Antitrust & Competition Policy Blog

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

Wednesday, May 4, 2016

Commitments and Settlements – Benefits and Risks

Heike Schweitzer, Free University of Berlin (FUB) - Institute for German and European Business, Competition and Regulatory Law and Matteo Bay, Latham & Watkins - Law discuss Commitments and Settlements – Benefits and Risks.

ABSTRACT: The 2016 St.Gallen International Competition Law Forum ICF will serve as the backdrop for discussions on a variety of current competition law, economics and policy topics. One of the panels is going to focus on commitments and settlements and their role in the antitrust enforcement system of the European Commission. What kind of benefits do these instruments have? What are the problems and issues?

The following interview between Prof. Dr. Heike Schweitzer (Professor and Managing Director, Institute for German and European Economic Law, Competition Law and Regulatory Law, Freie Universität Berlin) and Matteo Bay (Partner and Attorney-at-Law, Latham & Watkins) offers you some food for thought and a starting point for our panel discussion. During the St.Gallen ICF itself, additional input will be offered by Céline Gauer (Director Energy and Environment, DG Competition, European Commission) and Catriona Munro (Partner and Attorney-at-Law, Maclay Murray & Spens).

May 4, 2016 | Permalink | Comments (0)

Strategic Capacity Investment Under Hold‐Up Threats: The Role of Contract Length and Width

Laure Durand-Viel, Universite Paris Dauphine and Bertrand Villeneuve, Université Paris Dauphine; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) identify Strategic Capacity Investment Under Hold‐Up Threats: The Role of Contract Length and Width.

ABSTRACT: We analyze the impact of the length of incomplete contracts on investment and surplus sharing. In the bilateral relationship explored, the seller controls the input and the buyer invests. With two‐part tariffs, the length of the contract is irrelevant: the surplus is maximal and goes to the seller. In linear contracts, the seller prefers the shortest contract and the buyer the longest one. Further, the commitment period concentrates the incentives, whereas afterwards there is rent extraction. The socially efficient contract is as short as possible; yet, long contracts can be promoted because of the surplus they allocate to the buyer.

May 4, 2016 | Permalink | Comments (0)

Does the Excess Entry Theorem Hold in a Differentiated Oligopoly?

Koichi Kagitani, Kobe City University of Foreign Studies, Takao Ohkawa, Ritsumeikan University, and Makoto Okamura, Hiroshima University - Economics ask Does the Excess Entry Theorem Hold in a Differentiated Oligopoly?

ABSTRACT: Though it is generally believed that increasing competition improves social welfare, we are able to show with a Shubik–Levitan demand function for differentiated goods that this is not always the case. Under Cournot and Bertrand competition, market entry increases the equilibrium total output and lowers the equilibrium price in the case of substitutes, but it reduces the total output and raises the price in the case of complements. In the long run, the equilibrium number of firms is excessive and the equilibrium cannot achieve even the second‐best social welfare under either type of competition, regardless of product substitutability or complementarity.

May 4, 2016 | Permalink | Comments (0)

Tuesday, May 3, 2016

The Argument for Robust Competition Supervision in Developing and Transition Countries

Frank Emmert, Indiana University Robert H. McKinney School of Law makes The Argument for Robust Competition Supervision in Developing and Transition Countries.

ABSTRACT: This is a draft of an article that will be published - after some editorial revision - in the Journal of Governance and Regulation. It discusses first the differences between market economic models, socialist or planned economies, and economies controlled by monopolies or cartels, to make the case for competition supervision. Subsequently it argues for a broad approach to competition supervision - beyond a narrow view of antitrust law. This part discusses monopoly or dominant position and the criteria to measure them. It reviews the reasons for merger control as a preventive step against monopoly or dominant position. Finally it discusses the issues related to collusion in the form of cartels and how to detect them. The third part of the paper focuses on the best ways for developing and transition countries to introduce or reinforce comprehensive competition supervision: Functioning institutions and how they have to be empowered and structured; priorities to be set; how competition oversight has to be embedded in the legal system, including court review; and why effective enforcement is so important and how it can be promoted. In an annex, there are links to some 75 countries which have newly introduced competition laws in the past 25 years and their legislative materials. Finally, there are links to another 30 countries which have substantially revised their legislative bases in the same time frame.

 

 

May 3, 2016 | Permalink | Comments (0)

Second-Generation Monopolization: Parallel Exclusion in Derivatives Markets

Felix B. Chang, University of Cincinnati College of Law argues for Second-Generation Monopolization: Parallel Exclusion in Derivatives Markets.

ABSTRACT: The reluctance of antitrust to condemn parallel exclusion permits oligopolies to be entrenched. This is because parallel exclusion — multiple-firm conduct that inhibits market entrants — cannot satisfy the current strictures of monopolization, which is understood to prohibit single-firm conduct. Yet this is an outdated way of conceptualizing monopolization. An expansion of monopolization — to cover parallel, non-collusive acts by an oligopoly — is due.

To push the law toward recognizing parallel exclusion, this Article examines concentration in the markets for financial derivatives, which are perennially dominated by the same big banks. Even after losses under first-generation antitrust claims, the dominant derivatives dealers have found ways to retain market power. This Article therefore delves into the market power dynamics that traditional theories have sidestepped.

As a technical exercise, this Article illustrates the relevance of market definition as a paradigm — particularly for illuminating blindspots in financial regulation. As a doctrinal endeavor, this Article buttresses the efforts of other scholars to frame parallel exclusion as a form of monopolization.

May 3, 2016 | Permalink | Comments (0)

Hub-and-Spoke Conspiracies

Barak Orbach, University of Arizona analyzes Hub-and-Spoke Conspiracies.

ABSTRACT: In antitrust law, a hub-and-spoke conspiracy is a cartel in which a firm (the hub) organizes collusion (the rim of the wheel or the rim) among upstream or downstream firms (the spokes) through vertical restraints. Such a conspiracy may be illegal per se under antitrust law where the horizontal agreement among the spokes (the rim) is per se unlawful, such as fixing prices or allocating territories or customers among competing spokes. Hub-and-spoke cartels have drawn considerable attention since the 1930s, long before the conspiracy gained its name. Their architecture reduces the need for coordination among the spokes by centralizing at least some of the cartel functions at the hub. As a result, evidence of agreement among the spokes is often found in vertical coordination between the hub and the spokes, not in horizontal coordination. Yet the question of how to use vertical relationships to infer horizontal conspiracy has proved confusing and deserves clarification. In this article, I explain the analysis of hub-and-spoke cartels under antitrust law, clarify the meaning of the “rim requirement” (proof of an agreement among the spokes), and advocate that courts clearly state why and how they use vertical coordination to infer a horizontal conspiracy.

May 3, 2016 | Permalink | Comments (0)

ANTITRUST AND DEMOCRACY: PERSPECTIVES FROM EFFICIENCY AND EQUITY

Tay-Cheng Ma, Chinese Culture University, Taiwan has written on ANTITRUST AND DEMOCRACY: PERSPECTIVES FROM EFFICIENCY AND EQUITY.

ABSTRACT: This article estimates a simultaneous equations model to explore the linkages between antitrust and democracy in a cross-country dataset for 109 countries from 1996 to 2011. The model is specified to decompose the total effect of antitrust on democracy into two channels: one through efficiency and the other through equity. The model's purpose is to identify whether and how antitrust affects democracy through these two variables. The model's results suggest that equity (improving income distribution) rather than efficiency (promoting economic development) serves as the main channel through which antitrust influences democracy. However, even if improving income distribution by protecting consumers and small businesses is the channel through which antitrust safeguards political democracy, its effect is very small. Therefore, the goal of improving income distribution to promote democracy should fall into the realm of taxation and transfer payments rather than antitrust.

 

May 3, 2016 | Permalink | Comments (0)

Monday, May 2, 2016

Vertical Restraints: Towards Guidance to Iron Out Perceived Enforcement Discrepancies Across Europe?

Nicolas Sahuguet, HEC Montreal and CEPR, Jacques Steenbergen, Belgian Competition Authority, CREST, ENSAE and Norwegian School of Economics, Thibaud Verge, Belgian Competition Authority, CREST, ENSAE and Norwegian School of Economics and Alexis Walckiers, Belgian Competition Authority, CREST, ENSAE and Norwegian School of Economics. ask Vertical Restraints: Towards Guidance to Iron Out Perceived Enforcement Discrepancies Across Europe?

ABSTRACT: Focus on vertical restraints has increased in Europe both at the level of NCAs and the Commission, but some commentators have argued that competition authorities have reached different substantive and procedural outcomes.

Guidance on vertical agreements is necessary not only because most vertical agreements bring advantages and disadvantages to consumers but also because clauses that are most frequently used vary over time and because minor contractual variations may have significant effects on the competitive outcome.

The sector inquiry into cross-border e-commerce is an opportunity for the Commission to set out its views about a number enforcement discrepancies across Europe.

May 2, 2016 | Permalink | Comments (0)

Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms

David S. Evans Global Economics Group; University of Chicago Law School; University College London addresses Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms.

ABSTRACT: Market power on each side of a multisided platform, whether in the form of increasing prices or decreasing quality, is constrained by the risk of losing sales on the other sides. That tends to weaken market power on each side and encourages platforms to keep prices lower and quality higher than they would absent these feedback effects. In some cases the nature of the business model, and competition, result in the platform allowing one type of customers to participate in the platform for free or even to subsidize their participation. Non-price methods of attracting customers are especially important in this case, particularly when the business model adopted by the industry makes it difficult for platforms to move from free participation. To provide a reliable assessment of competitive constraints, market power analysis must consider the interdependencies in demand by the participants on the platform as well as have heightened focus on non-price competition when the participation for one group is free. Market shares should be used cautiously in assessing market power for multi-sided platforms, especially when they reflect only one side of the platform, and therefore do not account for the interdependent customer groups, or concern a free platform side where there is no monetary measure of value. Finally, dynamic competition makes the analysis of market power complex because it results in feature competition, and potentially drastic innovation, on one side of a platform that has feedback effects on the other side of the platform. The courts and authorities have recognized these points in Qihoo 360 v. Tencent, Cartes Bancaires v. European Commission, the Facebook/WhatsApp merger, and the Microsoft/Skype merger. These principals should become part of the standard analysis of multi-sided platforms by courts and competition authorities globally. These concerns are illustrated in the context of multi-sided platforms that offer online services where free services and dynamic competition are especially important.

 

 

May 2, 2016 | Permalink | Comments (0)

Competition in Lending and Credit Ratings

Javed Ahmed, Board of Governors of the Federal Reserve System explores Competition in Lending and Credit Ratings.

ABSTRACT: This article relates corporate credit rating quality to competition in lending between the public bond market and banks. In the model, the monopolistic rating agency's choice of price and quality leads to an endogenous threshold separating low-quality bank-dependent issuers from higher-quality issuers with access to public debt. In a baseline equilibrium with expensive bank lending, this separation across debt market segments provides information, but equilibrium ratings are uninformative. A positive shock to private (bank) relative to public lending supply allows banks to compete with public lenders for high-quality issuers, which threatens rating agency profits, and informative ratings result to prevent defection of high-quality borrowers to banks. This prediction is tested by analyzing two events that increased the relative supply of private vs. public lending sharply: legislation in 1994 that reduced barriers to interstate bank lending and the temporary shutdown of the high-yield bond market in 1989. After each event, the quality of ratings (based on their impact on bond yield spreads) increased for affected issuers. The analysis suggests that strategic behavior by the rating agency in an issuer-pays setting dampens the influence of macroeconomic shocks, and explains the use of informative unsolicited credit ratings to prevent unrated bond issues, particularly during good times. Additionally, the controversial issuer-pays model of ratings leads to more efficient outcomes than investor-pays alternatives.

 

 

May 2, 2016 | Permalink | Comments (0)

Online Platforms, Competition Rules and Consumer Protection in Travel Industry

Margherita Colangelo, University of Rome III - Department of Law and Vincenzo Zeno-Zencovich, University of Rome III - Department of Law examine Online Platforms, Competition Rules and Consumer Protection in Travel Industry.

ABSTRACT: The article analyses the growing role of on-line intermediaries in travel and accommodation services and the concerns that have arisen under competition law. In particular the clauses which tie service providers to the intermediaries are discussed in the light of several cases brought in front of national competition authorities for alleged violation of Article 101 TFEU. The article then examines the uncertain legal relationship between intermediaries and the final client in order to establish if consumer protection laws should and could be extended to such intermediaries and if they may be considered liable for unfair commercial practices.

 

 

May 2, 2016 | Permalink | Comments (0)

Saturday, April 30, 2016

Most Downloaded SSRN Antitrust Law Professors (Full time) in the past year

This list includes those who write (even occasionally) in antitrust even if their primary focus in in a different area of the top 300 most downloaded on SSRN:

Name                            Institution            Downloads 

Mark Lemley           Stanford                     17,568
Herb Hovenkamp  Iowa                             6,914
Tim Wu                    Columbia                    5,919
Josh Wright            George Mason            5,327
Nicolas Petit            Liege                           4,231
Christopher Yoo     Penn                           4,148
Maurice Stucke       Tennessee                  4,032
JamesChen              Michigan State          3,994
Daniel Sokol           Florida                        3,939
Einer Elhauge           Harvard                     3,866
Jorge Contreras       Utah                            3,067
Robin Feldman         Hastings                    3,030
William Landes         Chicago                     2,597
Doug Ginsburg          George Mason       2,537
David Hyman             Illinois                      2,246
Barak Orbach             Arizona                    2,150
Robert Lande             Baltimore               2,115
Spencer Waller         Chicago Loyola     2,098
Kathryn Spier            Harvard                   2,074
Scott Hemphill          NYU                          1,954
Matthew Sag               Chicago Loyola    1,727

Part time faculty also rank high

David Evan                Chicago and UCL                       9,852
Damien Geradin,     George Mason and Tilburg       8,208
Wouter Wils             Kings College                              6,046
Richard Posner        Chicago                                          2,400

 

Note: Names in bold are among the 100 most downloaded of all law professors globally in the last year. 

April 30, 2016 | Permalink | Comments (0)

Everyone Wants to Get Tough on Antitrust Policy, but Not Really

Chris Sagers, Cleveland State Law has an op-ed in the NY Times on how Everyone Wants to Get Tough on Antitrust Policy, but Not Really.  He notes that "[A]dministrations of both parties for some decades have painted us into a corner. Markets are now so concentrated and ripe for abuse, and the political will for enforcement so lacking, that our antitrust laws seem increasingly hopeless."

April 30, 2016 | Permalink | Comments (0)

Friday, April 29, 2016

simply inTAXicating - Turf War: Intellectual Property Vs Competition Law (India)

My friend Yohesh Pai of National Law University Delhi discusses FRAND issues in India on the show simply inTAXicating - Turf War: Intellectual Property Vs Competition Law.

 

April 29, 2016 | Permalink | Comments (0)

A Commentary on Article 101 TFEU

Rick Busscher, University of Groningen - Faculty of Law, Martin Herz, University of Groningen, and Hans H. B. Vedder, University of Groningen offer A Commentary on Article 101 TFEU.

ABSTRACT: Article 101 TFEU is one of the most prominent Treaty provisions on competition. It concerns hard core restrictions of competition like cartels as much as efficiency enhancing agreements. Moreover, competition is a primarily economic phenomenon, that can be understood, measured and appraised in many different ways. This means that a fundamental challenge in the interpretation of Article 101 follows from the necessity to provide adequate legal certainty and low compliance costs to undercover cartels as well as innocent cooperation agreements. This distinction between these two categories of cooperation coincides largely with the structure of Article 101 that distinguishes between agreements that have the object of restricting competition and those that have this effect.

This bifurcated approach and its effects on the legal and economic appraisal involved will be central to this commentary.

In this paper we will first discuss the general framework of Article 101 and the preliminaries of its application. After that the first and third paragraph of Article 101 TFEU will be discussed on the basis of the Court’s interpretation as well as the decisional practice of and guidance by the Commission. Finally, Article 101(2) will be discussed. In doing so, we will also engage in a comparison with US antitrust law, given that many of the issues surrounding Article 101 can be found in other jurisdictions and comparative approach may provide valuable insights.

April 29, 2016 | Permalink | Comments (0)

ICC publishes Leniency Manual and the Proposal for a One-Stop-Shop Mechanism for Leniency Markers

he ICC Task Force on Cartels and Leniency has recently issued two publications on leniency and leniency markers – the ICC Leniency Manual and the Proposal for a One-Stop-Shop Mechanism for Leniency Markers – illustrating its engagement in the discussion on current cartels and leniency issues worldwide.

ICC Leniency Manual / ICC Proposal to ICN for a one-stop-shop for leniency markers

Leniency Programmes, differing very much in their design from country-to-country, have become a crucial element in the detection and ending of cartels. There is an increasingly strong demand to align their key features in order to improve their implementation. While they have expanded globally, the question of alleviating multiple filings has become a key discussion point, as these multiple files are a major impediment to getting cartel participants to come forward.

This is why the ICC Task Force has put together a proposal to create a one-stop-shop for leniency markers, which aims to facilitate international cooperation among competent authorities and to increase the legal safety of applicants for leniency; and an ICC Leniency Manual, which provides a factual and visual overview of a number of countries' leniency programmes.

Both publications represent first steps towards a harmonization / convergence of leniency regimes.

The ICC Task Force on Cartels and Leniency is co-chaired by Luciano Di Via, Partner at Clifford Chance Italy and Marcin Trepka, Co-Head of the Antitrust, Competition and Trade Regulation practice at K&L Gates Poland.

For more information about the ICC Commission on Competition and its Task Forces:
http://www.iccwbo.org/about-icc/policy-commissions/competition/

ICC's Contributions

  • application/pdfICC Proposal to ICN for a one-stop-shop for leniency markers [0M]

    The issues paper on the creation of a one-stop-shop for leniency markers puts forward a proposal to create a one-stop-shop marker system to provide a mechanism for applicants to seek leniency with a marker application before a sole agency. This measure will enable a successful applicant to reserve its place in the queue in all jurisdictions participating in the system by applying for the marker in only one of them. The ICC proposal strives to enhance inter-agency cooperation on the issue of leniency programmes.

  • application/pdfICC Leniency Manual_Launch Edition [0M]

    The ICC Leniency Manual : Launch Edition is the first release of the ICC Task Force on Cartels and Leniency and the third publication "designed by business for business" of the ICC Commission on Competition. Intended as a living document, the Manual aims to demystify the leniency application process and assist business with filing local or multi-jurisdictional applications. The leniency practices gathered in the launch edition of the Manual span over 20 countries. It is being presented at the Roundtable to benefit from consultation during the ICN. The First Edition will be released in June 2016.

April 29, 2016 | Permalink | Comments (0)

Competition Authorities: Prosecutorial/Non-Prosecutorial Systems and the Fight Against Cartels

Marianela Lopez-Galdos, George Washington University-Competition Law Center and Gargi Yadav describe Competition Authorities: Prosecutorial/Non-Prosecutorial Systems and the Fight Against Cartels.

ABSTRACT: In recent years, considerable attention has been paid to the structures of different governmental institutions and the impact of such institutional structure on the outcomes and efficacy of goal attainment. At the same time, there is a global trend to impose criminal sanctions (i.e. imprisonment, fines, seizure of personal property, etc.) on people found to be engaging in cartelization. This paper focuses on institutional design and examines its impact regulation of cartels by way of criminalization of cartelists. The paper summarizes and describes what the main institutional characteristics of competition authorities are and unveils the international trends with regards to decision-making functions and the criminalization of cartelist. The paper then details the interaction and implications of decision-making function and criminalization of the cartels.

 

 

April 29, 2016 | Permalink | Comments (0)

Thursday, April 28, 2016

Why vertical restraints? New evidence from a business survey

Oxera produced a report for the CMA on Why vertical restraints? New evidence from a business survey.  The report suggests pro-competitive benefits to online vertical restraints.

April 28, 2016 | Permalink | Comments (0)

Concurrences Award Winning Articles (and Video reactions) now online

See here.

April 28, 2016 | Permalink | Comments (0)

Patents and Innovation in Economic History

Petra Moser has written on Patents and Innovation in Economic History.

ABSTRACT: A strong tradition in economic history, which primarily relies on qualitative evidence and statistical correlations, has emphasized the importance of patents as a primary driver of innovation. Recent improvements in empirical methodology – through the creation of new data sets and advances in identification – have produced research that challenges this traditional view. The findings of this literature provide a more nuanced view of the effects of intellectual property, and suggest that when patent rights have been too broad or strong, they have actually discouraged innovation. This paper summarizes the major results from this research and presents open questions.

April 28, 2016 | Permalink | Comments (0)