Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Tuesday, December 9, 2014

Unbundling the incumbent: Evidence from UK broadband

Mattia Nardotto (University of Cologne), Tommaso Valletti (Imperial College London, University of Rome “Tor Vergata” & CEPR) and Frank Verboven (KU Leuven, Telecom ParisTech and CEPR) discuss Unbundling the incumbent: Evidence from UK broadband.

ABSTRACT: We consider the impact of a regulatory process forcing an incumbent telecom operator to make its local broadband network available to other companies (local loop unbundling, or LLU). Entrants are then able to upgrade their individual lines and offer Internet services directly to customers. Employing a very detailed dataset covering the whole of the UK, we find that, over the course of time, many entrants have begun to take advantage of unbundling. LLU entry only had a positive effect on broadband penetration in the early years, and no longer in the recent years as the market reached maturity. In contrast, LLU entry continues to have a positive impact on the quality of the service provided, as entrants differentiate their products upwards compared to the incumbent. We also assess the impact of competition from an alternative form of technology (cable) which is not subject to regulation, and what we discover is that inter-! platform competition has a positive impact on both penetration and quality.

December 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Static and Dynamic Networks in Interbank Markets

Ethan Cohen-Cole (Econ One Research), Eleonora Patacchini (Cornell University and EIEF), and Yves Zenou (Stockholm University and IFN) explain Static and Dynamic Networks in Interbank Markets.

ABSTRACT: This paper proposes a model of network interactions in the interbank market. Our innovation is to model systemic risk in the interbank network as the propagation of incentives or strategic behavior rather than the propagation of losses after default. Transmission in our model is not based on default. Instead, we explain bank profitability based on competition incentives and the outcome of a strategic game. As competitors’ lending decisions change, banks adjust their own decisions as a result: generating a ‘transmission’ of shocks through the system. We provide a unique equilibrium characterization of a static model, and embed this model into a full dynamic model of network formation. We also determine the key bank, which is the bank that is crucial for the stability of the financial network.

December 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, December 8, 2014

Herbert Smith Freehills Competition Law Moot 2015 (hosted by King's College London)

Herbert Smith Freehills Competition Law Moot 2015

The Dickson Poon School of Law, King’s College London is very proud to offer students from across the world the opportunity to participate in the Herbert Smith Freehills Competition Law Moot, the first international competition law mooting competition to be held at King's. The competition is generously sponsored by Herbert Smith Freehills, one of the world’s leading law firms.

In 2015, we will invite 12 teams to compete in a moot competition in the home of The Dickson Poon School of Law, Somerset House East Wing, London. The competition will provide an excellent opportunity for students to practise and improve advocacy skills in front of a judging panel, drawn from international competition law specialists.

View and download the problem question.

View and download the rules

View and download the timeline.           

9 February 2015 Deadline for registration
16 February 2015 Deadline for requesting clarifications
2 March 2015 Publication of clarifications
13 April 2015 Deadline for written submissions
1 May 2015 Announcement of 12 finalists
12 – 14 June 2015 Oral round at King’s College London

December 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Lower Sanctions, Greater Antitrust Compliance? Cartel Conduct with Imperfect Information about Enforcement Risk

Johannes Paha, Justus Liebig University, Giessen asks Lower Sanctions, Greater Antitrust Compliance? Cartel Conduct with Imperfect Information about Enforcement Risk.

ABSTRACT: This article provides a model of two risk-neutral firms that may cooperate to achieve a goal that is potentially illegal. The model assumes enforcement risk and firms that are imperfectly informed about antitrust law enforcement. It is shown that compliance training, which educates the agents about law enforcement, may prevent hardcore cartels. Compliance training programs may also promote forms of cooperation that are beneficial for customers. The article shows that a competition authority can sometimes spur the implementation of compliance programs by imposing lower sanctions on wrongdoers.

December 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition in the Cryptocurrency Market

Neil Gandal (Tel Aviv University and CEPR) and Hanna Halaburda (Bank of Canada, CESifo and INE PAN) analyze Competition in the Cryptocurrency Market.

ABSTRACT: We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining the changes over time in exchange rate data among cryptocurrencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the U.S. dollar, it also becomes more valuable against other cryptocurrencies. This trend is reversed in the later period. The data in the later period are consistent with the use of cryptocurrencies as financial assets (popularized by Bitcoin), and not consistent with ``winner-take-all'' dynamics.

December 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Market Power and Collusion on Interconnection Phone Market in Tunisia: What Lessons from International Experiences

Sami DEBBICHI and Walid HICHRI describe Market Power and Collusion on Interconnection Phone Market in Tunisia: What Lessons from International Experiences.

ABSTRACT: We try in this paper to characterize the state of mobile phone market in Tunisia. Our study is based on a survey of foreign experience (Europe) in detecting collusive behavior and a comparison of the critical threshold of collusion between operators in developing countries like Tunisia. The market power is estimated based on the work of Parker Roller (1997) and the assumption of "Balanced Calling Pattern". We use then the model of Friedman (1971) to compare the critical threshold of collusion. We show that the “conduct parameter” measuring the intensity of competition is not null during the period 1993-2011. Results show also that collusion is easier on the Tunisian market that on the Algerian, Jordanian, or Moroccan one.

December 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Quality Competition in Mobile Telecommunications: Evidence from Connecticut

Patrick Sun (Columbia University) provides Quality Competition in Mobile Telecommunications: Evidence from Connecticut.

ABSTRACT: Signal quality is a significant contributor to the overall quality of wireless telephone service, which competitive analyses often overlooks. To understand the competitive impact of signal quality investment on further consolidation in this industry, I use a market research survey of choice of wireless service provider and a government database on transmission base stations in Connecticut. Dropped call rates and local coverage improve as base station density increases, so I treat base station density as an endogenous product characteristic and relate it to the local value of wireless services. I find a marginal base station contributes a median 0.15% increase in own market share and a median 0.03% decrease in rival market share. Marginal base station costs are implied to be substantial, so if these costs can be effectively reduced through network integration after a merger, the merging firms and consumers can both benefit through increased base station provision. If such integration is not possible, consumers lose due to either a loss in variety of products or reduced incentives of merged firms to produce quality. These results suggest that merger review must pay careful attention to the potential for network integration in wireless and related industries.

December 8, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, December 7, 2014

The Network Effects of Air-Travel Demand

Yanhao Wei (Department of Economics, University of Pennsylvania) has written on The Network Effects of Air-Travel Demand.

ABSTRACT: As demand increases, airline carriers often increase flight frequencies to meet the larger flow of passengers in their networks, which reduces passengers' schedule delays and attracts more demand. Motivated by this, I study a structural model of the U.S. airline industry accounting for possible network effects of demand compared with previous studies, the model implies higher cost estimates, which seem more consistent with the unprofitability of the industry; below-marginal-cost pricing becomes possible and appears on many routes. I also study airline mergers and find that the network effects can be the main factor underlying their profitability.

December 7, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, December 5, 2014

A Utility-Based Model of Sales with Informative Advertising

Sandro Shelegia and Chris M. Wilson offer A Utility-Based Model of Sales with Informative Advertising.

ABSTRACT: This paper presents a generalised framework to understand mixed-strategy sales behaviour with informative advertising. By introducing competition in the utility space into a clearinghouse sales model, we offer a highly tractable framework that can i) provide a novel welfare analysis of intra-personal price discrimination in sales markets, ii) characterise sales in a range of new contexts including complex market settings and situations where firms conduct sales with two-part tariffs or non-price variables such as package size, and iii) synthesise past research and highlight its key forces and assumptions.

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

WEBINAR: First Antitrust Decision by the Chinese Supreme People’s Court, Qihoo 360 v. Tencent Dec 16, 2014

CPI Webinar: First Antitrust Decision by the Chinese Supreme People’s Court, Qihoo 360 v. Tencent

The Chinese Supreme People’s Court issued its first antitrust judgment in Qihoo 360 v. Tencent on October16, 2014. In affirming a lower court ruling in favor of defendant Tencent, the Court addressed the question of market definition and market power in the context of dynamic platform-based businesses in which products are provided for “free.” It is one of the most influential cases in the 65-year history of the Supreme Court according to the Newspaper of the People’s Court.

CPI has gathered leading antitrust lawyers and economists to discuss the implications of the Tencent judgment for antitrust in China and for Internet-based cases in other jurisdictions.

The webinar will be held on 16 December 2014 at 12:00pm EST/17:00GMT/18:00 CET.

Professor D. Daniel Sokol will moderate a discussion with Antonio Bavasso, Dr. David S. Evans, Willard Tom, and Dr. Vanessa Yanhua Zhang. Evans and Zhang, with Global Economics Group, advised Tencent and submitted testimony to the Chinese Supreme People’s Court. Bavasso is a partner at Allen & Overy in London and Will Tom is a partner at Morgan Lewis in DC and former General Counsel of the US Federal Trade Commission. Danny Sokol teaches at University of Florida Law School and is Senior Of Counsel to Wilson Sonsini Goodrich & Rosati.

The webinar should be of interest to antitrust and IT lawyers and lawyers in other disciplines that could be exposed to issues related to Internet-based markets (IP, Media, Telecoms) and to anyone interested in the development of antitrust in China.

CPI will be distributing an English translation of the decision and other material in advance of the webinar.

To register, please email Carolyn Vallejo at

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

Sequential Product Innovation, Competition and Patent Policy

George Norman, Lynne Pepall, and Dan Richards explore Sequential Product Innovation, Competition and Patent Policy.

ABSTRACT: This paper examines the role of patent policy in a spatial model of sequential innovation. Initial entrepreneurs develop a new product market and anticipate that subsequent innovation may lead to a product line that consumers value more highly. The likelihood of sequential innovation increases with the number of initial early entrants in the market. Patent protection that encourages early entry can therefore raise the probability of both initial and subsequent innovation. We determine the optimal patent breadth as a function of key industry characteristics of both consumer taste and the new technology.

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

OECD Tender for Competition Work in Romania

The OECD’s Competition Division is running a new project to assess competitive impacts of regulations in Romania and is looking for consultants to contribute to the project. The pro-competitive regulatory review of three key sectors -- food processing, construction and transport -- was launched by the Romanian Prime Minister Victor Ponta and OECD Deputy Secretary General William Danvers on 15 October. The project will review laws and regulations in food processing, transport and construction using the method of the OECD’s Competition Assessment Toolkit. The OECD will make recommendations for revisions to certain laws and regulations aimed at improving competitive conditions.
The project will be carried out by a project team that involves staff of the OECD, the Romanian Competition Council, consultants and input from the Romanian Government and relevant ministries. A call for tender has been issued with a view to sourcing consultants to support the project.  The OECD is looking for economists, lawyers and researchers, as well as an interpreter/translator and some logistical support, all of whom would need to read Romanian. Each of these areas is considered a “lot” for the purpose of the tender. Bidders are invited to bid on one or more of the lots. So, for example, an economist or a lawyer could submit a bid on their own. Alternately, they could combine with others into a group or via a company.
If you would be interested, the OECD would be happy to provide more details. The OECD’s Competition Division is interested in spreading news of this announcement widely, so would request that you forward to people who might be interested. The closing deadline for receiving bids is 6 January 2015 at  3 P.M. (Paris time).
For further information on the tender, please

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

The Limits of Price Discrimination

Dirk Bergemann (Cowles Foundation, Yale University), Benjamin Brooks (Dept. of Economics, Princeton University) and Stephen Morris (Dept. of Economics, Princeton University) discuss The Limits of Price Discrimination.

ABSTRACT: We analyze the welfare consequences of a monopolist having additional information about consumers' tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out "third degree price discrimination." We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.

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

Thursday, December 4, 2014

Innovation and Competition in the Retail Banking Industry: An Industrial Organization Perspective

Carlotta Mariotto, Ecole Nationale Superieure des Mines de Paris - Centre d'Economie Industrielle (CERNA) and Marianne Verdier, Universite Paris 2 Pantheon Assas explore Innovation and Competition in the Retail Banking Industry: An Industrial Organization Perspective.

ABSTRACT: Over the recent years, the development of mobile banking and Internet banking has had a considerable impact on competition in the retail banking industry. In some countries, the regulatory framework has been adapted to allow non-banks to operate in retail payments and compete with banks for deposits. Several Internet Service Providers or large retailers have started to offer innovative financial products to their customers. In this paper, we analyse how the industrial organization literature can be used to study recent innovations in retail banking and discuss some perspectives for future research.

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

AAI 2014 Antitrust Enforcement Award Winners

The American Antitrust Institute (AAI) held its second annual Antitrust Enforcement Awards on Tuesday night, honoring litigation achievements in three categories.

UCLA¹s Edward Leamer, Ph.D. received the award for Outstanding Antitrust Litigation Achievement in Economics for his work in In Re High-Tech Employee Antitrust Litigation.   Dr. Leamer¹s work helped demonstrate that, even in a post-Dukes environment, economic analysis can help determine if a class action is the appropriate vehicle for employees to seek redress for alleged harms.  Finalists in the Economics category were Princeton¹s Orley C. Ashenfelter and UC Berkeley¹s Richard Gilbert for their work in United States of America v. Apple Inc., et al. (e-books), Duke University¹s Leslie M. Marx, Ph.D. For her work in In Re Petition of Pandora Media, Inc. related to United States v. American Society of Composers, Authors and Publishers (ASCAP) et al., and UC Berkeley¹s Carl Shapiro, Ph.D. for his work in United States v. Bazaarvoice, Inc.

K. Craig Wildfang of Robins Kaplan Miller & Ciresi LLP was awarded Outstanding Antitrust Litigation Achievement in Private Law Practice for his work as co-lead counsel for the plaintiff class in In re Payment Card Interchange Fee and Merchant Discount Litigation in which he secured approval of what is believed to be the largest-ever settlement of a private antitrust case in the 120-year history of the Sherman Act.  Finalists in the Private Law Practice category were Jay N. Fastow of Ballard Spahr LLP for his work in ZF Meritor LLC v. Eaton Corporation and Kenneth L Steinthal of King & Spalding for his work in United States v. American Society of Composers, Authors and Publishers (ASCAP) et al.  There were two honorable mentions: Eric L. Cramer of Berger & Montague, P.C. For his work in Marchbanks Truck Service Inc., et al. v. Comdata Network, Inc., et al. and K. Craig Wildfang and Christopher Burke of Scott & Scott for their work in Dahl v. Bain Capital Partners, LLC et al.

The AAI added a new category to the Antitrust Enforcement Awards in 2014. Outstanding Antitrust Litigation Achievement by a Young Lawyer was awarded to Matt Duncan of Fine, Kaplan and Black, R.P.C. for his work in In re Steel Antitrust Litigation. Duncan and a small group of co-lead counsel managed all aspects of the claims against eight large defendants. He helped lead this enormous litigation to outstanding results.  Finalists in the Young Lawyers category were Andrew C. Curley of Berger & Montague, P.C. For his work in Marchbanks Truck Service Inc., et al. v.  Comdata Network, Inc., et al., and Meegan F. Hollywood of Robins, Kaplan, Miller & Ciresi L.L.P. for her work in In re Air Cargo Shipping Services Antitrust Litigation. 

Qualified nominations had to be for 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 ended on September 10. A panel of judges determined finalists within each category. A second round of judging determined the winning entry.

The judging committee was comprised of:
· Daniel E. Gustafson, Gustafson Gluek PLLC, Chair
· Hollis Salzman, Robins, Kaplan, Miller & Ciresi L.L.P., Vice Chair
· Jonathan Baker, American University's Washington College of Law
· Ellen S. Cooper, Office of the Attorney General of Maryland
· Harry First, New York University School of Law
· Kathleen E. Foote, California Department of Justice Antitrust Section
· Warren Grimes, Southwestern Law School
· Thomas Horton, South Dakota School of Law
· Ellen Meriwether, Cafferty Clobes Meriwether & Sprengel LLP
· Dianne Nast, NastLaw, LLC
· Roger Noll, Stanford University
· Linda Nussbaum, Grant & Eisenhofer, P.A.
· Christopher Sagers, Cleveland-Marshall College of Law
· Bonny Sweeny, Robbins Geller Rudman & Dowd LLP
· Richard O. Zerbe, University of Washington

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

E-Book Pricing and Vertical Restraints

Babur De los Santos Indiana University - Kelley School of Business - Department of Business Economics & Public Policy and Matthijs R. Wildenbeest Indiana University - Kelley School of Business - Department of Business Economics & Public Policy have a new paper on E-Book Pricing and Vertical Restraints.

ABSTRACT: This paper empirically analyzes how the use of vertical price restraints has impacted retail prices in the market for e-books. In 2010 five of the six largest publishers simultaneously adopted the agency model of book sales, allowing them to directly set retail prices. This led the Department of Justice to file suit against the publishers in 2012, the settlement of which prevents the publishers from interfering with retailers' ability to set e-book prices. Using a unique dataset of daily e-book prices for a large sample of books across major online retailers, we exploit cross-publisher variation in the timing of the return to the wholesale model to estimate its effect on retail prices. We find that e-book prices for titles that were previously sold using the agency model decreased by 18 percent at Amazon and 8 percent at Barnes & Noble. Our results are robust to different specifications, placebo tests, and synthetic control groups. Our findings illustrate a case where upstream firms prefer to set higher retail prices than retailers and help to clarify conflicting theoretical predictions on agency versus wholesale models.

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

Origins of the Species: The 100 Year Evolution of the Clayton Act

William Baer (DOJ) just gave a speech on the Origins of the Species: The 100 Year Evolution of the Clayton Act.

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

Activating Actavis: Taking the Story Beyond the Temporary Duopoly

Bruce H. Kobayashi, George Mason University - School of Law, Joshua D. Wright, Federal Trade Commission; George Mason University School of Law, Douglas H. Ginsburg, George Mason University School of Law, and Joanna Tsai, Government of the United States of America - Federal Trade Commission Activating describe Actavis: Taking the Story Beyond the Temporary Duopoly.

ABSTRACT: This paper examines the economics of litigation and settlement of patent disputes arising from Paragraph IV ANDA filings under the Drug Price Competition and Patent Term Restoration Act (“Hatch-Waxman Act”) within the framework set out in FTC v. Actavis. Recent economic analyses of reverse payment settlements are based upon a monopoly-to-duopoly model that assumes a single generic entrant. These analyses have been used to support antitrust rules that would enjoin reverse payments that exceed the cost of litigation. We demonstrate that the simple monopoly-to-duopoly models providing the analytical basis for the litigation cost benchmark for analyzing reverse payment settlements is incomplete. Our key institutional insight is the fact that entry by multiple firms follows the invalidation of a patent. Accounting for this critical institutional detail in a more generalized monopoly-to-duopoly model results in important and different implications for patent settlements, welfare, and application of the rule of reason pursuant to Actavis. The result is a broader settlement range than under the monopoly-to-duopoly model that yields robust incentives for the brand and generic entrant to settle the case. This broad settlement range makes attempts to regulate the size of patent settlements ineffective at achieving consumer welfare increasing settlements, or inducing the invalidation of “bad” patents through higher litigation rates. Incorporating multiple serial entrants also decouples the litigation-adjusted expected value of the patent and the consumer welfare standard, and further weakens the relationship between patent strength and the size of the settlement which has motivated numerous calls to deem presumptively unlawful all payments greater than anticipated litigation costs.

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

Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks

Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) Doh-Shin Jeon, Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR) and Byung-Cheol Kim, Georgia Institute of Technology analyze Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs. Mobile Networks.

ABSTRACT: We study how net neutrality regulations affect a high-bandwidth content provider’s (CP) investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With limited capacity, as in mobile networks, prioritized delivery services are complementary to the CP’s investments and can facilitate entry of congestion-sensitive content; however, this creates more congestion for other existing content. By contrast, if capacity is relatively large, as in fixed-line networks, prioritized services reduce QoS investment as they become substitutes, but improves traffic management. These results are qualitatively robust to the extension of the ISP’s endogenous choice of network capacity.

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

Wednesday, December 3, 2014

The Collusion Incentive Constraint

Jesper Fredborg Huric Larsen, Copenhagen Business School - Law Department; University of Southern Denmark - Department of Environmental and Business Economics describes The Collusion Incentive Constraint.

ABSTRACT: The collusion incentive constraint is an important economic measure of cartel stability. It weighs the profits of being in a cartel with those of cheating and punishment of the remaining cartel members. The constraint places no restrictions on firm cartel, cheating and punishment pricing, but is usually considered in a restricted competitive set up characterized by either Cournot or Bertrand competition. This paper examines the constraint under Bertrand competition and homogenous goods when assuming that cartel members have the same market power and then continues to examine if this is not so.

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