Antitrust & Competition Policy Blog

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

Saturday, June 11, 2016

Deputy Assistant Attorney General David Gelfand Delivers Remarks at the Bates White Antitrust Conference

See here for Deputy Assistant Attorney General David Gelfand Delivers Remarks at the Bates White Antitrust Conference.

 

June 11, 2016 | Permalink | Comments (0)

ACM launches offensive against illegal cartel agreements (with video)

According to the ACM Press Release:

“Cartels never go unnoticed.”

There are always people who know about illegal agreements between competitors. The Netherlands Authority for Consumers and Markets (ACM) will be running a campaign over the next few weeks to make people aware of cartel agreements. ACM calls on everyone to report any suspicions they might have about potential cartels.

Cartels are illegal agreements between businesses in order to eliminate the competition. For example, they could agree on raising prices or on sharing the market. In most cases, prices of products and services go up by at least 15 percent as a result of cartels. ACM tracks down cartels, ends illegal agreements, and can impose hefty fines on the businesses and individuals involved. These fines can amount to tens of millions of euros per business involved, and, from July 1, the fines on individuals can be as high as EUR 900,000.

Cartel agreements are daylight robbery. They erode a healthy, competitive economy, and they undermine public confidence in business. We are calling on everyone to track down cartels together.

June 11, 2016 | Permalink | Comments (0)

Friday, June 10, 2016

Merger policy in a quantitative model of international trade

Holger Breinlich; Volker Nocke; Nicolas Schutz describe Merger policy in a quantitative model of international trade.

ABSTRACT: In a two-country international trade model with oligopolistic competition, we study the conditions on market structure and trade costs under which a merger policy designed to benefit domestic consumers is too tough or too lenient from the viewpoint of the foreign country. Calibrating the model to match industry-level data in the U.S. and Canada, we show that at present levels of trade costs merger policy is too tough in the vast majority of sectors. We also quantify the resulting externalities and study the impact of different regimes of coordinating merger policies at varying levels of trade costs.

June 10, 2016 | Permalink | Comments (0)

Sequential decision making in merger control

Damien Neven (IHEID, The Graduate Institute of International and Development Studies, Geneva); Vilen Lipatov and Gregor Langus examine Sequential decision making in merger control.

ABSTRACT:  We model merger control procedures as a process of sequential acquisition of information and compare US and EU procedures. In the US, the authorities do not have to justify their decision to require further information (issue a second request), whereas in the EU, the authorities face a di_erent (enforceable) standard of proof in phase I relative to phase II. We _nd that in the absence of remedies, the US procedure is always superior in terms of expected consumer welfare. When we allow for remedies, we _nd that, compared to the US, merging parties in the EU have more scope to propose remedies in phase I that will preempt the authorities from uncovering unfavorable information in phase II, and this might reduce expected consumer welfare. However, the higher standard of proof in phase I can also in some circumstances act as a commitment not to accept remedies below some threshold and yield a higher expected consumer welfare in the EU. Our model also shows th! at for global mergers that have the same effect in the two jurisdictions, a decision to trigger a Phase II in the EU yields the same expected consumer welfare as a clearance in Phase I with remedies in the US. However, the converse is not true.

June 10, 2016 | Permalink | Comments (0)

Patent hold-up and royalty stacking: the case of multiple downstream firms

Karbowski, Adam and Prokop, Jacek write on Patent hold-up and royalty stacking: the case of multiple downstream firms.

ABSTRACT: The objective of this paper is twofold. First, we study the patent hold-up problem in game-theoretic framework. We show that in subgame perfect equilibrium of the patent hold-up game the innovating manufacturer exerts reduced effort to develop the new product and the patent holder obtains the entire value of product innovation. Second, we show that royalty stacking, which is believed to magnify the patent hold-up, may cause less severe problems than the ones predicted by Lemley and Shapiro when competition on the downstream product market is introduced.

June 10, 2016 | Permalink | Comments (0)

Thursday, June 9, 2016

Transaction costs and the sharing economy

Henten, Anders and Windekilde, Iwona explore Transaction costs and the sharing economy.

ABSTRACT: The paper discusses the so-called sharing economy from an industrial structure perspective. The illustrative cases examined are Airbnb and Uber. The research question raised is concerned with the extent to which transaction cost theory can be used to explain the changing industrial structures in the application areas that the Internet-based platforms are addressing and how other theoretical frameworks can be helpful in understanding these developments. The paper concludes by proposing a theoretical framework for analyzing the structural implications of the sharing economy based on theories on multi-sided platforms, transaction costs, and substitution and complementation.

June 9, 2016 | Permalink | Comments (0)

Demand Heterogeneity and the Adoption of Platform Complements

Rietveld, J. and Eggers, J.P. examine Demand Heterogeneity and the Adoption of Platform Complements.

ABSTRACT: This paper offers a demand-based theory of how platform maturity affects the adoption of platform complements. We argue that differences between early and late adopters of the platform include willingness to pay for the platform-and-complement bundle, risk preferences, preference for novelty, and search behavior. These differences create heterogeneous demand conditions for complements that affect both average complement performance and variance in the types of complements that are more or less successful. Using a novel dataset of 2,921 sixth-generation console video games, we find that platform maturity has a negative relationship on video games’ unit sales. Furthermore, as the platform matures, we find that the sales disparity between new intellectual property (IP) games and games based on existing video game properties or media tie-ins grows to the detriment of new IP games. We find that the sales disparity between superstar games and flops also widen! s as the platform matures. These effects are accentuated by the introduction of a next generation platform, which further skews the complement’s customer pool as early adopters migrate away from the current generation platform. Robustness tests that control for unobserved heterogeneity help rule out alternative explanations and support our argument that these performance implications are truly driven by heterogeneity in demand.

June 9, 2016 | Permalink | Comments (0)

Contracting with Endogenous Entry

Marco Pagnozzi (Universita di Napoli Federico II and CSEF) and Salvatore Piccolo (Universita Cattolica del Sacro Cuore di Milano and CSEF) are Contracting with Endogenous Entry.

ABSTRACT: A principal contracts with an agent who is privately informed about his production cost. Before contracting, the agent learns his probability of having a low cost – his ex ante “type” – and decides whether to pay an entry fee. We show that the entry game has two equilibria that determine the possible types of the agent who contract with the principal. Contrasting with standard intuition, in the equilibrium that is “risk dominant” for the agent, an increase in the entry fee increases the mass of types who enter and the expected cost of the entrant. Public policies that increase entry barriers may be welfare improving.

June 9, 2016 | Permalink | Comments (0)

Price-Cost Tests in Antitrust Analysis of Single Product Loyalty Contracts

Benjamin Klein, University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon and Andres V. Lerner, Compass Lexecon study Price-Cost Tests in Antitrust Analysis of Single Product Loyalty Contracts.

ABSTRACT: This article examines the conditions when predatory pricing or exclusive dealing antitrust principles should be the controlling legal standard for the evaluation of single product loyalty discount contracts. Following Meritor, it clarifies what it means for price to be “the predominant mechanism of exclusion” in a loyalty contract, and therefore for price-cost considerations to be a relevant element of the analysis. Loyalty contracts are shown to be a way by which firms efficiently reduce the price of incremental sales, with effects similar to the commonly recognized competitive use of price discounts in Brooke Group. Rather than assuming a loyalty contract involves exclusive dealing, antitrust analysis in all cases requires determining whether a de facto exclusive dealing arrangement has been created where equally efficient rivals cannot compete for contestable sales.

June 9, 2016 | Permalink | Comments (0)

Wednesday, June 8, 2016

The Economics of Retailing Formats: Competition Versus Bargaining

Bjorn Olav Johansen, University of Bergen - Department of Economics and Tore Nilssen, University of Oslo - Department of Economics examine The Economics of Retailing Formats: Competition Versus Bargaining.

ABSTRACT: We set up a merger game between retailing stores to study the incentives of independent stores to form a big store when some consumers have preferences for one‐stop shopping. Such one‐stop shopping creates complementarity between products, leading in turn to lower prices after a big store is formed but may also lead to an improvement in the bargaining position vis‐à‐vis producers through the creation of an inside option that small stores do not have. We find that big stores will not be formed when the stores' ex ante bargaining power vis‐à‐vis producers is high. Otherwise, an asymmetric situation occurs with only one big store created when one‐stop shoppers are abundant.

June 8, 2016 | Permalink | Comments (0)

Competitive Nonlinear Pricing and Contract Variety

Jian Shen, Navigant Consulting, Inc., Huanxing Yang, Ohio State University (OSU) - Economics, and Lixin Ye, Ohio State University (OSU) - Economics theorize about Competitive Nonlinear Pricing and Contract Variety.

ABSTRACT: We analyze markets with both horizontally and vertically differentiated products under both monopoly and duopoly. In the base model with two consumer types, we identify conditions under which entry prompts an incumbent to expand or contract its low end of the product line. Our analysis offers a novel explanation for the widespread use of ‘fighting brands’ and ‘product line pruning.’ We also extend our analysis to asymmetric firms and three types of consumers and show that depending on the specific environment, entry may lead the incumbent to expand or contract the middle range of its product line (middle contracts). Our results are mainly driven by interactions between horizontal differentiation (competition) and vertical screening of consumers.

June 8, 2016 | Permalink | Comments (0)

Product Variety and Vertical Integration

Yue Maggie Zhou, University of Michigan, Stephen M. Ross School of Business and Xiang Wan, Ohio State University (OSU) - Fisher College of Business think about Product Variety and Vertical Integration.

ABSTRACT: In vertical relationships the potential for scale economy in manufacturing often calls for specialization and outsourcing. Specialization, however, depends critically on the stability of the task and contractual environment. In a highly uncertain environment the need for frequent mutual adjustments favors integration instead of outsourcing. To evaluate vertical relationships in value chains where one stage competes on product variety under great uncertainty and the other stage competes on scale, we compare operations data at about 300 distribution centers within a major soft-drink bottler before and after it was integrated into an upstream firm. We find that vertical integration improved coordination for the integrated firm by aligning incentives and reducing strategic information asymmetry, but it worsened coordination for upstream rivals who shared the same downstream facilities.

June 8, 2016 | Permalink | Comments (0)

Nuking Misconceptions: Hinkley Point, Chinese SOEs and EU Merger Law

Alan Riley, Institute for Statecraft is Nuking Misconceptions: Hinkley Point, Chinese SOEs and EU Merger Law.

ABSTRACT: As Chinese outbound investment and acquisitions of European and other western assets reach hitherto unseen dimensions, the European Commission and other antitrust regulators are being called upon to assess the competitive impact of acquisitions by Chinese SOEs. A critical threshold issue, with both jurisdictional and substantive implications, is whether Chinese SOEs have a power of decision independent of the Chinese state. The EU Merger Regulation provides a clear framework for examining the independence of SOEs, regardless of their nationality. But the Commission’s case law as it pertains to Chinese SOE acquirers, up until very recently, failed to come to terms with the extensive evidence of multifaceted state control exercised by Beijing over its SOEs. In its March 2016 decision in the Hinkley Point case, the Commission has begun to take the bull by the horns. It is submitted, however, that the European antitrust regulator still has some way to go: evidence of the deeply pervasive nature of Communist Party and Chinese state influence over SOEs in the Middle Kingdom is extensive and can no longer be ignored.

June 8, 2016 | Permalink | Comments (0)

Tuesday, June 7, 2016

American Bar Association Section of Antitrust Law 2017 International Scholar in Residence Program Announcement

American Bar Association Section of Antitrust Law 2017 International Scholar in Residence Program Announcement

The Section of Antitrust Law International Scholar in Residence Program (“SAL SIR”) will provide funding of $10,000.00 USD each for up to two scholars to visit the United States to pursue competition policy-related research in the Spring of 2017. With prior ABA approval, the scholars may request additional reimbursable expenses of up to $2,500 to travel to other locations in the United States to conduct research. Junior faculty members (those who have been engaged in full-time teaching for five years or less) as well as current or recent Ph.D. candidates who have a demonstrated interest in the study of competition policy are invited to apply.

Applicants chosen as International Scholars in Residence (“SAL Scholars”) will be expected to visit the United States for a period of 8 to 12 weeks, commencing on or after March 1, 2017, and coinciding with the 65th Annual Spring Meeting of the Antitrust Section scheduled for March 29-31, 2017. During their time in the U.S., SAL Scholars will conduct research, meet and interact with members of the U.S. antitrust community, and attend the annual Spring Meeting in Washington, D.C. Although arrangements can be tailored to the particular needs of each scholar’s research proposal, SAL Scholars are expected to reside in Washington, D.C. for some of their time in the U.S., so they can have access to federal agency personnel as well as a range of academics, lawyers, and consulting firms. SAL Scholars can also propose short visits to state enforcement agencies or U.S. academic institutions outside of Washington, D.C., provided the visit will advance their research. Additional funding has been made available to support these visits.




Find more information online at http://apps.americanbar.org/dch/committee.cfm?com=AT939371




Application Process and Contents




Each Applicant must submit an application to the “SAL SIR Selection Committee” that includes the following:

• A cover letter/statement of interest describing the Applicant’s current position, research interests related to competition policy, and qualifications to serve as a SAL Scholar.

• A current curriculum vitae.

• A specific and significant research proposal (typically 3-5 single-spaced pages) that includes a description of steps already taken in furtherance of the research and an explanation of how the proposal would be significantly advanced through work in residence in the U.S. Proposals can include work in progress as well as new research projects. Applicants must also disclose any other sponsors of the research.

• Two letters of recommendation from current faculty members familiar with the candidate and her/his work, evaluating the Applicant’s ability to undertake the proposed research, including the Applicant’s proficiency in English. In the case of a current faculty member or Ph.D. candidate, one of the letters should come from the Dean, Director, or Head of School of the applicant’s home institution or program, indicating: (1) the Applicant’s good standing in the institution; (2) the institution’s willingness to grant the Applicant the necessary leave time; and (3) an intention to support the Applicant’s research as a SAL Scholar, including whether any home institution funds will be provided in support of the visit. In the case of current or recent Ph.D. candidates, one letter should come from the faculty adviser who is supervising or who supervised the Applicant’s doctoral research.

• If applicable, a statement of interest in visiting any academic institutions or enforcement agencies outside of Washington, D.C., such as the offices of a State Attorney General, along with a justification for the specific goals sought to be achieved by the “side visit” and a supportive letter of invitation from a representative of the institution to be visited.

• A description of the particular work product that the Applicant intends to produce as a result of her/his visit, such as an article, book, book chapter, or report for use by a government or non-government agency focused on competition policy issues. Successful applicants also will agree that any work product prepared in whole or part with the support of the SAL SIR program will so indicate with the specific language approved by the Section of Antitrust Law.

• Any other material the Applicant would like the Selection Committee to consider.

In judging the proposals received, the SAL SIR Selection Committee will be guided by the following factors: the strength and specificity of the research proposal, the likelihood that the Applicant’s overall research goals could better be realized through participation in the program, evidence of past scholarly productivity, the letters of recommendation, the mix of research topics selected for support under the program as a whole, and diversity in terms of home institutions, national origin, race, religion, and gender.

Although SAL Scholars will be responsible for making all of their own travel and accommodation arrangements, the Section of Antitrust Law will assist in providing guidance on making arrangements to secure work space to aid in research at a Washington, D.C.-area academic institution. Successful applicants will be strongly encouraged to apply to the Visiting Researcher Program at Georgetown University Law Center, which provides research space and support to international scholars. For more information, see http://tinyurl.com/GTownLawProgram. The Section of Antitrust Law will also help to facilitate meetings and interviews with a range of enforcers, academics, and private consultants who can advise SAL Scholars on their specific research topics.




Eligibility Criteria and Personal Responsibilities




As indicated above, to be eligible for consideration, applicants should be current Ph.D. candidates or recent recipients of a Ph.D. or a junior faculty member (engaged in full-time teaching for five years or less), who have a demonstrated interest in the study of competition policy and proficiency in English. Applicants need not be current members of the American Bar Association or the Section of Antitrust Law. SAL Scholars shall be responsible for determining their liability, if any, for taxes in their home jurisdiction as well as in the United States.




Deadline for Applications




The deadline for submitting an application to be considered for appointment as an SAL SIR for the 2016-17 academic year is August 15, 2016. The SAL SIR Selection Committee hopes to announce its selections by September 15, 2016. Applications should be submitted to Julianna Theberge, Program Specialist, American Bar Association, Section of Antitrust Law, preferably via email at julianna.theberge@americanbar.org, or, if necessary by mail to:




Julianna Theberge
Program Specialist
Section of Antitrust Law
American Bar Association
321 North Clark Street
Chicago, IL 60654-7598

June 7, 2016 | Permalink | Comments (0)

Trademark Exhaustion and Its Interface with EU Competition Law

Apostolos Chronopoulos, Centre for Commercial Law Studies, Queen Mary, University of London and Spyros M. Maniatis, University of London - Centre for Commercial Law Studies (CCLS) examine Trademark Exhaustion and Its Interface with EU Competition Law.

ABSTRACT: The paper traces the evolution of the exhaustion doctrine in EU trademark law and examines its dialectic with the treatment of vertical restraints under EU competition law.

From a rigid rule not allowing the trademark proprietor to control the further commercialization of a trademarked good after its initial sale, the exhaustion doctrine in the EU has gradually developed to complex set of sub-rules balancing the diverse interests of traders, parallel importers, and the consuming public in a manner that resembles market regulation through unfair competition norms. In similar vein, the doctrine of exhaustion should encompass the potential benefits of post-sale restraints. The paper contains a critical analysis of the Court of Appeal’s ruling in Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd & Madaus GmbH [2015] EWCA CIV 54.

June 7, 2016 | Permalink | Comments (0)

The Meaning of Vertical Agreement and the Structure of Competition Law

Louis Kaplow, Harvard has a fascinating paper on The Meaning of Vertical Agreement and the Structure of Competition Law. Worth downloading!

ABSTRACT: Competition law’s vertical agreement requirement is widely regarded to be perplexing and to offer a fairly limited unilateral action defense. These views prove to be understated. The underlying distinction is incoherent on a number of levels and difficult to reconcile with pertinent statutes, precedent, and practice. The requirement has little nexus with competition policy, and its satisfaction may even be associated with less, not more, anticompetitive danger. Furthermore, reflection on the thinness or nonexistence of the vertical agreement requirement renders problematic a central feature of competition law: the aim to subject myriad everyday actions of countless firms to more lenient scrutiny than that applicable to agreements, which on reflection are ever-present.

June 7, 2016 | Permalink | Comments (0)

Competition Law in the Western World: Legal Framework in European and American Jurisdictions

Sankalp Jain, Delhi High Court explores Competition Law in the Western World: Legal Framework in European and American Jurisdictions.

ABSTRACT: Any study in Competition law makes the examination of the position of the European Union (EU) and USA competition regime focal as these are the two most important economic blocks of the present times. EU regime has been applied for more than fifty years and is considered one of the most mature regimes in the world; secondly and even more importantly, competition law in the EU has been applied on a transnational level, since the EU itself is a regional bloc. At the same time US antitrust law experience and its influence on thought, expectations and interpretations of competition law around the world and at experience has long been central to international competition law. Many countries have turned to the US law in shaping their own competition law decisions, and US competition law thinking has influenced the thinking of scholars, administrators and political decision makers virtually everywhere including India where the competition law is a mix of both EU and American regimes.

June 7, 2016 | Permalink | Comments (0)

Monday, June 6, 2016

Price-Cost Tests in Antitrust Analysis of Single Product Loyalty Contracts

Benjamin Klein, University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon and Andres V. Lerner, Compass Lexecon examine Price-Cost Tests in Antitrust Analysis of Single Product Loyalty Contracts.

ABSTRACT: This article examines the conditions when predatory pricing or exclusive dealing antitrust principles should be the controlling legal standard for the evaluation of single product loyalty discount contracts. Following Meritor, it clarifies what it means for price to be “the predominant mechanism of exclusion” in a loyalty contract, and therefore for price-cost considerations to be a relevant element of the analysis. Loyalty contracts are shown to be a way by which firms efficiently reduce the price of incremental sales, with effects similar to the commonly recognized competitive use of price discounts in Brooke Group. Rather than assuming a loyalty contract involves exclusive dealing, antitrust analysis in all cases requires determining whether a de facto exclusive dealing arrangement has been created where equally efficient rivals cannot compete for contestable sales.

June 6, 2016 | Permalink | Comments (0)

FairEconomy. Crises, Culture, Competition and the Role of Law

Philipp Hacker, Humboldt University of Berlin and Rupprecht Podszun, University of Bayreuth; Max Planck Institute for Innovation and Competition have written on FairEconomy. Crises, Culture, Competition and the Role of Law.

ABSTRACT: This synopsis contains excerpts from and novel introductions to the four chapters constituting “FairEconomy. Crises, Culture, Competition and the Role of Law”, a monograph co-authored and published by the late Wolfgang Fikentscher, Philipp Hacker and Rupprecht Podszun in 2013. In honor and continuation of Wolfgang Fikentscher’s unwavering commitment to open access to scholarship, we are thus presenting the most relevant parts and arguments of the book in universally accessible format, with the kind permission of the publisher.

In the first chapter, we draw on anthropology and economic theory to show that (i) the chief objective of “the economy” is to fulfill basic human needs and that (ii) it is currently far from achieving this aim. We suggest that, not only but also in response to the financial crises haunting the global economy, a reorientation toward the necessary normative foundations of the economy is in order; a reorientation that includes a commitment to fairness as a key concept to build trust, structure economic interactions, and distribute surplus. We trace legal concepts operationalizing the subjective right to a fair economy in Western legal history in order to show that the economy is never simply natural or emergent, but always instituted by a complex web of legal, political and cultural arrangements that demand particular attention – and readjustments – in times of crises. In the following two chapters, we spell out the content of FairEconomy in competition law and securities regulation, the two crucial domains for the regulation of contemporary economic activity. The final chapter offers perspectives on global institutions for the enforcement of fairness-oriented norms in market transactions.

June 6, 2016 | Permalink | Comments (0)

Antitrust Overhaul

Richard Steuer, Mayer Brown advocates Antitrust Overhaul.

ABSTRACT: The time has come to begin a serious discussion of the overhaul of America’s antitrust statutes. Simpler and more contemporary language would make those statutes easier to comprehend and would foster harmonization with the competition laws of other jurisdictions. Proposals for a global competition law have been discussed repeatedly in the past but none is likely to be adopted anytime soon, if ever. A more realistic path to harmonization is for each country to streamline its own statutes, moving as far as it comfortably can in the direction of others. This article illustrates how the U.S. antitrust statutes can be rewritten, without changing the substance of the law. This would make them easier to understand both within the U.S. and abroad, facilitating compliance and harmonization with the statutes of other jurisdictions. The article also compares the illustration with statutes from several other jurisdictions around the world. An overhaul of America’s antitrust statutes will not happen overnight, but the author maintains that it is time to begin considering how best to bring those statutes into the 21st Century.

June 6, 2016 | Permalink | Comments (0)