Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, August 17, 2015

Vinci Construction e.a. v France: Limits on Unannounced Inspections on the Basis of the Rights to a Fair Trial and to the Respect for Privacy

Collette Rawnsley, Shearman & Sterling examines Vinci Construction e.a. v France: Limits on Unannounced Inspections on the Basis of the Rights to a Fair Trial and to the Respect for Privacy.

ABSTRACT: The European Court of Human Rights (the ‘ECtHR’) has upheld applications by construction companies Vinci Construction France (‘Vinci’) and GTM genie civil et services (‘GTM’) that certain aspects of the dawn raids carried out by the French competition authority (the ‘DGCCRF’) violated the companies' rights under Article 6(1) (right to a fair trial) and Article 8 (private and family life, home and correspondence) of the European Convention of Human Rights (‘ECHR’).

August 17, 2015 | Permalink | Comments (0)

On the efficiency of Bertrand and Cournot equilibrium in the presence of asymmetric network compatibility effects

Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) offers thoughts On the efficiency of Bertrand and Cournot equilibrium in the presence of asymmetric network compatibility effects.

ABSTRACT: Based on a differentiated duopoly model, we consider the efficiency of Bertrand and Cournot equilibrium in the presence of network effects and product compatibility. In particular, we demonstrate that if an asymmetric product compatibility with a strong network effect between the firms arises, give certain conditions, Cournot equilibrium is more efficient than Bertrand equilibrium in terms of greater consumer, producer, and social surplus.

August 17, 2015 | Permalink | Comments (0)

Trading Gains and Losses in Antitrust: Why Losses Should Count More than Gains — An Implication of Behavioral Economics for Antitrust Losses

Richard O. Zerbe Jr., University of Washington - Daniel J. Evans School of Public Affairs describes Trading Gains and Losses in Antitrust: Why Losses Should Count More than Gains — An Implication of Behavioral Economics for Antitrust Losses.

ABSTRACT: In mainstream antitrust law the nature of economic efficiency has not been investigated in great depth. Such an investigation has important implications for antitrust law and economics. Among these are the following: (1) Behavioral economics shows that consumer surplus measures of losses underestimate consumer damages, often considerably, while producer surplus measures generally do not. (2) Thus an efficiency-based approach to antitrust should weigh consumer losses much more heavily than producer gains. (3) This conclusion has profound effects on many areas of antitrust, including every area that involves both market power and efficiency effects.  The fact is that consumer surplus measures of losses underestimate consumer damages, often considerably, while producer surplus (profits) measures generally do not. This is because economic efficiency requires that losses be weighed more than gains. This result suggests that the optimal antitrust penalty as suggested by Landes and Posner is an underestimate.

I show further that the concept of economic efficiency furnishes a justification for a focus on consumer protection as the correct role for antitrust law. This justification is related to the underestimates of consumer losses.  The gain-loss disparity suggests a rationale in antitrust law for the emphasis on consumer protection rather than using a total surplus standard. 

August 17, 2015 | Permalink | Comments (0)

Competition and State Aid Implications of the Spezzino Judgment (C-113/13): The Scope for Inconsistency in Assessing Support for Public Services Voluntary Organisations

Albert Sanchez-Graells, University of Leicester - School of Law explores Competition and State Aid Implications of the Spezzino Judgment (C-113/13): The Scope for Inconsistency in Assessing Support for Public Services Voluntary Organisations.

ABSTRACT: This paper assesses the competition law and State aid implications of the CJEU Judgment in Azienda sanitaria locale n. 5 "Spezzino" and Others, C-113/13, EU:C:2014:2440 (Spezzino). It pays particular attention at the departure from the Altmark test for the assessment of public support granted to providers of public services; as well as on the change of mind by the CJEU regarding the special position of non-profit entities in the direct award of public service contracts.

August 17, 2015 | Permalink | Comments (0)

Friday, August 14, 2015

The dangers of ad hoc changes to merger control regulation: the Irish financial crisis

Paul K. Gorecki, Economic and Social Research Institute, Dublin and Department of Economics, Trinity College Dublin and Francis O’Toole, Department of Economics, Trinity College Dublin explain The dangers of ad hoc changes to merger control regulation: the Irish financial crisis.

ABSTRACT: Ireland’s policy-makers were confronted with difficult decisions concerning the financial sector and competition policy during the recent financial crisis. In response, Ireland’s Credit Institutions (Financial Support) Act 2008 (‘CIFS Act 2008’) introduced ad hoc policy changes to the review of mergers deemed necessary for the stability of the Irish financial system. These changes were repealed in August 2013. This article explores the adequacy of the temporary ad hoc approach and highlight its significant shortcomings, on both procedural and competition assessment grounds. In contrast to this ad hoc temporary-changes approach, this article argues that in the context of a crisis, financial, or otherwise, requiring changes to merger control regulation, the competition agency should conduct the initial competition assessment and only then should non-competition criteria be applied by the relevant Minister and/or independent institution. The major lesson from the Irish experience is that side-lining competition concerns by a series of ad hoc short-term responses to problems in the financial sector is likely to damage growth and the recovery in the medium to longer term.

August 14, 2015 | Permalink | Comments (0)

CDC v Akzo Nobel and Others: Clarifications on the Jurisdiction Rules in Cartel Damages Claims

Laurent Geelhand and Stella Gartagani, Hausfeld examine CDC v Akzo Nobel and Others: Clarifications on the Jurisdiction Rules in Cartel Damages Claims.

ABSTRACT: On 21 May 2015, the Court of Justice of the European Union (‘CJEU’) handed down its ruling on a preliminary reference from the Regional Court of Dortmund in Germany in respect of jurisdictional issues arising in the context of cross-border cartel damages claims. The CJEU clarified the interpretation of Brussels I Regulation1 and its findings apply equally to the Recast Brussels Regulation.

There are several ways in which jurisdiction can be established over a damages claim under the Brussels I Regulation. Article 2 of the Brussels I Regulation (now Article 4 of the Recast Brussels Regulation) sets out the general rule that persons domiciled in a Member State shall be sued in the courts of that Member State. Article 5(3) (now Article 7(2) of the Recast Brussels Regulation) states that in matters relating to tort or delict a person may be sued in the place where the harmful effect occurred or may occur. Article 6(1) (now Article 8(1) of the Recast Brussels Regulation) allows for claims against defendants domiciled in different Member States to be brought in the courts of the Member State where any one of the defendants is domiciled, provided that the claims are so closely connected as to give rise to the risk of irreconcilable judgements resulting from separate proceedings.

August 14, 2015 | Permalink | Comments (0)

Damages Claims for the Infringement of EU Competition Law

Ioannis Lianos, Peter Davis, and Paolisa Nebbia describe Damages Claims for the Infringement of EU Competition Law.

BOOK ABSTRACT: Damages Claims for the Infringement of Competition Law addresses the current state of the law in the EU on damages claims for the infringement of EU competition law by combining a theoretical with a practical perspective.

The work first focuses on the relevant Community acquis, examining all aspects of EU law that may be relevant to damages claims (whether brought by a consumer or not) such as those concerning fault and 'excusable errors', small claims, legal aid, alternative dispute resolution, as well as private international law instruments. 

The book then delves into the economic underpinnings of claims for damages, including optimal enforcement theory and damages and the legal standards of liability, the evaluation of damages for cartels, exploitative conduct and exclusionary conduct.

The work also examines collective actions (legal regime and financing aspects), the interaction between damages claims and public enforcement, as well as issues relating to multi-jurisdictional enforcement and damages claims.

August 14, 2015 | Permalink | Comments (0)

Thursday, August 13, 2015

Determinants of the Duration of European Appellate Court Proceedings in Cartel Cases

Florian Smuda, Patrice Bougette and Kai Hüschelrath examine Determinants of the Duration of European Appellate Court Proceedings in Cartel Cases.

ABSTRACT: The duration of appellate court proceedings is an important determinant of the efficiency of a court system. We use data of 263 appeals decisions referring to 54 cartels convicted by the European Commission between 2000 and 2012 to investigate the determinants of the duration of the subsequent one- or two-stage appeals process. We find that while the speed of first-stage appellate court decisions depend, inter alia, on authority-related factors such as the complexity of the case, the clarity of the applied rules and regulations and previous or simultaneous US investigations, the second-stage appellate court proceedings appear to be largely unaffected by those drivers.

August 13, 2015 | Permalink | Comments (0)

FTC Issues Statement of Principles Regarding Enforcement of FTC Act as a Competition Statute

FTC Issues Statement of Principles Regarding Enforcement of FTC Act as a Competition Statute

                

      Frames Agency’s Use of ‘Stand Alone’ Section 5 Authority to Address Unfair Methods of Competition   

For Release    

August 13, 2015     

  

The Federal Trade Commission has issued a Statement of Enforcement Principles that describes the underlying antitrust principles that guide the Commission’s application of its statutory authority to take action against “unfair methods of competition” prohibited by Section 5 of the FTC Act but not necessarily by the Sherman or Clayton Act.

“The promotion of consumer welfare is a cornerstone of the FTC’s antitrust enforcement, and these principles reaffirm the agency’s legal framework in carrying out that important mission,” said FTC Chairwoman Edith Ramirez. “The statement formally aligns Section 5 with the Sherman and Clayton Acts.”

The statement announced today explains that, consistent with FTC precedent, the Commission will adhere to the following principles when deciding whether to use its standalone authority under Section 5 of the FTC Act to challenge unfair methods of competition:

  • the Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;
  • the act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and
  • the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.

The Commission vote to approve the Statement of Enforcement Principles was 4-1, with Commissioner Maureen K. Ohlhausen voting no. The Commission issued a statement, and Commissioner Ohlhausen issued a dissenting statement.

August 13, 2015 | Permalink | Comments (0)

Entry of Non-Financial Firms and Competition in the Retail Payments Market

Jooyong Jun, Bank of Korea; Bank of Korea - Economic Research Institute describes Entry of Non-Financial Firms and Competition in the Retail Payments Market.

ABSTRACT: We investigate the effects of a non-financial firm’s entry on competition in the retail payments market, from the perspective of duopoly between an incumbent and an entrant in conditions of vertical restraints. Considering the cross-platform externalities in payment processing, differentiated preferences for payment platforms, and competitive bottleneck on the consumer side, we derive the following results. When only the entry of a vertically integrated (or end-to-end service) provider is allowed, either all merchants choose to multi-home or no entry occurs, regardless of the regulatory requirement. On the other hand, if the entry of a downstream-only (or front-end service) provider is possible, a partial multi-homing equilibrium result can emerge for some conditions under which the entry of an end-to-end service provider does not occur. In addition, due to the lowered entry cost, the overall welfare is greater when the entry of downstream-only service is possible although the entire increase in welfare goes to the entrant. Without regulation, however, the vertically integrated incumbent does not voluntarily provide the back-end service to the entrant when the merchant’s benefit from the payments service is not sufficiently high. It suggests the need for proper regulatory measures to reach a socially desirable outcome from the new entry in the retail payments market.

August 13, 2015 | Permalink | Comments (0)

Effects of Spectrum Holdings on Equilibrium in the Wireless Industry

Jonathan R Lhost, Lawrence University - Department of Economics, Brijesh Pinto, Keystone Strategy, LLC, and David S. Sibley, University of Texas at Austin - Department of Economics examine the Effects of Spectrum Holdings on Equilibrium in the Wireless Industry.

ABSTRACT: We propose a model of Bertrand competition in which consumers choose firms based on prices and qualities. Service quality depends on congestion, which is a function of capacity and output. We first present theoretical properties of the model. Next, we calibrate the model to the wireless industry and use it to evaluate the impacts of changes in spectrum allocation on consumer welfare and profits. Simulations of the model show that when one firm acquires more spectrum, consumer welfare at all firms increases due to congestion externality effects. We find that a transfer of spectrum from one firm to another can either raise or lower consumer welfare at the firms not involved in the transaction, again due to externality effects. Where it is possible to compare the results of our model to the wireless industry, they are consistent with the data.

August 13, 2015 | Permalink | Comments (0)

Horizontal Shareholding as an Antitrust Violation

Einer Elhauge, Harvard Law School explores Horizontal Shareholding as an Antitrust Violation.

ABSTRACT: Horizontal shareholdings exist when a common set of investors own significant shares in corporations that are horizontal competitors in a product market.  Economic models show that such horizontal shareholdings are likely to anticompetitively raise prices when the owned businesses compete in a concentrated market.  Recent empirical work not only confirms the prediction of these models, but also reveals that such horizontal shareholdings are omnipresent in our economy.  I show that such horizontal shareholdings can help explain fundamental economic puzzles, including why corporate executives are rewarded for industry performance rather than just individual corporate performance, why corporations have not used recent high profits to expand output and employment, and why economic inequality has risen in recent decades.  I also show that stock acquisitions that create such anticompetitive horizontal shareholdings are illegal under current antitrust law, and I recommend antitrust enforcement actions to undo them and their adverse economic effects.

August 13, 2015 | Permalink | Comments (0)

Wednesday, August 12, 2015

Leniency and Damages

Paolo Buccirossi, Laboratory of Economics, Antitrust, Regulation (LEAR) Catarina Moura Pinto Marvao, Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE); Trinity College Dublin and Giancarlo Spagnolo, Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF discuss Leniency and Damages.

ABSTRACT: Damage actions may reduce the attractiveness of leniency programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel’s victims will bring a successful suit. A long legal debate culminated in an EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the effectiveness of a leniency program by preventing the use of leniency statements in subsequent actions for damages. Our analysis shows such compromise is not required: limiting the cartel victims’ ability to recover their loss is not necessary to preserve the effectiveness of a leniency program and may be counterproductive. We show that damage actions will actually improve its effectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized and full access to all evidence collected by the competition authority, is granted to claimants, like in the US.

August 12, 2015 | Permalink | Comments (0)

Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI

Duarte Brito New University of Lisbon António M. Osório C. Universitat Rovira i Virgili Ricardo Ribeiro Faculdade de Economia e Gestão, Universidade Católica Portuguesa Helder Vasconcelos Universidade do Porto - Faculdade de Economia (FEP) examine Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI.

ABSTRACT: Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization to a partial horizontal acquisition setting of the two most traditional indicators used to screen unilateral anti-competitive effects: the Helfindahl-Hirschman Index and the Gross Upward Price Pressure Index. The proposed generalized indicators can deal with all types of acquisitions that may lessen competition in the industry: acquisitions by owners that are internal to the industry (rival firms) and engage in cross-ownership, as well as acquisitions by owners that are external to the industry and engage in common-ownership. Furthermore, these indicators can deal with direct and indirect acquisitions, which may or may not correspond to control, and nest full mergers as a special case. We provide an empirical application to several acquisitions in the wet shaving industry. The results seem to suggest that (i) a full merger induces higher unilateral anti-competitive effects than a partial controlling acquisition involving the same firms, (ii) a partial controlling acquisition induces higher unilateral anti-competitive effects than a partial non-controlling acquisition involving the same firms and the same financial stakes, and (iii) an acquisition by owners that are internal to the industry induces higher unilateral anti-competitive effects than an acquisition (involving the same firms and the same stakes) by external owners that participate in more than one competitor firm.

August 12, 2015 | Permalink | Comments (0)

Import Competition and the Great U.S. Employment Sag of the 2000s

Daron Acemoglu, Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER) David H. Autor, Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA) David Dorn, University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute) Gordon H. Hanson, University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER) and Brendan Price, Massachusetts Institute of Technology (MIT) - Department of Economics analyze Import Competition and the Great U.S. Employment Sag of the 2000s.

ABSTRACT: Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable employment gains achieved during the 1990s, with a historic contraction in manufacturing employment being a prime contributor to the slump. We estimate that import competition from China, which surged after 2000, was a major force behind both recent reductions in U.S. manufacturing employment and-through input-output linkages and other general equilibrium channels-weak overall U.S. job growth. Our central estimates suggest job losses from rising Chinese import competition over 1999 through 2011 in the range of 2.0 to 2.4 million.

 

August 12, 2015 | Permalink | Comments (0)

The Economics of Television and Online Video Markets

Gregory S. Crawford, University of Zurich - Department of Economics offers a literature review of The Economics of Television and Online Video Markets.

ABSTRACT: Television is the dominant entertainment medium for hundreds of millions.  This chapter surveys the economic forces that determine the production and consumption of this content.  It presents recent trends in television and online video markets, both in the US and internationally, and describes the state of theoretical and empirical research on these industries.  A number of distinct themes emerge, including the growing importance of the pay-television sector, the role played by content providers (channels), distributors, and negotiations between them in determining market outcomes, and concerns about the effects of market power throughout this vertical structure.  It also covers important but unsettled topics including the purpose for and effects of both the old (Public Service Broadcasters) and the new (online video markets).  Open theoretical and empirical research questions are highlighted throughout.

August 12, 2015 | Permalink | Comments (0)

Tuesday, August 11, 2015

Bundeskartellamt publishes teaching material on competition

The Bundeskartellamt has a fabulous new resource (I am a month late on this news).  From the press release:

The Bundeskartellamt has today published a learning kit on the subject "Competition Control in Germany". Together with a comprehensive list of links to illustrative video and audio clips the kit addresses students who are interested in economics and competition. Teachers can use the kit in economics and social studies lessons to demonstrate in a practice-oriented approach the significance of competition in our economic system and explain the framework conditions set by the state to protect competition.

Andreas Mundt, President of the Bundeskartellamt: "With our teaching materials and the list of links we wish to help ensure that a greater emphasis is placed on the subject of economics in schools. When we visited schools and offered further training programmes for teachers we often found that the subject of competition law is very suitable for teaching basic concepts of the economic and business world in an interesting way."

The kit deals with the following subjects:

-       Why do we need competition?

-       Does free competition need rules?

-       How does the Bundeskartellamt prosecute cartels?

-       Why does the Bundeskartellamt control mergers?

-       What is the purpose of the control of abusive practices?

-       Protection of competition in the European Union

The kit was prepared by the Bundeskartellamt in cooperation with teachers specialized in the subject. It consists of a total of six worksheets with relevant task sheets. On the basis of practical case examples each worksheet explains a separate area of activity and provides an insight into the organisation and activities of competition control. The documents include tasks with possible solutions and suggestions for further discussion on the respective subject. There are also two classroom experiments which can be used to illustrate how market prices are formed in a competitive environment and how the leniency programme works in cartel prosecution.

The teaching materials (only German version) can be downloaded here.

The collection of links which the authority has also published today includes a large number of illustrative contributions by other competition authorities and institutions. These include e.g. a video produced by the Netherlands Competition Authority on the "Frikandel Cartel" as well as comics and mangas produced by the European Commission and the Competition Commission of Singapore. "Fair Fight in the Marketplace", a video considered to be a classic among competition experts, is also included. The English language documentation deals with the so-called lysine cartel on which the movie "The Informant" starring Matt Damon was based.

Easily understandable contributions for younger pupils are provided for example by ZDF tivi with its contribution on the sausage cartel or the audio clip "Tim asks Tom - What is the Bundeskartellamt?" with Tom Buhrow, produced by the radio channel SWR3.

The collection of links is available here.

August 11, 2015 | Permalink | Comments (0)

Competition Enforcement – A Discussion with FTC Chairwoman Edith Ramirez - Thursday August 13, 2015 at GW Law School

Competition Law Center

George Washington University Law School

 

Distinguished Speaker Series

 

Edith Ramirez

Chairwoman

Federal Trade Commission

 

 

“Competition Enforcement – A Discussion with FTC Chairwoman Edith Ramirez”

 

 

Time: 12 Noon to 1 PM

 

 

Thursday, August 13, 2015

 

 

Lerner 402

George Washington University Law School

2000 H Street, N.W.

Washington, D.C. 20052

 

 

Admission to the event is free of charge and open to the public.  A boxed lunch will be served.

 

Registration: Please send a note to Ms. Kierre Hannon, khannon@law.gwu.edu, indicating that you plan to attend.

August 11, 2015 | Permalink | Comments (0)

Price Caps in Multi-Price Markets

Oren Bar-Gill, Harvard Law School discusses Price Caps in Multi-Price Markets.

ABSTRACT: Many consumer markets feature a multi-dimensional price. A policymaker – a legislator, a regulator or a court – concerned about the level of one price dimension may decide to cap this price. How will such a price cap affect other price dimensions? Will the overall effect be good or bad for consumers? For social welfare? Price caps can be beneficial when sellers set prices in response to consumer misperception. The scope for welfare-enhancing regulation depends on the type (and direction) of the underlying misperception, as well as on market structure.

August 11, 2015 | Permalink | Comments (0)

Behavioral Economics and U.S. Antitrust Policy

Elizabeth M. Bailey, University of California, Berkeley - Haas School of Business examines Behavioral Economics and U.S. Antitrust Policy.

ABSTRACT: Modern day antitrust policy is grounded firmly in neoclassical economics.  It is important, however, to test whether the modelling assumptions accord with the facts. It is also important to assess whether behavior that deviates from the conventional assumptions is systematic and persistent. If the relevant facts suggest that consumers or firms might behave in ways that depart from conventional assumptions, then private parties, government agencies and the courts should consider alternate economic models that account appropriately for the observed behavior.

August 11, 2015 | Permalink | Comments (0)