Antitrust & Competition Policy Blog

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

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Friday, September 5, 2014

Price Theory: A Short Summary

E. Glen Weyl, Microsoft Research New England; University of Chicago has a nice paper on Price Theory: A Short Summary.

ABSTRACT: I propose an alternative to the conventional definition of “price theory” as price-taking in partial equilibrium. Instead I define it as a methodological approach that derives a small collection of “prices” sufficient to characterize low-dimensional allocative problems in rich aggregate economies. A classic example is optimal income taxation formulas based on summary elasticities of taxable income and measures of inequality. This definition derives from a tight analogy to thermodynamics in physics and contrasts both with “reductionism” (e.g. game theory) that seek more complete characterizations of lower-dimensional economies and reduced-form “empiricism” that builds off of available empirical evidence. I use recent research from fields ranging from market design to international trade to highlight this definition and both the contrasts and complementarities of such price theory with empiricism and reductionism. I then argue that this schema helps make sense of the historical evolution of price theory during the 19th and 20th centuries, especially its interaction with the other traditions during the last half century, when price theory was closely identified with the University of Chicago. I conclude by expositing the analytic tools of price theory.

September 5, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, September 4, 2014

Patent Trolls

Lauren Cohen, Harvard Business School; National Bureau of Economic Research (NBER), Umit G. Gurun, University of Texas at Dallas - Naveen Jindal School of Management, and Scott Duke Kominers, Harvard University have an important empirical paper on Patent Trolls.

ABSTRACT: We provide theoretical and empirical evidence on the evolution and impact of non-practicing entities (NPEs) in the intellectual property space. Heterogeneity in innovation, given a cost of commercialization, results in NPEs that choose to act as “patent trolls” that chase operating firms' innovations even if those innovations are not clearly infringing on the NPEs' patents. We support these predictions using a novel, large dataset of patents targeted by NPEs. We show that NPEs on average target firms that are flush with cash (or have just had large positive cash shocks). Furthermore, NPEs target firm profits arising from exogenous cash shocks unrelated to the allegedly infringing patents. We next show that NPEs target firms irrespective of the closeness of those firms' patents to the NPEs', and that NPEs typically target firms that are busy with other (non-IP related) lawsuits or are likely to settle. Lastly, we show that NPE litigation has a negative real impact on the future innovative activity of targeted firms.

September 4, 2014 | Permalink | Comments (0) | TrackBack (0)

Industry Structure and Pricing Over the Business Cycle

Yossi Spiegel, Tel Aviv University - The Leon Recanati Graduate School of Business Administration and Konrad O. Stahl, University of Mannheim - Department of Economics; Centre for Economic Policy Research (CEPR) discuss Industry Structure and Pricing Over the Business Cycle.

ABSTRACT: We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the entrant is a first mover, and capacity utilization can be either pro- or countercyclical if the incumbent is a first mover. Moreover, our results show that entry deterrence by the incumbent firm can either amplify or dampen the effect of demand fluctuations on prices, price-cost margins, and capacity utilization.

September 4, 2014 | Permalink | Comments (0) | TrackBack (0)

Time for Renewables to Join the Market: the New Guidelines on State Aid for Environmental Protection and Energy

Erika Szyszczak, Littleton Chambers addresses Time for Renewables to Join the Market: the New Guidelines on State Aid for Environmental Protection and Energy.

ABSTRACT: The New Guidelines on State aid for environmental protection and energy impose tighter scrutiny upon the way Member States may fund projects to develop renewable energy. The emphasis is placed upon moving towards market-based incentives to develop renewables energy rather than automatically assuming market failure and the need for subsidies.

September 4, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 3, 2014

The French Taxi Case: Where Competition Meets—and Overrides—Regulation

Liliana Eskenazi, Allen & Overy discusses The French Taxi Case: Where Competition Meets—and Overrides—Regulation.

ABSTRACT: A new market for passenger cars with driver (VTC) booked in advance online or through smartphone apps has recently emerged in France, in parallel to the regulated taxi business. The resulting market clash between VTCs and traditional taxis, which are partially protected by a legal monopoly in relation to ‘hail and ride’ services, triggered new regulation aiming to restrict VTC activity. The French Competition Authority, in a recent opinion, and the supreme administrative court (Conseil d'Etat) in an interim order both ruled that such regulatory restrictions distort competition on the unprotected segment of the market and hamper the freedom to conduct business.

September 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Is the Time Allocated to Review Patent Applications Inducing Examiners to Grant Invalid Patents?: Evidence from Micro-Level Application Data

Michael D. Frakes, Northwestern University School of Law and Melissa F. Wasserman, University of Illinois have an interesting paper asking Is the Time Allocated to Review Patent Applications Inducing Examiners to Grant Invalid Patents?: Evidence from Micro-Level Application Data.

ABSTRACT: This paper explores how examiner behavior is altered by the time allocated for reviewing a patent application. Insufficient examination time may crowd out examiner search effort, impeding the ability to form time-intensive prior-art-based rejections (especially, obviousness rejections) and thus leaving examiners more inclined to grant otherwise invalid applications. To test this prediction, we trace the behavior of individual examiners over the course of a series of certain promotions that carry with them a substantial reduction in expected examination time. For these purposes, we use novel micro-level application data spanning a ten year period and estimate examiner fixed-effects specifications that allow us to control flexibly for examiner heterogeneity. We find evidence demonstrating that search efforts and time-intensive rejections indeed fall, while granting tendencies rise, upon the promotions of interest. Assuming that patent examiners will tend to make the correct patentability determinations when provided sufficient examination time, our results suggest that the present schedule of time allotments may be inducing patent examiners to grant patents that otherwise fail to meet the patentability requirements.

September 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Effects of antitrust leniency on concealment effort by colluding firms

Leslie M. Marx, Duke and Claudio Mezzetti, Melbourne describe the Effects of antitrust leniency on concealment effort by colluding firms.

ABSTRACT: We provide an economic analysis of the incentives created by an antitrust leniency programme, with particular attention to incentives created for effort directed at the concealment of collusion. The results point to a need for competition authorities to consider the effects of concealment when evaluating economic evidence of collusion. The results also suggest possible benefits from increasing penalties for cartels that use third-party facilitators.

September 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Procedural Powers in Competition Enforcement: A Look at Inspections

Maria De Benedetto, Roma Tre University examines Procedural Powers in Competition Enforcement: A Look at Inspections.

ABSTRACT: Competition enforcement is characterised by asymmetric information and Competition Authorities have been provided with inspection powers to reduce the informative gap. The paper looks at competition inspections from different perspectives. First of all, the paper analyses convergences of principles and divergences of rules between different competition systems starting from two wide analyses carried out by the European Competition Network in 2012 and by the International Competition Network in 2013. Secondly, it tries to look at competition inspections from the point of view of undertakings, especially describing the practice of adopting Guidelines and internal rules for giving instructions to be followed during a competition inspection but also mentioning the costs of inspections, the duty of undertakings to cooperate during inspections (and sanctions for non-compliance) and – finally – the limits to the same power of inspection. Moreover, the point of view of Competition Authorities has been taken into account, with particular regard to the questions of planning inspections, administrative capacity in performing inspections and international cooperation in competition inspections.

September 3, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 2, 2014

the American Antitrust Institute is recruiting the next generation of antitrust practitioners

To continue its growth, the American Antitrust Institute is recruiting the next generation of antitrust practitioners. The AAI is seeking the antitrust community’s support of two new programs aimed at connecting with this next generation. Antitrust practitioners can help by


1.
Sponsoring an associate to attend the December 2 Private Enforcement Conference in Washington DC which features a new “Young Lawyers Breakfast.”  At this breakfast session, targeted to the young practitioners who will be the future of our sector, a panel composed of both junior lawyers and legendary veterans will give a variety of perspectives on tightened pleading standards, restricted admissibility of expert opinions, increased roadblocks to class certification, and the proliferation of mandatory arbitration with class action bans.  Among
other things, panelists will discuss how problems like those facing our practices have been overcome in the past, and offer reasons to expect that private antitrust enforcement may well have a vibrant future.  The panel will
consider practical solutions, and how young lawyers in particular can take part. Panelists include Joe Goldberg, William Isaacson, Roberta D. Liebenberg, H. Laddie Montague, Robert Kaplan, and David A. Young.

For those not in Washington, accommodations on December 1 will be needed to be able to attend the 8:30 breakfast.  But, consider the cost of accommodations and tuition an investment in the associate as well as in the future of the AAI.  



2.
Nominating a young lawyer for Outstanding Antitrust Litigation Achievement by a Young Lawyer
which will be presented at the Antitrust Enforcement Awards dinner on December 2.
This award is limited to private civil actions. Nominees should be individual practitioner(s) under 40 years old or admitted to practice for 10 years or less. Nominees will be judged on:
1. the individual’s contribution to the case

2. the benefit realized by the client, consumers, or class

3. the positive development of antitrust policy

Qualified nominations must relate to antitrust-focused litigation that was (a) initiated in or appealed in any U.S. state or federal court and (b) resulted (whether or not subject to appeal) in a final judgment, verdict, dismissal, conviction, injunction, order, or settlement between July 1, 2013 and June 30, 2014.

The award submission period ends on September 10, 2014.
Nomination Form: http://www.antitrustinstitute.org/sites/default/files/Awards%20Entry%20Form%202014.doc
Award Procedures: http://www.antitrustinstitute.org/sites/default/files/Awards%20Procedures%202014_0.pdf


Please contact Sarah Frey at American Antitrust Institute (
sfrey@antitrustinstitute.org) with any questions.

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Targeted advertising, platform competition and privacy

Henk Kox, CPB Netherlands Bureau for Economic Policy Analysis, Bas Straathof, CPB Netherlands Bureau for Economic Policy Analysis and Gijsbert Zwart, TILEC. discuss Targeted advertising, platform competition and privacy.

ABSTRACT: Targeted advertising can benefit consumers through lower prices for access to websites. Yet, if consumers dislike that websites collect their personal information, their welfare may go down. We study competition for consumers between websites that can show targeted advertisements. We find that more targeting increases competition and reduces the websites' profits, but yet in equilibrium websites choose maximum targeting as they cannot credibly commit to low targeting. A privacy protection policy can be beneficial for both consumers and websites. If consumers are heterogeneous in their concerns for privacy, a policy that allows choice between two levels of privacy will be better. Optimal privacy protection takes into account that the more intense competition on the high-targeting market segment also benefits consumers on the less competitive segment. Consumer surplus is maximized by allowing them a choice between a high t! argeting regime and a low targeting regime which affords more privacy.

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

A Model of Dynamic Limit Pricing with an Application to the Airline Industry

Christopher Gedge, Duke, James W. Roberts, Duke, Andrew Sweeting, Maryland offer A Model of Dynamic Limit Pricing with an Application to the Airline Industry.

ABSTRACT: The one-shot nature of most theoretical models of strategic investment, especially those based on asymmetric information, limits our ability to test whether they can fit the data. We develop a dynamic version of the classic Milgrom and Roberts (1982) model of limit pricing, where a monopolist incumbent has incentives to repeatedly signal information about its costs to a potential entrant by setting prices below monopoly levels. The model has a unique Markov Perfect Bayesian Equilibrium under a standard form of refinement, and equilibrium strategies can be computed easily, making it well suited for empirical work. We provide reduced-form evidence that our model can explain why incumbent airlines cut prices when Southwest becomes a potential entrant into airport-pair route markets, and we also calibrate our model to show that it can generate the large price declines that are observed in the data.

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

ANTITRUST IN EMERGING AND DEVELOPING COUNTRIES: China, India, Mexico, Brazil, South Africa ...

ANTITRUST IN EMERGING AND DEVELOPING COUNTRIES: China, India, Mexico, Brazil, South Africa ...

Concurrences Journal + New York University School of Law                               

Friday, October 24, 2014 from 8:30 AM to 6:30 PM (EDT)

New York, United States

 

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay?

Keith M. Drake, Greylock McKinnon Associates, Martha A. Starr, American University and Thomas McGuire, Harvard Medical School ask Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay?

ABSTRACT: Brand and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer along with a specified date at which the generic would enter the market. The Federal Trade Commission contends that these agreements extend the brand’s market exclusivity and amount to anticompetitive divisions of the market. The parties involved defend the settlements as normal business agreements that reduce business risk associated with litigation. The anticompetitive hypothesis implies brand stock prices should rise with announcement of the settlement. We classify 68 brand-generic settlements from 1993 to the present into those with and without an indication of a “reverse payment” from the brand to the generic, and conduct an event study of the announcement of the patent settlements on the stock price of the brand. For settlements with an indication of a reverse payment, brand stock prices rise on average 6% at the announcement. A “control group” of brand-generic settlements without indication of a reverse payment had no significant effect on the brands’ stock prices. Our results support the hypothesis that settlements with a reverse payment increase the expected profits of the brand manufacturer and are anticompetitive.

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Nothing so certain as your anchors? A consumer bias that might lower prices

Barna Bako, Corvinus University of Budapest and Andras Kalecz-Simon, Corvinus University of Budapest argue Nothing so certain as your anchors? A consumer bias that might lower prices.

ABSTRACT: Anchoring is a well-known decision-making bias: original guesses for a certain question could act as anchors and could influence our final answers. Reference prices - in a similar fashion - can lead to a bias in consumer valuations, and thus consumer demand will be coherent but not one derived from a utility framework. In our paper we investigate the effect of the existence of anchoring on how oligopolistic firms might change their pricing strategy. More specifically, we analyze the effect of anchoring on pricing when differentiated firms compete in Bertrand fashion. We show that if the anchoring effect is smaller than a threshold the average price is lower compared to the no-anchoring case.

September 2, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, September 1, 2014

On the Optimality of Pure Bundling for a Monopolist

Domenico Menicucci, Universita degli Studi di Firenze Sjaak Hurkens, Institute for Economic Analysis (CSIC) and Barcelona GSE and Doh-Shin Jeon, Toulouse School of Economics write On the Optimality of Pure Bundling for a Monopolist.

ABSTRACT: This paper considers a monopolist selling two objects to a single buyer with privately observed valuations. We prove that if each buyer’s type has a non-negative virtual valuation for each object, then the optimal price schedule is such that the objects are sold only in a bundle; weaker conditions suffice if valuations are independently and identically distributed. Under somewhat stronger conditions, pure bundling is the optimal sale mechanism among all individually rational and incentive compatible mechanisms.

September 1, 2014 | Permalink | Comments (0) | TrackBack (0)

Selling Experiments: Menu Pricing of Information

Dirk Bergemann (Cowles Foundation, Yale University), Alessandro Bonatti (MIT) and Alex Smolin (Dept. of Economics, Yale University) are Selling Experiments: Menu Pricing of Information.

ABSTRACT: A monopolist sells informative experiments to heterogeneous buyers. Buyers differ in their prior information, and hence in their willingness to pay for additional signals. The monopolist can profitably offer a menu of experiments. We show that, even under costless information acquisition and free degrading of information, the optimal menu is quite coarse. The seller offers at most two experiments, and we derive conditions under which at vs. discriminatory pricing is optimal.

September 1, 2014 | Permalink | Comments (0) | TrackBack (0)

King’s College London presents the Postgraduate Diploma in EU Competition Law 2014 - there is still time to enroll (through this Friday)

King’s College London presents the Postgraduate Diploma in EU Competition Law 2014

Start date 1st October 2014

Some of the key elements of the course:

Professor Richard Whish is the guru on EU Competition Law and the reason many students choose to do this programme. Professor Whish has been the Professor of Law at Kings College London since 1991 and this year has been awarded Emeritus Professor at Kings. He is a qualified solicitor and also acts as a consultant to a variety of companies and regulatory agencies and was a non-executive director at the Office of Fair Trading. He is actively involved in research on many aspects of competition law policy, including the international merger process, pricing behaviour and the relationship between competition law and regulation.

As well as including the expertise of Professor Richard Whish, the course also includes a number of Competition experts with years of varied experience between them. Wouter Wills, Hearing Officer and Leo Flynn, Member of the Legal Service of the European Commission; Paula Riedel, Partner, Linklaters; and Rafique Bachour, Partner, Freshfields are all part of this impressive programme.

The course has been running for around 16 years and has had over 2000 students study during this period. Many law firms and Competition Authorities use this course as their training programme for employees in the competition field.

The course is completed in a short 8 months and gives the Students who gain a merit level the opportunity to go on to study the MA in EU Competition Law starting in the following September

Ranking 4th amongst UK law schools*, law at King’s has enjoyed a tradition of excellence for over 175 years and is recognised globally as one of the UK’s premier law schools

*source: 2013 QS World University Rankings by Subject

Please quote the booking code TT112 which will help ensure that the application is processed as quickly as possible.

To enrol, complete the two page application form at the back of the brochure and return it to me or follow this link to enrol through my booking page: http://www.ibclegal.com/FKW12322TT112.

If you have any questions please contact

Hannah Osborne

Divisional Training Manager

Informa Professional Academy

Lloyd’s Maritime Academy

IBC Academy

T: +44 (0) 20 7017 4940

F: +44(0) 20 7017 7853

hannah.osborne@informa.com

September 1, 2014 | Permalink | Comments (0) | TrackBack (0)

Period of limitations in follow-on competition cases: when does a ‘decision’ become final?

Pınar Akman, Associate Professor of Law, School of Law, University of Leeds asks Period of limitations in follow-on competition cases: when does a ‘decision’ become final?

ABSTRACT: A series of private competition law cases in the UK has demonstrated that there are significant procedural issues that need resolving before private enforcement can flourish in the way that the European Commission and the UK Government are currently encouraging. One of these issues is the calculation of the period of limitations in a follow-on case where there are multiple infringers some of whom appeal the infringement decision of the competition authority and some of whom do not. A closely related issue is that of when the underlying infringement decision of the competition authority becomes final and consequently binding on a national court deciding a follow-on case. This has been a recurring problem in the UK in the context of follow-on actions before the Competition Appeal Tribunal (CAT) culminating in the Deutsche Bahn decision of the Supreme Court. This article shows that this seemingly simple issue of establishing when a decision becomes final and the calculation of the period of limitations is in fact loaded with serious implications going well beyond a procedural, timing point. Although the issue is pertinent to all types of infringements of competition law with multiple infringers, it has particular implications for leniency recipients in cartel cases and therefore, for the overall relationship between private and public enforcement of competition law. This article demonstrates how suboptimal the current legal situation is and what the overall preferable solution is for establishing when an infringement decision becomes final and the period of limitations in follow-on cases based on infringement decisions in the presence of multiple infringers under UK and EU law.

September 1, 2014 | Permalink | Comments (0) | TrackBack (0)

The Rocky Relationship between the Federal Trade Commission and Administrative Law

Richard J. Pierce Jr., George Washington University Law School describes The Rocky Relationship between the Federal Trade Commission and Administrative Law.

ABSTRACT: In this contribution to a symposium in honor of the 100th anniversary of the FTC, Professor Pierce describes the problems that FTC has experienced as a result of conflicts between its practices and basic principles of administrative law. He traces those problems to the history of the FTC, including the language of the FTC Act of 1914 and FTC's attempt to implement that statute. He describes the ways in which the conflicts between FTC practices and administrative law handicap FTC's efforts to perform its antitrust mission. He then proposes a combination of changes in antitrust statutes that would allow FTC to perform its antitrust mission more effectively over the next century. Those changes include: (1) repeal sections 5 and 13(b) of the FTC Act; (2) confer on FTC power to issue legislative rules to implement the Sherman and Clayton Acts; (3) confer on FTC exclusive jurisdiction to resolve civil cases that arise under the Sherman and Clayton Acts; and, (4) replace oral evidentiary hearings with paper hearings.

September 1, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, August 29, 2014

Identifying Benchmarks for Applying Non-Discrimination in Frand

Dennis W. Carlton, University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) and Allan Shampine, Compass Lexecon are Identifying Benchmarks for Applying Non-Discrimination in Frand.

ABSTRACT: Standard setting organizations have for many years asked members to commit to license patents essential to use of standards on Fair, Reasonable and Non-discriminatory, or FRAND, terms. Previous work has shown how standard setting that incorporates patents can lead to complicated situations in which the patent owner, sometimes in collaboration with rival firms, can exploit the market power that is created by being designated a standard essential patent, but that the non-discriminatory provision of FRAND can be interpreted so as to mitigate the inefficiencies that can result when patent owners try to exploit their market power conferred by the standard setting process. This paper discusses the availability of appropriate benchmarks for implementing the non-discriminatory provision and shows how even when license terms for patents are not set in advance, FRAND terms can protect members of an SSO and that this protection can be implemented by using various benchmarks.

August 29, 2014 | Permalink | Comments (0) | TrackBack (0)