Wednesday, November 4, 2015
How EU Judges Behave in Competition Appeals - 18.00 Thursday 5 November 2015, Edmond Safra Lecture Theatre, Strand Campus, King's College London
The Italian Guidelines on the Method of Setting Fines. A (Half) Step Towards Transparency and Deterrence
Federico Cesare Guido Ghezzi, Bocconi University - Department of Law and Gian Diego Pini, University of Milan - Department of Public, Civil Procedure, International and European Law examine The Italian Guidelines on the Method of Setting Fines. A (Half) Step Towards Transparency and Deterrence.
ABSTRACT: In this paper, we examine the new Italian Guidelines on the method of setting fines for antitrust law infringements in the broader context of Italian antitrust public enforcement.
The analysis of the new Guidelines is interesting for at least three reasons. Firstly, in drafting the new guidelines the Italian Competition Authority (ICA) adopted a comprehensive approach, taking into account that the method of setting fines may affect all the other elements of the sanctioning system. Thus, even if the Guidelines deal specifically only with the quantifications of fines, many elements of the new methodology have been designed to affect other important areas of the antitrust enforcement, particularly the leniency programs.
Secondly, the new Guidelines clearly witness a shift towards an antitrust enforcement system based on deterrence. Unfortunately, the ICA’s very formal interpretation of the notion of undertaking undermines, if not completely annuls, the efforts towards heavier fines on naked cartels and exclusionary abuses of dominant position.
Finally, in choosing the quantification method, the ICA largely followed the 2006 EU Guidelines on the method of setting fines. This should not come as a shock considering that Italian antitrust law closely mirrors Articles 101 and 102 TFEU. It should be pointed out, however, that the ICA resisted to the pleas of many commentators, urging it to follow other more lenient or in any case different national models. We think that, also in light of the allocation principles laid down in the Notice on the cooperation within the network of European Competition Authorities, a high degree of harmonization between the EU and the Italian antitrust sanctioning systems is beneficial to assure a level playing field for companies operating in the Italian markets.
Harry G. Hutchison, George Mason University - School of Law describes Monopsony Power, Collective Bargaining and College Football.
ABSTRACT: The collision of sports and labor law has prompted a rise in scholarly activity best exemplified by the recent Workshop on Sports Law at the Southeastern Association of Law Schools (SEALS). Featuring a number of scholars, the workshop moderated by Professor William Berry surveyed an array of issues. One issue concerns the implications that correspond with the question whether or not the football players at Northwestern University, who receive grant-in-aid scholarships, ought to treated as employees within the meaning of Section (2)(3) of the National Labor Relations Act of 1935 (NLRA).
Although Richard Posner’s understanding of economic theory suggests that the NLRA can be viewed as a kind of reverse Sherman Act designed to encourage cartelization of labor markets, it is equally possible to adduce evidence showing that universities, as putative employers, richly defended by the NCAA, possess unjustified market power. If universities are properly seen as employers, they can be viewed as monopsonies that extract unjustified benefits from their employees who possess inferior bargaining power in spite of the NCAA’s self-proclaimed mission to prevent exploitation of student-athletes under the umbrella of “amateurism.” This brief essay suggests that an economic case can be established favoring the unionization of Division I football players grounded in the likelihood that college players face employers with monopsony power. This remains true despite the fact that complications arise with regard to the possible adverse effects of unionization on both the status of Division II and Division III programs and university athletic programs outside of the domain of football.
Tuesday, November 3, 2015
In Defense of Sports Antitrust Law: A Response to Law Review Articles Calling for the Administrative Regulation of Commercial Sports
Marc Edelman, City University of New York - Baruch College, Zicklin School of Business writes In Defense of Sports Antitrust Law: A Response to Law Review Articles Calling for the Administrative Regulation of Commercial Sports.
ABSTRACT: In recent years, two law review articles have proposed that the United States regulate commercial sports through a direct federal commission, rather than through traditional antitrust remedies. Nevertheless, the practical realities of commercial sports’ power to influence government policy offset the many theoretical advantages to creating a specialized regulatory body to oversee commercial sports. The commercial sports industry already possesses an extraordinarily strong lobbying arm that has successfully lobbied for special legislation, such as the Sports Broadcasting Act of 1961 and the Professional and Amateur Sports Protection Act of 1992. If commercial sports ever were to become administratively regulated, sports leagues would likely be able to use their lobbying power to obtain even greater concessions under U.S. law. Consequently, this Article argues that, albeit imperfect, antitrust law remains the most practical way to regulate commercial sports leagues.
Scott Hemphill, NYU ponders Less Restrictive Alternatives in Antitrust Law.
ABSTRACT: Antitrust courts often confront “mixed” conduct that has two contrasting effects, one harmful and the other beneficial. For example, a nationwide agreement not to pay college football players harms the players, while benefiting fans of amateur sports. An important tool for analyzing mixed conduct is to compare the action to a hypothesized alternative, and ask whether the alternative action is “less restrictive” and hence less harmful. The less restrictive alternative (LRA) test is used widely, from the rule of reason to mergers to monopolization. The test often assumes a particular, narrow form, that the alternative must be dominant: not only less restrictive but also equally effective. In other words, could the benefits have been achieved equally well with less harm?
This Article offers a new account of the LRA test that draws inspiration from constitutional law and other fields. Dominant LRAs offer a shortcut that avoids the difficult tradeoff between increased benefit and increased harm. However, most LRAs are less effective, rather than dominant. Such alternatives offer a basis for condemning conduct when they are preferable on balance. Balancing in antitrust is not a myth, as many believe; instead, the tradeoff of incremental benefit and harm occurs in the assessment of LRAs. I also demonstrate how the LRA test serves to “smoke out” an inference of anticompetitive effect.
As the Article shows, courts that restrict their analysis to dominant LRAs run a high risk of false negatives, particularly when they also ignore the overall competitive effects of the restraint, as in the recent O’Bannon v. NCAA decision. Finally, the Article proposes best practices in assessing LRAs to minimize the risk of false positives.
Scott Hemphill, NYU ponders
Daryl Lim, The John Marshall Law School studies Patent Holdups.
ABSTRACT: Holdups have gained infamy from the image of knuckled-under implementers forced to pay patentees a premium because they are locked-in. Like shark attacks, holdups are real but their actual occurrence is sporadic enough to be treated as aberrations rather than a systematic failure in the patent system. A higher price may also reflect the premium associated with calculated convenience and certainty, a premium anyone who choses Uber’s taxi service rather than the public bus system knows. At the same time while holdups, like crimes, are not widespread, laws must still exist to deter them before they occur and address them when they do.
Patent ambushes are rare, less because of disclosure obligations and more due to the sting of possible antitrust enforcement. With FRAND disputes, patentees know injunctions are hard to come by and courts will likely map reward to technical contribution. Evidence showing intent can be useful here, as is direct or circumstantial evidence of harm. In the event negotiations fail, agreeing to submit the dispute to third party adjudication would be the clearest evidence of good faith. Harmful PAE conduct stems from features of the patent system, so the solution is to raise the bar of software patents, make it harder to initiate a suit, and punish those who bring frivolous suits.
Protagonists and antagonists exist on a spectrum that can appear flipped, depending on one ideological point of view, much like how one man’s terrorist and is another man’s freedom fighter. As with many things in life, the truth can be complicated and each choice come with its own set of tradeoffs. Deterring brinkmanship could deter innovators who would otherwise invest more heavily in new technologies or participate as intermediaries in facilitating licensing. Despite this complexity, the law must set down the ground rules for engagement. Those whose everyday lives depend on the law finding a proper balance between competing interests deserve no less.
Deborah Healey, University of New South Wales (UNSW) - Faculty of Law and Chenying Zhan,g University of Pennsylvania - The Wharton School examine The Chinese Anti-Monopoly Law: Lessons for Australian Banks and Chinese Regulators.
ABSTRACT: This research project compares the application of the competition laws of China and Australia to bank mergers, against financial regulatory frameworks and the dual objectives of competition and economic stability. As the title indicates, it seeks to identify lessons for Australian banks and Chinese regulators. A number of features dictate that the two jurisdictions will differ on many issues: ideological approach to the role of the market and the degree of appropriate government intervention; stage of economic development; nature of banking markets, particularly the extent of regulation. All of these features mean that many comparisons which could be made were not really of like with like. The research found a number of differences between approaches to merger analysis, particularly in relation to the role of competition itself.
Financial stability is important in both jurisdictions. The Ministry of Commerce (MOFCOM) has the responsibility for reviewing mergers under the Anti-Monopoly Law of China (AML). There are no MOFCOM bank merger determinations under the AML at this point, but China places particular emphasis on financial stability as part of its national development agenda. This is unsurprising as despite its size and economic power China is still a developing nation. The research found that there are a number of examples where MOFCOM merger determinations in other areas of industry diverge from a pure competition-based analysis, but the divergences are generally within the terms of the AML. MOFCOM’s approach is founded in the political economy of the People’s Republic of China (PRC), which influences a number of features of the AML, meaning that the outcomes are uniquely Chinese. The AML is enforced by MOFCOM but questions remain about the nature of its application to mergers in sensitive industries. Despite the size of the country, market definition tends to be geographically very broad, which may also affect outcomes in all industries including banking.
Monday, November 2, 2015
MERGERS AND ACQUISITIONS IN EUROPEAN AND NORTH AMERICAN ENERGY MARKETS: EMPIRICAL ANALYSIS OF LEGAL AND OWNERSHIP UNBUNDLING
Stefan Bogner, WU (Vienna University of Economics and Business), Stephan M. Gasser, WU (Vienna University of Economics and Business), and Margarethe Rammerstorfer, University Vienna analyze MERGERS AND ACQUISITIONS IN EUROPEAN AND NORTH AMERICAN ENERGY MARKETS: EMPIRICAL ANALYSIS OF LEGAL AND OWNERSHIP UNBUNDLING.
ABSTRACT: Competition and antitrust law aims to prevent companies from engaging in anti-competitive behavior and to promote and protect market competition. In this context, mergers and acquisitions (M&As) are under particular scrutiny, since they are often assumed to be motivated by possible market power increases, thus adversely affecting market efficiency. With a view to recent efforts within the European Union to increase the effectiveness of competition law in the energy sector (that is, legal and ownership unbundling as policy tools geared towards forcing corporations into demerging transactions), an event study approach is applied in this article to evaluate the market response to the announcement of mergers and acquisitions in EU and U.S. energy markets and to determine whether or not the hypothesis that M&As result in increased market power of the joined companies actually holds true. Findings indicate that increases in market power are not the main motive for energy market M&As. The results thus oppose the general adequacy of legal and ownership unbundling as veritable competition law instruments against market imperfections and failures, but indicate that unbundling can indeed be a viable policy solution if implemented on a case-by-case basis.
Holger Breinlich, University of Essex - Department of Economics; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Centre for Economic Policy Research (CEPR) Volker Nocke, University of Mannheim and Nicolas Schutz, University of Mannheim examine 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.
Jorge Padilla, Compass Lexecon examines The Role of Economics in EU Competition Law: From Monti's Reform to the State Aid.
ABSTRACT: This paper considers the role of economics in EU competition over the last fifteen years. It offers and personal, and thus subjective, account of policy developments and doctrinal debates. First, I explain the reasons why the European Commission decided to incorporate PhD economists to its ranks, describe the evolution of the Chief Competition Economist Team (CET) at Directorate General for Competition of the European Commission (DG Comp), and document the impact of the creation of the CET for the economic consulting industry. Then, I review the contributions made by the CET economists and economic academics and consultants to the development of EU competition law. I identify those areas where the law does not reflect current economic thinking and those where, on the contrary, the enforcement of competition law is well grounded in economics. I conclude with a brief account and a critical assessment of the views of economists and non-economists who have recently criticized the use – in their opinion abusive – of economics in EU competition law matters.
Recently I read an interesting paper by my friend Joel Waldfogel on Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales? We are in the process of setting a date for my 10 year old's bat mitzvah (yes, you need to set the date three years ahead) and my daughter, who like me is an avid Spotify user asked about movie soundtracks. I remember how much soundtracks mattered to movies. In most cases, the songs sound very dated. Some that I remember:
Robert Tepper - No Easy Way Out (Rocky IV). My father took me and my brother to see this movie the day after Thanksgiving in 1985. We loved it.
Stan Bush - Fight to Survive (Bloodsport). When I was in junior high and high school, TBS probably played Bloodsport every third night.
Kenny Loggins - Danger Zone (Top Gun). Loggins was a soundtrack machine- Caddyshack, Footloose, Over the Top (in retrospect, who green lights a movie about Stallone as an arm wrestler?) but from the mid 1980s, I remember Top Gun as the movie in 6th grade that I really enjoyed.
Not all movies involved explosions and beating someone to a pulp. Some movies I remember that had great soundtracks were a bit better.
Say Anything was a great story of improbable love and a dad who was a tax cheat.
Peter Gabriel - In Your Eyes (Say Anything)
Every decade needs a rock and roll movie. I liked Eddie and the Cruisers.
John Cafferty & The Beaver Brown Band - On the Dark Side (Eddie and the Cruisers)
There is always a movie about a doomed set of relationships. In the case of Robert Downey Jr. life imitated art for a number of years.
Bangles - Hazy Shade of Winter (Less Than Zero)
The 1980s was filled with Fantasy movies (does anyone else remember Legend with Tom Cruise and Mia Sara?). I always liked the Never Ending Story.
Limhal - Never Ending Story (Never Ending Story)
Laura Guttuso, University of Queensland -TC Beirne School of Law discusses From 'Mono' to 'Stereo': Fine-Tuning Leniency and Settlement Policies.
ABSTRACT: The article brings out the ambivalent role played by leniency and settlement policies in today’s cartel enforcement. Both occupy a prime position in the prosecution of cartels, whilst nevertheless having the potential, if not carefully managed, to undermine deterrence. The article first discusses leniency and settlements within the context of economic theories on deterrence and optimal sanctions.
The key practical challenges in the operation of leniency and settlement policies are then outlined, providing examples from recent European Commission and United Kingdom practice, as well as from experiences further afield. There is a risk that over-reliance on leniency and settlements compromises fairness, particularly in the context of the often one-dimensional manner in which these tools are deployed.
In the second part, the article argues that beyond a purely economics-driven paradigm, the effective administration of leniency and settlement policies requires fairness and due process to be accommodated in equal measure. Due process within penalty-setting has multiple facets, such as respecting the principles of transparency and equality of treatment, to name but a few.
The message in the final part is that competition agencies need to consider ways in which to administer remedies more effectively, addressing the goals of deterrence, restoration and behaviour control in a more coherent manner.
Saturday, October 31, 2015
In our previous issue we took a broad look at the intersection of antitrust and intellectual property. Now we're burrowing more deeply, looking at the ECJ's decision in Huawei v ZTE that attempts to establish an EU framework for SEP licensing negotiations—a decision made even more noteworthy as the two players are both Chinese tech giants. Our authors address whether the decision cleared the waters—or made them murkier.
- The Huawei-ZTE Decision
- Kyriakos Fountoukakos, Nick Root, Oct 27, 2015
It is, therefore, clear that there remains some scope for a divergence in the approach taken in different Member States. Kyriakos Fountoukakos & Nick Root (Herbert Smith Freehills LLP)
- Dina Kallay, Oct 27, 2015
The importance of the Decision lies in the procedural framework it provides for licensing negotiations. Dina Kallay (Ericsson)
- James Killick, Stratigoula Sakellariou, Oct 27, 2015
It is perhaps a sign of changing times that a key EU decision is being set for the first time by Chinese tech giants rather than U.S. ones. James Killick & Stratigoula Sakellariou (White & Case LLP)
- Nicolas Petit, Oct 27, 2015
This short paper argues that Huaweï v ZTE is a conservative judgment—it only extends by a razor-thin margin the zone of antitrust liability for patent owners. Nicolas Petit (University of Liège)
- Miguel Rato, Collette Rawnsley, Mark English, Oct 27, 2015
Huawei: Establishing the Legal Standard for a FRAND Defense as a Basis for Resisting Requests for Injunctive Relief for Infringements of SEPs Under Competition Law
The CJEU appears to have considered incorrectly that a request for an injunction is analogous to a refusal to license. Miguel Rato, Collette Rawnsley, & Mark English (Shearman & Sterling LLP)
- Kyriakos Fountoukakos, Nick Root, Oct 27, 2015
Friday, October 30, 2015
Geoffrey Christopher Rapp, University of Toledo College of Law asks Is it Time to Give Up on Antitrust Law for Pro Sports?
ABSTRACT: Professor Nathaniel Grow has produced a creative, thoroughly researched piece arguing that antitrust has failed in the context of professional sports and calling for the creation of a national-level federal regulatory agency to address anticompetitive conduct by the major leagues. I respond to his diagnosis of antitrust’s failings and to his prescription.
Nathaniel Grow, University of Georgia - Department of Insurance, Legal Studies, Real Estate describes The Curiously Confounding Curt Flood Act.
ABSTRACT: This article provides a novel textualist interpretation of the Curt Flood Act of 1998, a relatively little known statutory provision that partially repealed professional baseball’s controversial, judicially created antitrust exemption in only a single limited respect. Aside from allowing major league baseball players to file antitrust lawsuits against Major League Baseball, the Flood Act was intended — as Congress went to great lengths to emphasize throughout the legislative process — to remain neutral regarding the continued vitality and scope of baseball’s exemption in all other respects.
Despite these clear expressions of Congressional intent, however, most subsequent courts and commentators have surprisingly interpreted the CFA quite differently, concluding that the Flood Act in fact either expressly or implicitly endorsed broad antitrust immunity for professional baseball based on a single amorphous passage in the statute. The implication of this analysis is that the judiciary now lacks the power to modify or repeal baseball’s antitrust immunity, with the exemption instead having effectively been codified by Congress.
This article contends that future courts should reject the majority interpretation of the Flood Act and instead construe the law neutrally in most respects, as Congress intended. While other commentators have previously argued that the CFA should be read narrowly in light of its legislative history, this article advances a new textualist interpretation of the Flood Act. In particular, it asserts that when properly read, the Flood Act neither codifies baseball’s antitrust exemption nor reflects Congressional acquiescence in most aspects of the immunity. Therefore, the article concludes that the judiciary retains the power to reconsider baseball’s antitrust status, should a future court wish to do so.
Carlos Bellon, Universidad Carlos III de Madrid Bank discusses Competition, Borrower Competition and Interest Rates.
ABSTRACT: The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.
Thursday, October 29, 2015
Carolyn M. Evans, University of New South Wales (UNSW) Faculty of Law; ThinkEvans Pty Ltd, Deborah Healey, University of New South Wales (UNSW) - Faculty of Law, Marina Nehme, UNSW Australia and Rob Nicholls examine Competition in Financial Services.
Abstract: The Centre for International Finance and Regulation and UNSW Australia jointly funded this research under CIFR Project T20. The Centre for International Finance and Regulation is funded by the Commonwealth and NSW Governments and is supported by other Consortium members. The research question for this project was ‘What are the optimal competition law and policy settings that should apply to the financial services sector?’
The research question was driven by two Australian Government inquiries which will affect competition policy in the financial services sector: the Financial System Inquiry chaired by David Murray and the Competition Policy Review, chaired by Professor Ian Harper.
The project has three objectives.
The first is to investigate the nature of competition in certain sectors of the financial markets. Meeting this objective will provide Australian evidence on which decisions as to the competitive settings in the sector can, or should be, adjusted.
The second is to consider the mechanisms by which competition in the financial services sector can be promoted. This includes an analysis of the approaches used on an international basis for the promotion of competition in financial services. Meeting this objective will provide evidence on which decisions as to allocation of responsibility for promoting competition can be made.
The third is to consider the sector-specific competition settings in the financial sector, including the balance between competition and stability. As the global financial crisis did not provide Australia with direct experience of the practical limitations of this balance, the work investigates theoretical approaches and international experience. Meeting this objective will provide evidence for appropriate policy settings if there are to be any sector-specific competition policy exemptions.
Final Call for papers: Fourth Next Generation of Antitrust Scholars Conference at NYU School of Law on Friday, January 22, 2016
The fourth Next Generation of Antitrust Scholars Conference will be held at NYU School of Law on Friday, January 22, 2016. The conference is co-sponsored by NYU School of Law and the American Bar Association -- Section of Antitrust Law. The purpose of this day-long conference is to provide an opportunity for antitrust/competition law professors who began their full time professorial career in or after September 2008 to present their latest research. Senior antitrust scholars and practitioners in the field will comment on the papers. Papers may be submitted to email@example.com, which will then be circulated to our panel of referees for review. The deadline for submission of papers is November 1, 2015. There is a strong preference for work that is unpublished and for which the comments from the conference can be incorporated into the work.
'The assessment of the effect on trade by the national competition authorities of the “new” Member States: Another legal partition of the Internal Market?
Marco Botta, Alexandr Svetlicinii, Maciej Bernatt, discuss 'The assessment of the effect on trade by the national competition authorities of the “new” Member States: Another legal partition of the Internal Market?' (2015) 52 Common Market Law Review, Issue 5, pp. 1247–1275
Abstract: Under Regulation 1/2003, NCAs of EU Member States must apply Articles 101–102 TFEU to anti-competitive conducts with an effect on intra-Community trade, and must notify the Commission of investigations and envisaged decisions based on Articles 101–102 TFEU. In the last decade, the NCAs of the “new” EU Member States have notified a lower number of envisaged decisions in comparison to “old” EU Member State; this has been explained by the institutional constraints of the individual NCAs. However, the paper shows that the NCAs of the “new” EU Member States have not been “less active” in terms of enforcement, but have adopted most of their decisions under the national competition rules.Also, there is significant divergence in the assessment of the effect on trade by the NCAs of the selected jurisdictions. Some NCAs have not taken account of the relevant ECJ case law and the 2004 Commission Notice on the effect.