Friday, July 17, 2015
Joshua P. Davis, University of San Francisco - School of Law and Ryan J. McEwan, Joseph Saveri Law Firm describe Deactivating Actavis: The Clash between the Supreme Court and (Some) Lower Courts.
ABSTRACT: Numerous trial courts have misinterpreted the Supreme Court’s recent decision in FTC v. Actavis, Inc. An interesting question is why they have done so. Perhaps lower courts disagree with the Supreme Court about so-called “reverse payment” cases, the subject of the Actavis opinion. Or perhaps they simply have made random mistakes, as is perhaps inevitable, particularly in a challenging area of the law like antitrust. This Article suggests an alternative account: that lower courts are seeking clear guidance from Actavis, clear guidance that the Supreme Court has not tended to provide in antitrust cases in general and that it did not provide in Actavis in particular. This Article attempts to correct the ensuing confusion, and concludes with a modest suggestion about how the Supreme Court could minimize these sorts of difficulties in the future.
Florian Wagner-von Papp, University College London Faculty of Laws examines De Minimis.
ABSTRACT: This short article summarizes recent developments on the de minimis exception in EU competition law and the competition law of the Member States. Most of the article is devoted to the de minimis exception in Article 101(1) TFEU and the corresponding national provisions. This includes a discussion of the Expedia judgment, the 2014 revision of the European Commission's de minimis Notice, and to what extent object restriction that have a negligible impact on competition fall outside Article 101(1) TFEU.
Vertical Issues Arising from Conduct between Large Supermarkets and Small Suppliers in the Grocery Market: Law and Industry Codes of Conduct
ABSTRACT: The grocery retail market is often recognised as problematic, with governments facing complaints from small retailers and suppliers about the practices of large companies and subsequent difficulties in competing with them. This leads to investigations into the grocery markets...
Placing the primary focus on the UK and Australian codes of conduct, this article will explore whether a specific regulation for the grocery retail market in the form of an industry code is or would be beneficial and whether a code of conduct is or could be an effective tool for dealing with the issues arising from an unequal bargaining power between large retailers and their suppliers. To determine the limitations of the law in this matter, the relevant Australian legal instruments will be surveyed. Indeed, Australia, having one of the most concentrated grocery retail markets in the world and a number of relevant legal instruments embodied in competition law and consumer law, provides a well-resourced example for the analysis of the issues occurring on the vertical chain in the grocery retail market.
These issues come about in two key areas: the first lies in unbalanced bargaining power between the large supermarket chains and smaller suppliers and creates unequal and/or unfair conditions. The second is based on a lack of enforcement of supplier "rights" and is thus related to the first group of issues. This lack of enforcement occurs for two reasons. First, suppliers fear potential commercial consequences enforced by large supermarkets and are, hence, reluctant to disclose unfair practices. This limits the deterrence and subsequent punishment of unwanted conduct. Secondly, without the existence of a specific legal or policy instrument, such as a soundly-based industry code, there might be, and as the analysis below will reveal in Australia there is a lack of prohibition of such practices and a lack of effective enforcement mechanisms.
The first group of issues will be drawn from inquiries into the grocery market in the United Kingdom and in Australia and from the rules embodied in the most recent UK and Australian industry codes of conduct. These are surveyed in the first part of the article, together with the reasons for tackling these issues, which will lead to arguments for addressing them by law and policy. After establishing the reasons, the relevant Australian law is outlined to determine whether a specific industry regulation of the analysed issues is needed. This part reveals a number of inefficiencies in the application of general law to these issues. On these bases, the enforcement of both codes of conduct is analysed to draw a final conclusion as to whether the codes of conduct are or could be an effective tool to deal with the analysed issues, primarily in the Australia context. The comparison of the codes further assists with the determination of the most effective mechanisms for tackling these issues.
Thursday, July 16, 2015
Michal S. Gal, University of Haifa School of Law, Israel, Mor Bakhoum, Max Planck Institute for Innovation and Competition, Josef Drexl, Director, Max Planck Institute for Innovation and Competition, Munich, Germany, Eleanor M. Fox, New York University School of Law, US, and David J. Gerber, Chicago-Kent College of Law, Illinois Institute of Technology, US have edited The Economic Characteristics of Developing Jurisdictions Their Implications for Competition Law.
BOOK ABSTRACT: There is ongoing debate as to what competition law and policy is most suitable for developing jurisdictions. This book argues that the unique characteristics of developing jurisdictions matter when crafting and enforcing competition law and these should be placed at the heart of analysis when considering which competition laws are judicious. Through examining different factors that influence the adoption and implementation of competition laws in developing countries, this book illustrates the goals of such laws, the content of the legal rules, and the necessary institutional, political, ideological and legal conditions that must complement such rules. The book integrates development economics with competition law to provide an alternative vision of competition law, concluding that ‘one competition law and policy size’ does not fit ‘all socio-economic contexts'.
Conor C. Talbot European University Institute - Department of Law (LAW); Trinity College (Dublin) - Department of Economics; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) identifies Developments in Merger Control and the Need to Notify.
ABSTRACT: In this article, it is proposed to highlight a series of evolving risks that should be taken into account by all businesses in Ireland, especially those seeking new business partners or exploring acquisition opportunities in Ireland or abroad. Most experienced practitioners will be aware of the legal obligation to notify specific types of transactions to competition authorities before completion. Equally, it is widely known that any transaction which should have been notified under the competition rules, but is completed before the proper approval is obtained, will be void.
However, the decision whether a transaction must be notified or not is increasingly complex and depends on a number of fluid factors which are discussed in this article. A number of recent developments have significantly increased the risks associated with merger control process for businesses in Ireland.
Tristan Feunteun describes Cartels and the Right to Food: An Analysis of States’ Duties and Options.
ABSTRACT: Hunger has complex causes and can be exacerbated by the actions and/or inactions of various actors, such as states, intergovernmental organizations, and transnational corporations. Globalization has stretched food supply chains worldwide, with an accompanying increase in the harm upon the right to food (RTF) being imposed by extraterritorial parties (whether transnational corporations, foreign states, or intergovernmental organizations). The RTF under international human rights law accommodates the complexities of this, and presents states with a variety of obligations and/or responsibilities within a framework that seeks to respect, protect, and fulfil the RTF. This article will focus on one discrete yet widespread aspect of distortions in agricultural markets and food systems in general, namely collusive price-fixing cartels. The existing literature has largely ignored the nexus of these important issues. First, this article will analyse the (scale of the) effects of such cartels on the RTF. Secondly, it will then examine the respect–protect–fulfil obligations and/or responsibilities of states to regulate such cartels in light of this, embedding the analysis of the problem posed by cartels (and the potential solutions thereto) within this framework. States, with regards to cartels involving transnational corporations in the food sector, have obligations and/or responsibilities to take all appropriate measures to tackle the problem. Such measures include using competition law to regulate the behaviour of transnational corporations and other market participants. Thirdly, this article will examine how competition law and similar mechanisms might yet be developed into effective tools to help states to meet these obligations and/or responsibilities regarding the RTF and to mitigate the effects of cartels upon this, notwithstanding the lack of consensus regarding competition law at the Ministerial Conferences of the World Trade Organization held in Doha and Cancún. This article concludes that hunger in the 21st century is a many-headed monster, and that the RTF obliges all states to assess and adapt all possible tools at their disposal—competition law included—to tackle one particular head of that monster: the impact of cartels on the RTF.
Dr Elizabeth Xiao-Ru Wang, Charles River Associates and Harry Foster, Charles River Associates offer An economic perspective of standards and FRAND enforcement in China.
ABSTRACT: China has confronted issues surrounding fair, reasonable and non-discriminatory terms (FRAND) for standard essential patents (SEPs) and has become an important arena for FRAND-related antitrust enforcement and litigation. This article summarizes the key enforcement activities in China to date by the Chinese courts and three antitrust enforcement agencies with regard to FRAND issues. These activities indicate that China’s approach to analysing and enforcing FRAND terms has been under the framework of the abuse of dominance. Chinese authorities’ decisions to date appear to indicate the following logic when deciding the FRAND issues: SEP holders generally possess market dominance in licensing SEPs, and that disputes concerning SEPs licensing terms may be scrutinized for the risks of abuse of market dominance. This abuse may take the form of charging excessive rates, imposing unreasonable licensing terms, or both. They also reflect that Chinese authorities appear to place an emphasis on preserving FRAND commitments, regardless of whether they are requested by a standard setting organization or unilaterally made by an individual company.
Wednesday, July 15, 2015
Fei Deng, Edgeworth Economics and Su Sun, Economists Incorporated discuss The Role of Economics in Chinese Merger Appraisal.
ABSTRACT: The article describes the role of economic analysis as provided in China’s Anti-monopoly Law, merger regulations and guidelines, and how such economic considerations have been applied in Ministry of Commerce’s (MOFCOM) merger review decisions when it has intervened. The article also provides a case study of the specific methodologies adopted by MOFCOM in its review of the Thermo Fisher/Life Tech merger. It can be expected that economic analysis will play an increasingly important role in China’s merger review work.
Estimating Dynamic Merger Effciencies with an Application to the 1997 Boeing-McDonnell Douglas Merger
Wei Zhao, Competition Economics is Estimating Dynamic Merger Effciencies with an Application to the 1997 Boeing-McDonnell Douglas Merger.
ABSTRACT: I evaluate the welfare effects of the 1997 merger between Boeing and McDonnell Douglas in the medium-sized, wide-bodied aircraft industry. I develop an empirical model of multi-product firms, allowing for both learning-by-doing and product innovation in a dynamic game to quantify merger efficiency. Merger efficiency from learning-by-doing is then disentangled from both the effects of innovation and market power. The results show that the primary benefits from the Boeing-McDonnell Douglas merger come from accelerated learning-by-doing. Taking account of all static and dynamic effects, net consumer surplus is found to have increased by as much as $1.57 billion. In contrast, a static model ignoring learning-by-doing and innovation predicts a consumer loss of approximately $20 billion. These results show that ignoring dynamic effects can lead to biased results and erroneous policy decisions regarding the welfare effects of proposed mergers.
Ninette Dodoo, Freshfields and Michael Han, Fagunda describe Non-horizontal mergers—the Chinese experience.
ABSTRACT: Non-horizontal mergers represent a significant proportion of the caseload of China’s Ministry of Commerce (MOFCOM). MOFCOM has considered two types of non-horizontal mergers: vertical mergers and conglomerate mergers. In the case of vertical mergers, published decisions concentrate on input foreclosure concerns. In relation to conglomerate mergers, published decisions focus on leveraging theories of harm. Non-horizontal mergers are subject to careful scrutiny in China if antitrust concerns arise. These mergers present a higher degree of antitrust risk in China than in other jurisdictions. We examine the framework for the assessment of non-horizontal mergers in China, outline the cases where MOFCOM has considered non-horizontal issues, and conclude with an overview of the factors that MOFCOM considers while analysing non-horizontal mergers.
Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach
Michael Polemis, University of Piraeus and Panagiotis Fotis, Hellenic Competition are Commission Measuring the Magnitude of Significant Market Power in the Manufacturing and Services Industries: A Cross Country Approach.
ABSTRACT: This paper provides estimates of price-marginal cost ratios for manufacturing and services sectors in the Eurozone, the US and Japan over the period 1970-2007. The estimates are obtained applying τhe methodology developed by Hall (1988) and extended by Roeger (1995) on the EU KLEMS March 2011 database. The major stylized facts that are emerged from the empirical results based on the Ordinary Least Squares, Two Step Least Squares and Bootstrap methods of estimation are a) there is no evidence of imperfect competition across the majority of industries in Eurozone, US and Japan, b) sectors that are more open to internationalisation, experience relatively lower mark up ratios than the ratios experienced in less open sectors to internationalisation and c) deregulated industries generally have lower mark – up ratios than regulated industries, while fragmented industries generally exhibit higher mark – up ratios than segmented ones.
Tuesday, July 14, 2015
Yu Morimoto and Kohei Takeda, Kyoto University describe Policy of airline competition ~monopoly or duopoly~.
ABSTRACT: We show that monopoly is better than competition in term of social welfare for low frequency routes. Competition affects both flight schedules and airfares. Flight schedules get un-even interval by competition and this leads to large scheduling delay cost (SDC). The increment of SDC is large when the number of flights is small. For low frequency routes, the increment of SDC by competition overwhelms the decreasing in the airfare, so monopoly is better than competition.
Dejan Trifunovic (University of Belgrade, Faculty of Economics) and Bojan Ristic (University of Belgrade, Faculty of Economics) explain Three Stage Dynamic Game of Merger with Incomplete Information on Competition Commission's Type.
ABSTRACT: Horizontal mergers are of particular interest of anti-trust authorities who must distinguish between mergers that increase market power and are anti-competitive and mergers that result in significant cost savings and are not harmful to consumers. We consider horizontal merger in an environment where competition commission might be strong or weak. Weak commissions are more likely to accept horizontal mergers due to the low level of competency and reputation while strong commissions are more likely to decline horizontal mergers. In developing countries where antitrust policy is not very sophisticated commissions are more likely to be considered as weak and with the accumulation of competence and reputation they move towards strong commissions. This model might explain the situation when international companies that operate in several countries intend to merge. These companies must submit notification to competition commissions in all countries where they operate and each national commission estimates the impact of the merger on the national market. This model might also describe the situation when companies operating dominantly in the national market intend to merge, but they don't know the commission's type since they were not dealing with the commission in the past.We model the interaction between companies that intend to merge and competition commission in a dynamic game of incomplete information where the commission's type is unknown to merging companies at the moment when they have to decide about notification submission to competition commission. If they are unsatisfied with commission's decision, they can complain to the court who can confirm commission's decision or overturn the verdict in favour of the companies. We determine that in perfect Bayesian equilibrium decision of merging companies about notification submission depends on possible weak commission's decision and they almost completely ignore strong commission's decision. If merging companies believe that weak commission will accept the merger, they will submit notification. Otherwise, they will restrain from merger. We also conduct an empirical analysis on the case of merger in sugar industry from Serbian regulatory practice that supports the main findings of our model.
Panagiotis N. Fotis, Hellenic Competition Commission, Victoria Pekka, University of Pireaus and Michael L. Polemis, University of Pireaus describe Intervalling-effect bias and evidences for competition policy.
ABSTRACT: The purpose of this paper is on the one hand to analyze whether the security’s systematic risk beta estimates change as the infrequent trading phenomenon appears and on the other hand to provide useful insight on the impact of mergers and acquisitions on competition policy. The paper employs the models of Scholes and Williams (1977), Dimson (1979), Cohen et al. (1983a) and Maynes and Rumsey (1993) on a small stock exchange with thickly infrequent trading stocks. The empirical results reveal that for some securities the models employed by Scholes and Williams (1977) and Cohen et al. (1983a) improve the biasness of the Ordinary Least Squares Market Model (Maynes and Rumsey, 1993). Regarding competition policy issues, we argue that competitors gain while merged entities loose or at least do not gain from the clearness of the mergers under scrutiny. However, if we focus our attention on each individual merger, the results are rather controversial.
ABSTRACT: This paper examines the relationship between corporate governance and cartel formation, A firmâ€™s participation in cartel depends upon the potential problems that may arise due to price fixing and the incentives provided to the management. The top levels of management such as the board of directors and the CEO are responsible for deciding if the firm will participate in the cartel and manage the corporate governance activities of collusive price fixing agreements. The study is focused on UK cartel firms which has the highest representation in the sample. A total number of 150 cartel firms in 52 cases from all around the world between the years 1990 to 2008 are involved in this study, of which 114 are UK firms. Therefore, this study is dominated by UK firms. The study concludes that UK-based cartel firms characterised by having larger board size compared to non-cartel firms; lower percentage of independent directors (non-executive); higher average of! board remuneration; less likely that cartel is formed by family-owned and controlled firm (large shareholders); having older CEOs represented on the board; having CEO who served a less number of years as a director; less likely to have a female CEO represented; more likely to have CEOs who's combined CEO-chairman position; and a higher average of CEOs bonuses and compensation packages.
Monday, July 13, 2015
From Tirole to the WBG Twin Goals: Scaling up competition policies to reduce poverty and boost shared prosperity
Anabel Gonzalez, World Bank has a new blog post on From Tirole to the WBG Twin Goals: Scaling up competition policies to reduce poverty and boost shared prosperity.
Steffen Huck, WZB and University College London, Gabriele K. Lunser Jean-Robert Tyran, University of Vienna and University of Copenhagen examine Price competition and reputation in markets for experience goods: An experimental study.
ABSTRACT: We experimentally examine the effects of price competition in markets for experience goods where sellers can build up reputations for quality. We compare price competition to monopolistic markets and markets where prices are exogenously fixed (somewhere between the endogenous oligopoly and monopoly prices). While oligopolies benefit consumers regardless of whether prices are fixed or endoge-nously chosen, we find that price competition lowers efficiency as consumers pay too little attention to reputation for quality. This provides empirical support to recent models in behavioral industrial organization that assume that consumers may with increasing complexity of the market place focus on selected dimensions of products. We also find that consumers' attention to quality and, hence, provided quality drops when regulated prices are set at levels that are too low.
Natalie Yeung, Slaughter and May offers IP and competition law—The Chinese perspective.
ABSTRACT: Recent case law and enforcement activities in China have begun to shed light on the approach of Chinese courts and competition authorities towards the application of competition law to issues involving intellectual property rights. This article considers these developments against the backdrop of the prevailing European and US practices, with particular focus on standard essential patents and how they relate to the issues of: (i) compulsory licensing; (ii) use of injunctive relief to enforce standard essential patents; (iii) how a FRAND royalty rate should be determined; and (iv) tying or bundling of licences. Although some of the principles applied by the Chinese courts and authorities are broadly in line with those adopted in the European Union and the US, the lack of a clear approach in areas such as compulsory licensing, the concept of ‘willing licensee’ and the determination of FRAND rates serves as a reminder that the regulation of competition and intellectual property laws in China is a comparatively recent endeavour and continues to evolve. The article concludes with a summary of competition enforcement activities in other areas of intellectual property rights and the lessons that businesses should be aware of in China.
Atsuhiro Satoh, Doshisha University & Yasuhito Tanaka, Doshisha University review Relative profit maximization and the choice of strategic variables in duopoly.
ABSTRACT: We study implications of the choice of strategic variables, price or quantity, by firms in a duopoly with differentiated goods in which each firm maximizes its relative profit. We consider general demand and cost functions, and show that the choice of strategic variables is irrelevant in the sense that the conditions of relative profit maximization for the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in a two stage game such that in the first stage the firms choose their strategic variables and in the second stage they determine the values of their strategic variables. We define the relative profit of a firm as the ratio of its profit over the total profit. But, even if we define the relative profit of a firm as the difference between the profits of firms, we can show the same result.
Ariel Ezrachi, Oxford and Wei Han, Chinese Academy of Social Sciences describe Merger Remedies—The Chinese Experience.
ABSTRACT: In the relatively short period in which the Ministry of Commerce of China (MOFCOM) has applied the Anti-Monopoly Law it has dealt with a large number of merger notifications against a backdrop of limited experience and enforcement resources. Of particular interest has been MOFCOM’s approach to merger remedies and the perceived difference, compared with other jurisdictions, in the nature and composition of accepted commitments. In this article we explore the relevant legal framework and case law and the composition of remedies used to date under the Chinese regime. We consider the use of behavioural and structural remedies and reflect on their implementations and the challenges they raise. In doing so, we consider the extent to which economic, industrial, and political considerations may have led to the unique composition of merger remedies and the prevalence of behavioural commitments.