Antitrust & Competition Policy Blog

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

Monday, November 16, 2015

Whistleblowers on the Board? The Role of Independent Directors in Cartel Prosecutions

Murillo Campello Cornell University; National Bureau of Economic Research (NBER) Daniel Ferres Universidad de Montevideo Gaizka Ormazabal University of Navarra, IESE Business School ask Whistleblowers on the Board? The Role of Independent Directors in Cartel Prosecutions.

ABSTRACT: Stock market reactions to news of cartel prosecutions are muted when indicted firms have a high proportion of independent directors on their boards. This finding is robust to self-selection and is pronounced when independent directors hold more outside directorships and fewer stock options -- when those directors have fewer economic ties to indicted firms. Results are even stronger when independent directors' appointments were attributable to SOX, preceded their CEO's own appointment, or followed class action suits -- when directors have fewer ties to indicted CEOs. Independent directors serving on indicted firms are penalized by losing board seats and vote support in other firms. Firms with more independent directors are more likely to cooperate with antitrust authorities through leniency programs. They are also more likely to dismiss scandal-laden CEOs after public indictments. Our results show that cartel prosecution imposes significant personal costs onto independent directors and that they take actions to mitigate those costs. We argue that understanding these incentive-compatible dynamics is key in designing strategies for cartel detection and prosecution.

November 16, 2015 | Permalink | Comments (0)

The abolition of the group boycott prohibition from New Zealand competition

Rex Ahdar, University of Otago describes The abolition of the group boycott prohibition from New Zealand competition.

ABSTRACT: New Zealand competition law’s per se prohibition upon group boycotts (contracts, arrangements or understandings containing an exclusionary provision), s 29 of the Commerce Act 1986, is destined for the scrap heap. Proponents of its repeal contend that its infrequent use and attenuated reach means its absence will not be missed, that hitherto s 29 has had a damaging chilling effect upon commercial activity and that the apparent ability of other provisions in the Act (especially the enhanced cartel offence) to fill the vacuum will assuage any lingering concerns. The article finds these justifications wanting and concludes that the preservation of the group boycott ban is warranted.

November 16, 2015 | Permalink | Comments (0)

Sunday, November 15, 2015

Startups, HI-Tech industries & Digital Economy… Is CCI promoting them or thwarting progress ?

Hard Work and the Music Business

My ten year old Raquel just received her bat mitzvah date from the synagogue (note to the non Jewish readers: you really do reserve three years ahead to make sure that everyone in the family has a clear schedule as well as the synagogue).  We were discussing how competition/antitrust means hard work (for companies).  We found that many of the top recording artists did not have an easy trip to the top (Maroon Five has discussed this in countless interviews and still is on top after 12 years - and I tell her that Adam Levine's mom is not happy about his permanent tattoos because nice Jewish boys don't get tattoos).  Our newest favorite family song is courtesy of a band out of NYU (Harry First, there is still hope for you as a rock star- and let me note that last Halloween Harry First went trick or treating with us, for which he is loved in our home even more than for his Microsoft book).  We read up recently on how her new favorite band A Great Big World had to work very hard to get to their Grammy success.  She particularly likes the Jew-fro of singer Ian Axel.


November 15, 2015 | Permalink | Comments (0)

Friday, November 13, 2015

Assistant Attorney General Bill Baer Delivers Remarks at the New Health Care Industry Conference

Assistant Attorney General Bill Baer Delivers Remarks at the New Health Care Industry Conference
Washington, DC
United States
Friday, November 13, 2015

November 13, 2015 | Permalink | Comments (0)

Competition Law as Regulation?

Edited by Josef Drexl, Director, Max Planck Institute for Innovation and Competition, Munich, Germany and Fabiana Di Porto, Associate Professor of Law, University of Salento, Lecce, Italy have a new book that asks Competition Law as Regulation?

BOOK ABSTRACT: To what extent should competition agencies act as market regulators? Competition Law as Regulation provides numerous insights from competition scholars on new trends at the interface of competition law and sector-specific regulation. By relying on the experiences of a considerable number of different jurisdictions, and applying a comparative approach to the topic, this book constitutes an important addition to international research on the interface of competition and regulation. It addresses the fundamental issues of the subject, and contributes to legal theory and practice. Topics discussed include foundations of the complex relationship of competition law and regulation, new forms of advocacy powers of competition agencies, competition law enforcement in regulated industries in general, information and telecommunications markets, and competition law as regulation in IP-related markets.

November 13, 2015 | Permalink | Comments (0)

Telecommunications: Mergers and More, CPI Antitrust Chronicle Autumn 2015, Volume 11 Number 1

Competition authorities have been spending a lot of time on telecommunications, especially in the merger area, tackling such questions as: How to balance two key needs—ensuring enough players to maintain sufficient competition while allowing that innovation requires deep pockets? How to define the appropriate market? How much consideration to give local vs. regional needs? This issue first looks at how the U.S. and EU have tackled these, and other, questions and then finishes with economic insights on how to analyze this ever-changing industry.

Telecommunications: Mergers and More
  1. Jonathan Sallet, Nov 11, 2015

    The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews

      We looked at theory and we looked at facts and we arrived at a series of important conclusions about the nature of the marketplace and competition. Jonathan Sallet (U.S. Federal Communications Commission)

    • Warren Grimes, Nov 11, 2015

      The Ad Hoc Approach to Telecommunications Mergers: The Public Interest Compromised?

        Guidelines, perhaps jointly issued by the FCC and the Justice Department, could also lessen the propensity of government enforcers to compromise away the public’s strong interest in competition. Warren Grimes (Southwestern Law School)

      • Nikolaos Peristerakis, Lodewick Prompers, Mar Garcia, Nov 11, 2015

        The Commission’s Merger Enforcement in Mobile Mergers: Brave New World for Non-coordinated Effects?

          The Commission appears to have significantly lowered the intervention threshold for challenging mergers on the basis of non-coordinated effects well beyond what was originally anticipated back in 2004. Nikolaos Peristerakis, Lodewick Prompers, & Mar Garcia (Linklaters)

        • Pedro Callol, Nov 11, 2015

          Competition in the Spanish Telecommunications Sector: Mergers, Football Rights, and Other Regulatory Issues

            It remains to be seen whether this apparently radical shift in industrial policy from the European Commission will cast its shadow on national markets such as Spain and also influence decisions at the local level. Pedro Callol (Callol, Coca & Asociados)

          • Pranvera Kellezi, Nov 11, 2015

            Magic Numbers and Merger Control in the Telecommunications Sector

              The particularities of national markets call for more involvement of national competition authorities, and highlight the limits of the one-stop-shop merger control in Europe. Pranvera Këllezi (KËLLEZI LEGAL)

            • Aleksander Maziarz, Nov 11, 2015

              Services of General Economic Interest in the Telecommunications Sector

                This means that a SGEI cannot be provided at any cost and that competition limitations have to be proportionate. Aleksander Maziarz (Kozminski University)

              • David Evans, Nov 11, 2015

                The Role of Economic Analysis in the Comcast/Time Warner Cable Merger

                  There is much fodder in this case, including the analysis of two-sided platforms, monopoly bottlenecks, bargaining theory, vertical restraints, and the use of natural experiments to test hypotheses. David S. Evans (Global Economics Group)

                • Fernando Herrera-Gonzalez, Nov 11, 2015

                  Are “Free” Relevant Markets Actually Free?

                    But citizens deserve the same effectiveness of competition policy, regardless of whether they pay with money, with their time, or with their data. Fernando Herrera González (Telefonica, S.A.)

                  November 13, 2015 | Permalink | Comments (0)

                  How Do Antitrust Law Scholars Rate Among the Most Downloaded in SSRN?

                  Someone asked me yesterday why I don't post SSRN download counts anymore (or citation counts). These are imprecise measurements and there are lots of people whose written work or contributions to the field (mentoring of LLM and PhD students, avid readers/reviewers of other people's work) is under-appreciated by such counts.  Nevertheless, since someone asked, here is the list of most downloaded professors of the past year with at least one major antitrust paper in recent memory of the top 200 most cited in law.  At some point in December I will create the most cited based on Westlaw citations based on the last five years worth of citations.


                  Lemley, Mark A.



                  Evans, David S.



                  Hovenkamp, Herbert J.



                  Wu, Tim



                  Geradin, Damien



                  Wils, Wouter P.



                  Wright, Joshua D.



                  Chen, James M.



                  Yoo, Christopher S.



                  Carrier, Michael A.



                  Petit, Nicolas



                  Sokol, D. D.



                  Stucke, Maurice E.



                  Feldman, Robin



                  Contreras, Jorge L.



                  Elhauge, Einer R.



                  November 13, 2015 | Permalink | Comments (0)

                  Price Competition in Product Variety Networks

                  Philip Ushchev, National Research University Higher School of Economics (Moscow) and Yves Zenou, Stockholm University; Research Institute of Industrial Economics (IUI); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR) examine Price Competition in Product Variety Networks.

                  ABSTRACT: We develop a product-differentiated model where the product space is a network defined as a set of varieties (nodes) linked by their degree of substituabilities (edges). In this network, we also locate consumers so that the location of each consumer (node) corresponds to her "ideal" variety. We show that there exists a unique Nash equilibrium in the price game among firms. Equilibrium prices are determined by firms' weighted Bonacich centralities and the average willingness to pay across consumers. They both hinge on the network structure of the firm-product space. We also investigate how local product differentiation and the spatial discount factor affect the equilibrium prices. We show that these effects non-trivially depend on the network structure. In particular, we find that, in a star-shaped network, the firm located in the star node does not always enjoy higher monopoly power than the peripheral firms.

                  November 13, 2015 | Permalink | Comments (0)

                  Equity Prices and Cartel Activity

                  Dan Richards, Tufts University - Department of Economics, Heng Yuan, Tufts University, and Marcelo Bianconi, Tufts University - Department of Economics have an important new finance paper on Equity Prices and Cartel Activity.

                  ABSTRACT: We use a new data set to examine the equity price impact of announced cartel investigations. Unlike prior research, we estimate normal returns using the Fama-French (1993) three-factor model. We find that cartel investigation announcements have a long-lasting negative share-price effect of two percent, but one near zero for firms receiving leniency. The two percent loss is notably less than the estimated present value of profits lost due to cartel termination, implying that cartel participation is profitable. However, the results also suggest that the no-cheating stability condition for cartels may often not be satisfied, especially given the incentive to seek leniency.

                  November 13, 2015 | Permalink | Comments (0)

                  Thursday, November 12, 2015

                  Antitrust Developments in Food and Pharma

                  John M. Connor, Purdue University; American Antitrust Institute (AAI) describes Antitrust Developments in Food and Pharma.

                  ABSTRACT: Closing the loopholes of downstream application of the Capper-Volstead exemption in the food system and pay for delay in pharmaceuticals is an important advance in US and EU antitrust norms. First, pay-for-delay conduct has been harmful for pharmaceuticals customers. After ten years of litigation that divided circuit courts, the Supreme Court decreed that payments to generic drug sellers by the patent holders of the brand equivalent that are aimed at delaying entry are illegal, but did so under a structured rule-of-reason approach. EU competition authorities treat such payments as per se civil infractions. Second, until court decisions made in 2011–2014, the reach of the Capper-Volstead Act and the legality of pay-for-delay conduct in the drug industry were in doubt. In 2015, most federal circuits now clearly agree that, at a minimum, acreage restrictions by marketing cooperatives are per se illegal. Moreover, any manipulation by farmers’ cooperatives of upstream supply is also likely to be illegal.

                  November 12, 2015 | Permalink | Comments (0)

                  The Competitive Effects of Parity Clauses on Online Commerce

                  Ariel Ezrachi, Oxford analyzes The Competitive Effects of Parity Clauses on Online Commerce.

                  ABSTRACT: Parity clauses, also known as most-favoured-nation clauses, are designed to address the hold-up problem in vertical relations and facilitate investment and efficiencies by the downstream platform. However, when designed too broadly, they have the potential of undermining the dynamics of competition and reducing consumer welfare. This paper explores the welfare effects of parity clauses and reflects on the level of intervention they may call for. It reviews the possible theories of harm associated with parity clauses and draws a dividing line between the effects generated by narrow and wide parity.

                  November 12, 2015 | Permalink | Comments (0)

                  Competition in Motor Racing: A New Formula One Antitrust Case?

                  Oliver Budzinski, Ilmenau University of Technology asks Competition in Motor Racing: A New Formula One Antitrust Case?

                  ABSTRACT: The European Commission appears to be considering to open a new antitrust case against the owners of the FIA Formula One World Championship (F1), which by some accounts represents the second biggest sports business in the world. Specifically, two interrelated concerns are raised: (i) a violation of a former settlement between F1 organizers and the EC’s competition division by re-mixing regulatory authority and commercial rights through the Fédération Internationale l’Automobile (FIA) and (ii) an unfair treatment of smaller teams by excluding them from regulatory decision procedures and by a grossly uneven distribution of revenues among teams. These two concerns, however, do not only point to a violation of the former settlement, they also reveal a major flaw in the 2001 agreement. Instead of restoring competition, the power may just have been leveraged from the FIA to the commercial rights holder.

                  November 12, 2015 | Permalink | Comments (0)

                  Quality provision and reporting when health care services are multi-dimensional and quality signals imperfect

                  Katharina Huesmann (University of Cologne,Germany) and  Wanda Mimra (ETH Zurich, Switzerland) have a paper on Quality provision and reporting when health care services are multi-dimensional and quality signals imperfect.

                  ABSTRACT: We model competition for a multi-attribute health service where patients observe attribute quality imprecisely before deciding on a provider. High quality in one attribute, e.g. medical quality, is more important for ex post utility than high quality in the other attribute. Providers can shift resources to increase expected quality in some attribute. Patients rationally focus on attributes depending on signal precision and beliefs about the providers’ resource allocations. When signal precision is such that patients focus on the less important attribute, any Perfect Bayesian Nash Equilibrium is inefficient. Increasing signal precision can reduce welfare, as the positive effect of better provider selection is overcompensated by the negative effect that a shift in patient focusing has on provider quality choice. We discuss the providers’ strategic reporting incentives and reporting policies. Under optimal reporting, signals about the important attribute! are always published. However, banning reporting on less important attributes might be necessary.

                  November 12, 2015 | Permalink | Comments (0)

                  Wednesday, November 11, 2015

                  Happy Diwali

                  Diwali celebrates the festival of lights.  How does the Sokol family celebrate Diwali?  We celebrate with our Hindu neighbors of course (they come over for Channukah for our festival of lights).

                  My favorite food of diwali: Barfi - sweet and delicious.  Because it is very sweet, even my wife and kids (who loves sweets more than I do) do not finish so I get to eat their barfi.

                  I had planned on coming to India next month for a great conference being put together at IIM Bangalore but my visa was denied so instead I'll next be back in India in 2016.  In the meantime, I am putting finishing touches on a book chapter on Indian antitrust for my friend Payal Malik who returned to academia after finishing up a stint as chief economist at CCI.



                  November 11, 2015 | Permalink | Comments (0)

                  AAI 2015 Airline Roundtable Dec 10, 2015

                  2015 Airline Roundtable

                  Date: Dec 10, 2015
                  Location: National Press Club, Washington DC

                  On Thursday, December 10, the American Antitrust Institute will host an Airline Roundtable where experts in antitrust and regulation from government, industry, advocacy, and academia will discuss major competition enforcement and policy issues facing the airline industry. The 2015 Airline Roundtable -  Airline Competition at a Crossroads: Refocusing Policy to Address Competitive Challenges - will focus on challenges to competition, with the goal of refocusing antitrust and regulatory aviation policies to promote rivalry, innovation, and consumer benefits.

                  The past decade has been one of rapid consolidation among U.S. airlines. Four large carriers now dominate the domestic markets. Evidence of tighter capacity, rising fares and ancillary fees, and growing airline influence over distribution continue to raise concerns among competition enforcers and policymakers. A decade of consolidation and change also highlights the challenge of market entry at slot-constrained domestic airports, and the connection between domestic and international competition, with growing questions surrounding open skies agreements, airline alliances, and antitrust immunity.

                  The Airline Roundtable will examine these issues, particularly how market participants along the supply chain are responding to competitive changes. The day will open with a Year in Review, followed by a moderated morning panel and roundtable discussion. This panel, Taking Stock of Competition - the Airlines, Distribution, and the Consumer, will focus on the industry competitive landscape and challenges faced by market participants, and feature experts from the airlines, distribution channels, and consumer community.

                  An afternoon panel and final roundtable discussion will follow a keynote luncheon. The afternoon panel, Refocusing Competition Policy – Market Concentration, Entry, Remedies, and Antitrust Immunity, will examine the tools of competition enforcement, the roles of public and private enforcement, and regulatory policy mechanisms for addressing potentially anticompetitive conduct, remedies, and promoting competition more broadly. 

                  This event is by invitation. To request an invitation, please email and include name, title, organization, and interest in the topic.  

                  November 11, 2015 | Permalink | Comments (0)

                  Insurer Competition in Health Care Markets

                  Ho, Katherine and Lee, Robin S. study Insurer Competition in Health Care Markets.

                  ABSTRACT: We analyze the impact of insurer competition on health care markets using a model of premium setting, hospital-insurer bargaining, household demand for insurance, and individual demand for hospitals. Increased insurer competition may lead to lower premiums; it may also increase health providers' leverage to negotiate higher prices, thereby mitigating premium reductions. We use detailed California admissions, claims, and enrollment data from a large benefits manager. We estimate our model and simulate the removal of an insurer from consumers' choice sets. Although premiums rise and annual consumer surplus falls by $50-120 per capita, hospital prices and spending fall in certain markets as remaining insurers negotiate lower rates. Overall, the impact on negotiated prices is heterogeneous, with increases or decreases of up to 15% across markets. We conclude that insurer competition can increase consumer surplus but also generate a redistribution of rents acr! oss hospitals and greater medical spending in certain markets.

                  November 11, 2015 | Permalink | Comments (0)

                  Leniency Policies and Criminal Sanctions in Anti-Cartel Enforcement: An Unhappy Marriage? Wednesday 18 November 2015, 1 - 2pm

                  Leniency Policies and Criminal Sanctions in Anti-Cartel Enforcement: An Unhappy Marriage?


                  Speaker: Caron Beaton-Wells (University of Melbourne) 
                  Chair: Dr Florian Wagner-von Papp (UCL) 

                  Wednesday 18 November 2015, 1 - 2pm
                  at University College London
                  G22 LT (UCL Pearson Building), Gower Street, London WC1

                  About the talk:
                  Leniency policies and criminal sanctions have each separately dominated the discourse and, to a significant extent, the practice of anti-cartel enforcement by competition authorities across the globe over recent years. The dual emergence of leniency and criminalisation policies in the field of competition law is not a coincidence. However, the reasons for and implications of this development are under-explored. This presentation will examine different explanations for the dynamics in the cartel leniency-cartel criminalisation relationship and, in particular, explanations that address the question as to whether the relationship suggests a predominantly instrumental justification for criminalisation (that is, using criminal sanctions to bolster leniency policies), as distinct from a more normative justification (that is, using criminal sanctions to reflect and punish the harmful and delinquent nature of cartels). Whichever explanation is favoured, the relationship should be seen as problematic, replete with ambiguities, tensions and contradictions that may threaten the legitimacy and effectiveness of both competition and criminal law enforcement. In making this case, the presentation will canvas the weaknesses in the assumptions made about the effectiveness of leniency policies bolstered by criminal sanctions; the retributive compromise and foreclosure inherent in a leniency-driven strategy of enforcement; the ways in which leniency policy underscores and may even reinforce the otherwise immoral (cheating) behaviour said to attract the moral opprobrium associated with criminal sanctions; the ways in which leniency policy shapes and distorts the relationship between cartelists as prospective leniency applicants and competition authorities; and the potential for leniency policy to be ‘gamed’ by cartelists and the associated risk of business capture of the legal process. The presentation draws on a chapter, co-authored by Caron Beaton-Wells, Christopher Harding and Jennifer Edwards, for a book co-edited by Caron Beaton-Wells and Christopher Tran, entitled “Anti-Cartel Enforcement in a Contemporary Age: Leniency Religion”, recently published by Bloomsbury.

                  About the speaker:
                  Caron Beaton-Wells is a Professor specialising in competition law at the Melbourne Law School, University of Melbourne and Director of the University’s Competition Law & Economics Network. Her research and teaching in this field extends beyond the law to institutional, political and sociological dimensions of competition regulation, and her recent research projects have focussed on cartel enforcement, supermarket power, petrol pricing and the interface between competition and consumer law. Her engagement activity involves contributing to the public discourse in Australia and around the world on significant competition law-related issues and on bringing together and fostering constructive debate and shared learning amongst stakeholders. Caron is a member of several national and international editorial and advisory boards, has consulted to the OECD, ASEAN, SSNED and the New Zealand Government, is a non-governmental advisor to the ICN and the Law School’s representative on UNCTAD’s Research Partnership Platform. Formerly a solicitor at (now) King & Wood Mallesons, Caron is also a member of the Law Council of Australia’s competition and consumer committee and a member of the Victorian Bar.

                  Sign up online for this talk, free of charge

                  November 11, 2015 | Permalink | Comments (0)

                  Entry Regulation in a Linear Market with Elastic Demand

                  Javier Elizalde (University of Navarra) ; Markus Kinateder (University of Navarra) ; Ignacio Rodriguez-Carreno (University of Navarra) examine Entry Regulation in a Linear Market with Elastic Demand.

                  ABSTRACT: This work performs a comparative welfare analysis of two types of entry regulation in a duopolistic retail market: number of licenses and minimum distance between stores. In a linear (Hotelling) market we show that a minimum distance rule is beneficial for the consumers and disadvantageous for the firms when demand is sufficiently inelastic. The distance rule that maximises social welfare is one quarter of the market under which firms will be located at the quartiles. Those locations are also optimal under regulated prices. This analysis, which is not yet considered in the literature, is motivated by a change of entry regulation in the drugstore market in the Spanish region of Navarre

                  November 11, 2015 | Permalink | Comments (0)

                  Product Line Strategy in a Vertically Differentiated Duopoly

                  Ryoma Kitamura (Graduate School of Economics, Kwansei Gakuin University) ; Tetsuya Shinkai (School of Economics, Kwansei Gakuin University) discuss Product Line Strategy in a Vertically Differentiated Duopoly.

                  ABSTRACT: We consider a duopoly model in which firms with different costs supply two vertically differentiated products in the same market. We show that the efficient firm produces more of the high-quality good and the inefficient one produces more of the low-quality good in equilibrium. We also find that a change in the quality superiority of goods and relative cost efficiency ratios leads to cannibalization from one good to the other and characterize graphically the product line strategies of firms through the two ratios.

                  November 11, 2015 | Permalink | Comments (0)