Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, November 18, 2014

U.S. Court Finds that an Athletics Association's Rules Restricting Payments to Student-Athletes Violate Antitrust Laws (O’Bannon v. NCAA)

Michael Carrier, Rutgers Camden describes U.S. Court Finds that an Athletics Association's Rules Restricting Payments to Student-Athletes Violate Antitrust Laws (O’Bannon v. NCAA).

ABSTRACT: In O'Bannon v. NCAA, the court found that the NCAA violated antitrust law by enacting rules preventing student-athletes from being paid for the use of their names, images, and likenesses in videogames, live game telecasts, and other television footage.
This short article examines the opinion, in particular the court's discussion of (1) the plaintiffs' showing of anticompetitive effects, (2) the NCAA's inability to justify the restraint, (3) less restrictive alternatives, and (4) an injunction blocking the NCAA's rules.
The article concludes by situating the opinion in the context of other recent developments, including the Jenkins and Alston cases, Northwestern unionization case, congressional hearings, and changes made by individual schools and conferences.

November 18, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, November 17, 2014

Antitrust Law Journal Volume 79 Issue 3 is now out

Defining Section 5 of the FTC Act: The Failure of the Common Law Method and the Case for Formal Agency Guidelines

Jan M. Rybnicek, Federal Trade Commission and Joshua D. Wright, Federal Trade Commission; George Mason University School of Law are Defining Section 5 of the FTC Act: The Failure of the Common Law Method and the Case for Formal Agency Guidelines.

ABSTRACT: As the Federal Trade Commission ("FTC" or the "Commission") celebrates its 100th anniversary, it does so amid a renewed interest in finally defining what constitutes a standalone "unfair method of competition" under Section 5 of the FTC Act. For a century, the business community and agency staff have been without any meaningful guidance about what conduct violates the Commission’s signature competition statute. As consensus begins to build about the appropriate parameters of Section 5, some commentators have opposed articulating a principled standard for the application of the FTC’s authority to prosecute standalone unfair methods of competition for fear that doing so would too severely restrict the agency’s enforcement agenda. These commentators prefer for Section 5 to develop though the common law method, and point to the successful development of the traditional antitrust laws as evidence that the common law approach is the standard and preferred means for developing competition law. This Article discusses why, after a century-long natural experiment, it is clear that the common law method cannot be expected to define the scope of the FTC’s unfair methods of competition authority. This Article explains that the failure of the common law process in the Section 5 context is due to fundamental differences between the inputs and outputs associated with traditional litigation and those associated with Section 5 enforcement actions. In particular, this Article explains that Section 5 disputes have almost always been resolved through settlements and, unlike reasoned judicial decisions, that such settlements do not help the public distinguish between what conduct is lawful and unlawful and generally are not treated as binding precedent by the FTC. As a result, this Article argues that the Commission should issue formal agency guidelines to serve as a superior analytical starting point and finally give meaning and purpose to Section 5.

November 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Manufacturers Mergers and Product Variety in Vertically Related Markets

Chrysovalantou Milliou, Athens University of Economics and Business and Joel Sandonis, Universidad de Alicante explore Manufacturers Mergers and Product Variety in Vertically Related Markets.

ABSTRACT: We study final product manufacturers’ incentives to introduce new products into the market and how they are affected by a merger among them. We show that when manufacturers distribute their products through multi-product retailers, a manufacturers merger, although it leads to an increase in the wholesale prices, it can enhance product variety. The merger generated product variety efficiencies though arise only when vertical relations are present: when manufacturers sell directly their products to consumers, a merger never results into more product variety. Still, both in the presence and in the absence of vertical relations, a manufacturers merger is harmful to consumers and welfare.

November 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Provider Competition and Over-Utilization in Health Care

Jan Boone, Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); TILEC and Rudy Douven, CPB Netherlands Bureau for Economic Policy Analysis; CPB Netherlands Bureau for Economic Policy Analysis analyze Provider Competition and Over-Utilization in Health Care.

ABSTRACT: This paper compares the welfare effects of three ways in which health care can be organized: no competition (NC), competition for the market (CfM) and competition on the market (CoM) where the payer offers the optimal contract to providers in each case. We argue that each of these can be optimal depending on the contracting environment of a speciality. In particular, CfM is optimal in a clinical situation where the payer either has contractible information on provider quality or can enforce cost efficient protocols. If such contractible information is not available NC or CoM can be optimal depending on whether patients react to decentralized information on quality differences between providers and whether payer's and patients' preferences are aligned.

November 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Raising Awareness of Anticompetitive Behavior in the Financial Sector of the PRC

The Asian Development Bank is Raising Awareness of Anticompetitive Behavior in the Financial Sector of the PRC.

ABSTRACT: The Anti-Monopoly Law, in effect since August 2008, seeks to encourage competition, maintain market order, and facilitates the allocation of resources through open markets in the People’s Republic of China (PRC). Studies on the impact of this law on the PRC’s financial industry have been limited in scope, hence, the research as published was conducted to fill the gap. This study examines the provisions of the law and the legislation process for them, followed by a discussion of the role of the PRC’s anti-monopoly authorities in enforcing the law in the banking, insurance, and securities industries. It looks at monopolistic practices in the financial industry and the mechanisms instituted for supervising and regulating those practices. It then makes conclusions about the current monopoly situation in the PRC’s financial industry and policy recommendations for a more effective and efficient enforcement of the said ! law.

November 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, November 14, 2014

Meeting Technologies and Optimal Trading. Mechanisms in Competitive Search Markets

Benjamin Lester (Federal Reserve Bank of Philadelphia), Ludo Visschers (The University of Edinburgh & Universidad Carlos III, Madrid), and Ronald Wolthoff (University of Toronto) explain Meeting Technologies and Optimal Trading. Mechanisms in Competitive Search Markets.

ABSTRACT: In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers’ revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the positive implications of this pricing mechanism for transaction prices and allocations.

November 14, 2014 | Permalink | Comments (0) | TrackBack (0)

The competition assessment framework for the retail energy sector: some concerns about the proposed interpretation

Stephen Littlechild, Cambridge discusses The competition assessment framework for the retail energy sector: some concerns about the proposed interpretation.

ABSTRACT: The framework proposed by Ofgem, OFT and CMA invokes a well-functioning market, but the Competition Commission has not always used such a concept, and when it has done so it has been problematic. Here, the well-functioning market is Ofgem’s vision of a successful market, not anchored in any actual market. Ofgem’s indicators of a competitive market have changed since 2002: tariff variety and products tailored to different customer groups are now a harmful complexity rather than a potential benefit of competition. The proposed “theories of harm” ignore regulatory policy and coordinated conduct facilitated by regulation. The analysis of weak customer response fails to distinguish between competition as an equilibrium state and as the Competition Commission's rivalrous discovery process over time. The framework thus reflects Ofgem’s perspective, but the assessment needs to be independent because regulation is at is! sue, and because Ofgem is no longer capable of a competition assessment.

November 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, November 13, 2014

Information Exchange: Productive Cooperation or Harmful Collusion? CPI Antitrust Chronicle Issue

Information Exchange: Productive Cooperation or Harmful Collusion?

  1. Jarod Bona, Nov 11, 2014

    “But the Bridge Will Fall” is Not a Valid Defense to an Antitrust Lawsuit

    An antitrust case is not the place to debate the merits of competition. Jarod Bona (Bona Law)

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  2. Pedro Callol, Nov 11, 2014

    Information Exchanges and Competition Law: A Few Comparative Law Thoughts

    Grey is most often the color of information exchanges. Pedro Callol (Callol Law)

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  3. Neha Georgie, Nov 11, 2014

    Collusion Versus Collaboration: Getting It Right

    In considering how collaboration differs from collusion, it is useful to think of form-based versus effects-based approaches. Neha Georgie

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  4. Mark Jephcott, Tom Kemp, Nov 11, 2014

    Trade Associations in Asia: A Predictable Focus of the Authorities

    Trade associations have been an enforcement focus of antitrust authorities in Asia, particularly in China, in recent years. Mark Jephcott & Tom Kemp (Herbert Smith Freehills)

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  5. Mark Katz, Nov 11, 2014

    Trade and Professional Associations in Canada: An Update

    What is needed, above all, is the commitment to make competition compliance a priority. Mark Katz (Davies Ward)

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Of Special Interest

November 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Price Asymmetry in Farm-Retail Price Transmission in the Turkish Dairy Market

Bor, Ozgur (Atilim University/Department of Economics), Ismihan, Mustafa (Atilim University/Department of Economics) and Bayaner, Ahmet (Akdeniz University/Department of Management) describe Price Asymmetry in Farm-Retail Price Transmission in the Turkish Dairy Market.

ABSTRACT: This study investigates the price asymmetry in farm-retail price transmission in the Turkish milk market. An asymmetric error correction model is applied on the monthly price data, and the results suggest that there is a positive price asymmetry in the farm-retail price transmission in the Turkish dairy market. That is, the retail prices tend to adjust more quickly to the input price increases than to its decreases which yield welfare losses to the consumers. In addition, cointegration results imply that there is a significant market power in the dairy market.

November 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Asymmetric and nonlinear pass-through of crude oil prices to gasoline and natural gas prices

Ahmed Atil (ESC Rennes School of Business - ESC Rennes School of Business), Amine Lahiani (ESC Rennes School of Business - ESC Rennes School of Business) and Duc Khuong Nguyen (IPAG - IPAG Business School - Ipag) explore Asymmetric and nonlinear pass-through of crude oil prices to gasoline and natural gas prices.

ABSTRACT: In this article, we use the recently developed nonlinear autoregressive distributed lags (NARDL) model to examine the pass-through of crude oil prices into gasoline and natural gas prices. Our approach allows us to simultaneously test the short-and long-run nonlinearities through positive and negative partial sum decompositions of the predetermined explanatory variables. It also offers the possibility to quantify the respective responses of gasoline and natural gas prices to positive and negative oil price shocks from the asymmetric dynamic multipliers. The obtained results indicate that oil prices affect gasoline prices and natural gas prices in an asymmetric and nonlinear manner, but the price transmission mechanism is not the same. Important policy implications can be learned from the empirical findings.

November 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Search and Ripoff Externalities

Mark Armstrong, Oxford discusses Search and Ripoff Externalities.

ABSTRACT: This paper surveys models of markets in which some consumers are "savvy" while others are not. We discuss when the presence of savvy consumers improves the deals available to non-savvy consumers in the market (the case of search externalities), and when the non-savvy fund generous deals for savvy consumers (ripoff externalities). We also discuss when the two groups of consumers have aligned or divergent views about market interventions. The analysis covers two overlapping families of models: those which examine markets with price/quality dispersion, and those which exhibit forms of consumer hold-up.

November 13, 2014 | Permalink | Comments (0) | TrackBack (0)

A General Theory of Endogenous Market Structures

Federico Etro (Department of Economics, University Of Venice Ca Foscari) and Paolo Bertoletti (Department of Economics, University Of Pavia) offer A General Theory of Endogenous Market Structures.

ABSTRACT: We provide a unified approach to imperfect (monopolistic, Bertrand and Cournot) competition equilibria with demand functions derived from symmetric preferences over a large but finite number of goods. The equilibrium markups depend on the Morishima Elasticity of Substitution/Complementarity between goods, and can be derived directly from the utility functions and ranked unambiguously. We characterize the endogenous market structures, their dependence on market size, income and firms’ productivity and compare them with the optimal allocations. Finally, we apply our results to the case of preferences such as Generalized Leontief, Generalized linear and Generalized quadratic that we introduce in the literature on imperfect competition.

November 13, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 12, 2014

The Antitrust Analysis of Rules and Standards for Software Platforms

David Evans, Global Economics Group; UCL; University of Chicago, has authored The Antitrust Analysis of Rules and Standards for Software Platforms.

ABSTRACT: Software platforms anchor vast global communities of users, application developers, device manufacturers, content providers, advertisers, and others. They drive innovation by enabling entrepreneurs, often anywhere in the world, to develop “applications” and to reach all the users of the platform, often anywhere in the world.  These applications are sometimes the foundation of substantial businesses. The value of these software platforms, and their ability to support large communities, depends on the ability of the platform to promote positive externalities and reduce negative externalities. Software platforms usually impose rules and standards and often exclude, or bounce, participants that harm others in the community, and reward participants that benefit others in the community. Competition policy should presume that these governance systems, and the restrictions they place on platform participants including their possible expulsion from the platform, are efficient and pro-competitive. Software platforms could, however, employ governance systems to foreclose competition.  These restrictions, therefore, should not be lawful per se. Rather, courts and competition authorities should employ screens to protect pro-competitive restrictions and isolate anti-competitive ones. The application of these screens should be neutral to the licensing model chosen by the software platform creator. There is, in particular, no basis for imposing tougher limitations on software platforms that use an open-source license model than on software platforms that use a proprietary license.

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Entry-Deterring Nonlinear Pricing with Bounded Rationality

Dawen Meng, Shanghai University of Finance and Economics and Guoqiang Tian, Texas A&M analyze Entry-Deterring Nonlinear Pricing with Bounded Rationality.

ABSTRACT: This paper considers an entry-deterring nonlinear pricing problem faced by an incumbent firm of a network good. The analysis recognizes that the installed user base/network of incumbent monopolist has preemptive power in deterring entry if the entrant’s good is incompatible with the incumbent’s network. This power is, however, dramatically weakened by the bounded rationality of consumers in the sense that it is vulnerable to small pessimistic forecasting error when the marginal cost of entrants falls in some medium range. These findings provide a formal analysis that helps reconcile two seemingly contrasting phenomena: on one hand, it is very difficult for a new, incompatible technology to gain a footing when the product is subject to network externalities; on the other hand, new technologies may frequently escape from inefficient lock-in and supersede the old technologies even in the absence of backward incompatibility. Our results therefore shed light on how the market makes transition between incompatible technology regimes.

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Bertrand and the long run

Roberto Burguet (Institute for Economic Analysis, CSIC, and Barcelona GSE) and Jozsef Sakovics (The University of Edinburgh) discuss Bertrand and the long run.

ABSTRACT: We propose a new model of simultaneous price competition, based on firms offer personalized prices to consumers. In a market for a homogeneous good and decreasing returns, the unique equilibrium leads to a uniform price equal to the marginal cost of each firm, at their share of the market clearing quantity. Using this result for the short-run competition, we then investigate the long-run investment decisions of the firms. While there is underinvestment, the overall outcome is more competitive than the Cournot model competition. Moreover, as the number of firms grows we approach the competitive long-run outcome.

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Master of Competition and Consumer Law MC-CMCNLAW

Overview

The specialisation in competition and consumer law offers highly specialised expertise and skills in an area of law that is growing, complex, interdisciplinary and relevant both in Australia and internationally. The courses in this specialisation are designed to recognise the economic character of the law, and also to offer an applied focus on issues arising in practice. In addition to providing students with a detailed understanding of the policy and law currently regulating competition and consumer protection, law reform initiatives and international and comparative perspectives are at the heart of the program.

Requirements

Students must complete eight subjects in total.

Students who do not have a law degree from a common law jurisdiction must complete the subject Fundamentals of the Common Law as well as seven subjects from the prescribed list.

Students with a law degree from a common law jurisdiction must complete at least seven subjects from the prescribed list and may choose an eighth subject from those available in the Melbourne Law Masters (excluding Fundamentals of the Common Law).

Competition Law Overview

Melbourne Law School also offers a one-day seminar called Competition Law Overview, providing students with a basic grounding in the competition provisions of the Competition and Consumer Act 2010 (Cth).

Learning Outcomes

Graduates of the Master of Competition and Consumer Law will:

  • Have an advanced and integrated understanding of the complex body of knowledge in the field of competition and consumer law, including:
    • the rules that prohibit anti-competitive conduct in major jurisdictions in this field around the world
    • the economic theories and policies that underpin and influence the operation of competition and consumer law
    • the design, operation and assessment of institutions that administer competition and consumer law
    • challenges that arise in the practice and application of competition and consumer law from both the perspective of businesses, practitioners, governments and enforcement agencies
    • current debates on the reform of competition and consumer law
  • Have expert, specialised cognitive and technical skills that equip them to independently:
    • analyse, critically reflect on and synthesise complex information, concepts and theories in the field of competition and consumer law
    • research and apply such information, concepts and theories to the relevant body of knowledge and practice; and
    • interpret and transmit their knowledge, skills and ideas to specialist and non-specialist audiences
  • Apply their knowledge and skills to demonstrate autonomy, expert judgment, adaptability and responsibility as a practitioner and learner in the field of competition and consumer law.

All Subjects

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Do Free Mobile Apps Harm Consumers?

Greg Sidak, Criterion asks Do Free Mobile Apps Harm Consumers?

ABSTRACT: Google distributes proprietary applications for its open-source Android mobile operating system (OS) free of charge. Some of those applications (apps) are offered together as a suite of apps known as Google Mobile Services (GMS). Manufacturers of mobile devices can agree, pursuant to Google’s Mobile Application Distribution Agreement (MADA), to install the suite of apps on their devices at a price of zero. Some theorize that Google’s policy of offering some applications together as a suite of apps harms competitors or menaces consumer welfare. That theory is wrong. As a matter of economics, Google’s practice of distributing free mobile apps in the GMS suite benefits consumers (as well as manufacturers, mobile carriers, app developers, and advertisers) by stimulating demand, by reducing the risk of fragmentation of the Android OS, and by preventing Google’s competitors from free riding on its investment to make the Android OS and mobile apps a viable open-source competitor to closed and proprietary—“walled garden”—platforms for mobile devices. As a matter of antitrust law, Google’s distribution of apps as part of a larger whole—GMS—is lawful under the Supreme Court’s four-part test for such arrangements. Google does not force consumers to pay for apps they do not want, and the MADA’s requirements enhance competition overall. The same conclusion holds with even greater certainty under the rule-of-reason analysis for software integration that the D.C. Circuit adopted in its historic Microsoft decision.

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Did Separating Openreach from British Telecom Benefit Consumers?

Greg Sidak (Criterion Economics) asks Did Separating Openreach from British Telecom Benefit Consumers?

ABSTRACT: In 2005, Ofcom, then telecommunications regulator in the United Kingdom, implemented functional separation of British Telecom plc (BT), separating its wholesale and retail services. BT established a division within the company, Openreach, to provide equal access to its local access network and backhaul products. The tenth anniversary of this regulatory and corporate experiment is an appropriate moment to ask whether functionally separating Openreach from BT benefited consumers. We find that Openreach’s creation generated short-run consumer benefits in the form of lower prices but also led to negative long-run effects, which outweighed the short-term price reduction. Our econometric analysis indicates that prices for broadband and residential fixed-line telephone services are lower than one would expect based on prices in comparable countries. However, telecommunications investment, customer satisfaction, and measures of the United Kingdom’s global competitiveness in telecommunications have also fallen. In particular, the United Kingdom’s investment in next-generation networks is lagging compared with the rest of the world.

November 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 11, 2014

The Antitrust Activism of the European Commission in the Telecommunications Sector

Alexandre De Streel, University of Namur describes The Antitrust Activism of the European Commission in the Telecommunications Sector.

ABSTRACT: This paper analyses the role of the European Commission in taking cases of abuse of dominance in the telecommunications sector since its liberalisation in 1998. The argument is that the Commission has played a very active antitrust role, in particular at the beginning of the liberalisation, and that its activism was blessed by the EU Courts. Indeed, the Courts see competition law as a complement, and not a substitute, to regulation. They have set a relatively low threshold for proving margin squeeze, the most common form of abuse in telecommunications; and they have allowed wide discretion to the Commission to deal with the inaction or failures of national regulatory authorities (NRAs).
It is further submitted that such activism was justified in the early days of liberalisation when the telecommunications markets were still very concentrated, and when the NRAs were in their infancy and sometimes captured. However, this activism is less justified today because, on the one hand, competition in the sector has increased, and on the other hand most anticompetitive practices can be, and should be, addressed by the NRAs. Today, the Commission should instead concentrate on consolidating the expertise and the independence of the NRAs, and it should rely on its extensive oversight of NRA decisions to prevent violations of the competition law.  
The paper is divided into five sections. The first section reviews the main EU cases of abuse of dominance in the various telecoms segments. The next three sections deal with the main substantive and institutional issues raised by those cases. The second section describes the approaches of the Commission and the EU Courts on the relationship between competition law and sector-specific regulation. The third section analyses the tests established by EU Courts to control margin squeeze and refusal to deal in post-liberalised markets. It also compares them with the tests proposed by the Commission in its Guidance Paper on exclusionary abuses. The fourth section analyses the different uses made by the Commission of its antitrust powers in the telecoms sector, and their institutional implications. The fifth section concludes the paper.

November 11, 2014 | Permalink | Comments (0) | TrackBack (0)