion of the Forum was that the best possible intervention against excessive prices is indirect. That is to say, it is best to address not high prices themselves but the conditions that enable them and cause their persistence. Only residually and very exceptionally should it be necessary to intervene directly against excessive prices.

The case law in this respect is not very helpful. The United Brands test established long ago by the Court of Justice is intended to determine whether a price is so high that it bears no reasonable relation to the economic value of the product concerned. It is clearly a test about ‘fairness’ under Article 102 TFEU: when taken literally, the first step of the test is to ascertain whether the price is excessive in light of the cost of production. The ECJ however, even in subsequent judgments, never identified rigorously how to determine when a given price-cost margin is excessive or when a price is unreasonably high in light of a product’s ‘economic value’. It simply referred to some comparisons, with the price of competing products, with the price of the same product across Member States or with the price of the same product in the past.

The Israeli Antirust Authority in recent years has made an effort to introduce some rigour in the definition of what is a reasonable price. In particular, in 2014 it issued a communication suggesting that any price-cost margin above 20% could only be accepted as fair if it was supported by some reasonable justification, for example ex ante investment. This safe harbour margin was recently rescinded for a number of reasons: 1) it may represent a focal point for dominant companies which could in fact raise their margins to that level; 2) it may lead to unnecessary and inefficient increases in costs aimed at reducing margins so as to fit within the safe harbour; and 3) for multiproduct firms characterized by a high proportion of common costs, identifying such a margin may become ultra-difficult if not impossible. The same is true in the case of two-sided markets.

In the course of the discussion, the Forum was unable to find a consensual view on a rigorous standard that would clearly tell us when a price is excessive.

However, it was suggested that the Italian Authority could clarify the circumstances when the prohibition against excessive prices will not be used. A sensible list of such circumstances could consist of the following:

  • there are other indirect ways to discipline the dominant firm;
  • the market on which the dominant firm operates is not characterized by high barriers to entry;
  • the dominant firm is not a monopoly (or quasi-monopoly);
  • the market is supervised by a sectoral regulator, and there is no clear regulatory failure;
  • the market is two-sided;
  • the dominant firm is a multiproduct firm with substantial common costs;
  • the customers of the dominant firm do not incur high sunk costs.

When none of these characteristics is present, the Forum concluded that enforcement of the prohibition against excessive prices may be appropriate. In such instances a three-step analysis may be particularly effective. In particular, the Authority should: 1) determine a point of reference such as a ‘more competitive price’, preferably through a comparison test but also possibly through a cost-based test; 2) determine whether the difference between the price charged and this ‘more competitive price’ is prima facie excessive; and, if so, 3) evaluate the dominant firm’s claim that the price in the particular case was justified, for example because of the need to stimulate valuable and risky investment.

Recommendations

In brief, the recommendations by the Forum on commitments decisions and excessive prices are as follows:

(Commitment decisions)

  • While the parties can ask for a postponement of the three-month deadline to propose commitments, the Authority is obliged to consider the commitments whenever they are proposed and is unable to unilaterally postpone them. To rebalance this asymmetry, the Authority could communicate to the parties its preliminary findings as enriched by the evidence gathered in the investigation, thus signalling its readiness to consider potential commitments, better coordinating the Italian procedure with the EU practice.
  • A rejection of a commitment proposal is possible when the suspected infringement is clearly serious, or where the proposed commitments are blatantly late or inadequate to address the Authority’s concerns. Furthermore, a rejection is also possible when the Authority has a legitimate interest in adopting a decision (e.g., in light of a new commercial practice, the importance of the sector, the need to establish a precedent, etc.). In order to increase the accountability of the Authority, it would be appropriate to clarify, in the decision rejecting the commitments, where this interest lies and how it applies to the specificities of the case, so that the Courts are able to exercise their review of the matter in a timely manner.
  • In a multiparty setting, it is often not in the interest of the Authority to accept commitments from one party while continuing the proceedings vis-à-vis other parties that did not present any. The Italian case law, however, allows for such practices. A communication by the Authority – suggesting for example that the agency would in principle not be willing to accept commitments unless they are offered by all parties concerned and explaining any exceptions to this general approach – could provide some needed clarification.
  • Proposing commitments may indicate either the intention to avoid the finding of a violation that the firm knows it has committed, or the desire to avoid the risk of being found guilty of a violation the firm does not believe it has committed. Due to this uncertainty about the presence of anticompetitive conduct, it would seem better not to place any prima facie evidentiary value on commitment decisions of the Authority in a follow-on action.

(Excessive prices)

 

  • The best possible intervention against excessive prices is indirect intervention: i.e., enforcement and/or advocacy actions should be taken to eliminate or rectify the conditions that cause such prices. Only residually and very exceptionally should it be necessary to intervene directly against excessive prices.
  • In its case law, the ECJ did not aim to identify an economic standard for what is excessive but was simply trying to identify an unfair price (prices unreasonably higher than costs). This fairness standard lacks an economic foundation.
  • In Israel, an effort was made to identify a rebuttable presumption of fairness based on the price-cost margin. The Forum, while appreciating the objective pursued by the Israeli Authority, believes that there are too many drawbacks associated with such a solution. It does not recommend that the Italian Authority move in that direction.
  • The Forum suggests that the Authority could clarify qualitatively the circumstances when the prohibition against excessive prices will not be used. In particular, enforcement of the prohibition is likely to be inappropriate when one or more of the following characteristics are present:
    • there are other indirect ways to discipline the dominant firm;
    • the market on which the dominant firm operates is not characterized by high barriers to entry;
    • the dominant firm is not a monopoly (or quasi-monopoly);
    • the market is supervised by a sectoral regulator, and there is no clear regulatory failure;
    • the market is two-sided;
    • the dominant firm is a multiproduct firm with substantial common costs;
    • the customers of the dominant firm do not incur high sunk costs.
  • Should none of the latter characteristics be present, a three-step analysis can help the Authority to determine whether a price is excessive. Specifically, the Authority should: 1) determine a point of reference such as a ‘more competitive price’, preferably through a comparison test but also possibly through a cost-based test; 2) determine whether the difference between the price charged and this ‘more competitive price’ is prima facie excessive; and, if so, 3) evaluate the dominant firm’s claim that the price in the particular case was justified, for example because of the need to stimulate valuable and risky investment.

 

January 1, 2018 | Permalink | Comments (0)

Competitions among OTT TV Platforms and Traditional Television in Taiwan: A Niche Analysis

Yi-Ning Katherine Chen has written on Competitions among OTT TV Platforms and Traditional Television in Taiwan: A Niche Analysis.

ABSTRACT: This study examines if OTT TV is a complement or a substitute for traditional TV. By categorizing satisfaction into seven dimensions, this study adopts niche theory to look at the aspects of gratification toward OTT TV’s complementarity of or replacement of cable TV. Following an online survey conducted during March 2016, 620 qualified responses were collected. The results show that the giant western OTT platforms overshadow the local OTT players. In terms of niche breadth, our findings present that OTT TV scores higher than traditional TV for all seven dimensions, with the greatest difference manifested on the dimension of convenience. For the niche overlap, our findings show that OTT and traditional TV share a high level of similarity on amusement and ease of use. Overall, OTT TV’s competitive superiority surpasses that of traditional TV in all dimensions. Implications for research and practices are discussed herein.

January 1, 2018 | Permalink | Comments (0)

Friday, December 29, 2017

Network tower sharing and telecom infrastructure diffusion in Ghana - a Structure-Conduct-Performance approach

Osei-Owusu, Alexander ; Henten, Anders describe Network tower sharing and telecom infrastructure diffusion in Ghana - a Structure-Conduct-Performance approach.

ABSTRACT: The paper answers the following questions: whether infrastructure sharing policy been able to achieve its core objective of preventing network tower investment duplication in single locations? And whether pricing strategy employed by tower owners encourage sharing? The foundation of these issues is concerned with the structure of costs for providing sharing services, the nature of contracts or other conditions for commercialization, and the clash of different buyers (MNOs) of towers spaces. The implications for the diffusion of telecom infrastructure and services to poorly covered areas of these market conditions and the conduct of the market players constitute the primary focus of this research. For assessing the market structure, the behavior of market players, and the outcome of the sharing policy, a Structure-Conduct-Performance (SCP) framework is applied. A combination of qualitative and quantitative data were collected including ten (10) employees of the network companies, tower companies, internet service vendors and the regulatory agency (NCA) for interviews and reports on 2000 out of 5750 co-location tower sites (at the beginning of 2016) across the country were analyzed. Against the expectations of the regulator, infrastructure sharing is currently not effective. For rural communities, rather than sharing amidst non-pleasant market conduct from the incumbent operators, new entrant operators have chosen to build their own towers, holding back diffusion due to single cost ownership and also defeating the purpose of infrastructure sharing policy. Factors such as market size of firms and their degree of concentration will continue to affect conduct and performance, unless there is a strong institutional incentive for undertaking mandatory access strategies to challenge dominance to induce greater competition in markets.

December 29, 2017 | Permalink | Comments (0)

Thursday, December 28, 2017

The Story Behind the Making of Spandau Ballet’s ‘True’

Today's Wall Street Journal has the backstory to one of 80 synth pop's greatest songs (which also appeared in the classic film Sixteen Candles with Molly Ringwald - the Superbad of the 1980s).  Behind the paywall you can read The Story Behind the Making of Spandau Ballet’s ‘True’.

December 28, 2017 | Permalink | Comments (0)