Wednesday, November 13, 2013
American Antitrust Institute's 2013 Antitrust Enforcement Awards Finalists Announced
Klaus Gugler, Vienna University of Economics and Business and Florian Szucs, DIW Berlin, discuss Merger Externalities in Oligopolistic Markets.
ABSTRACT: We quantify externalities on profitability and market shares of competing firms in oligopolistic markets through the transition from an n to an n - 1 player oligopoly after a merger. Competitors are identified via the European Commission's market investigations and our methodology allows us to distinguish the externality due to the change in market structure from the merger effect. We obtain results consistent with the predictions of standard oligopoly models: rivals expand their output and increase their profits, whereas merging firms are negatively affected. This indicates that on average the market power effects of large mergers outweigh the efficiencies.
Sjaak Hurkens, Institute for Economic Analysis (CSIC) and Barcelona GSE, Doh-Shin Jeon, Toulouse School of Economics and Domenico Menicucci, Universita degli Studi di Firenze have posted on Dominance and Competitive Bundling.
ABSTRACT: We study bundling by a dominant multi-product firm facing competition from a rival multi-product rm. Compared to competition under independent pricing, competition under pure bundling reduces (increases) each firm's profit for low (high) levels of dominance, while for intermediate levels of dominance, it increases the dominant firm's prot but reduces the rival's profit. The latter result provides a justication for the use of contractual bundling to build entry barrier. When we allow for mixed bundling, we nd a threshold level of dominance above which the unique outcome is the one under pure bundling.
Jon Baker (American) is Channeling and Contending with Bill Kovacic.
ABSTRACT: This essay was written for a festschrift in honor of Professor William E. Kovacic. It discusses Prof. Kovacic’s work on the design of antitrust enforcement institutions, the interplay between the Chicago and Harvard schools in the transformation of antitrust that took place a generation ago, and the extent to which antitrust norms exhibit continuity over time. It will published
in "William E. Kovacic - Liber Amicorum: An Antitrust Tribute - Vol. II," which is scheduled to be released in February 2014 by the Institute of Competition Law.
Dirk Burghardt (St. Gallen) explores The Impact of Trade Policy on Industry Concentration in Switzerland.
ABSTRACT: This paper studies the impact of trade policy on industry concentration. Based on the Swiss Business Census, concentration levels for all four-digit manufacturing industries in Switzerland are calculated. Then the effect of a bilateral reduction in technical barriers to trade with the European Union is estimated. Adopting a difference-in-differences approach, it turns out that concentration in affected industries with low R&D intensity increased significantly following the policy change. This supports the notion that fewer firms are able to survive as the toughness of price competition increases. The effect on industries with high R&D intensity is found to be insignificant.
Tuesday, November 12, 2013
Tarcisio da Graca (Universite du Quebec (Outaouais)) and Robert Masson (Cornell University) argue Flawed Economic Models have Misled RPM Policy in the US, Canada and the EU.
ABSTRACT: We show that some influential literature supporting the RPM efficiency view is flawed when it relies on the presale service justification for RPM. In particular we consider presale services that do not modify in use value of a good, what we term sterile services. We debunk what we call the Bork proposition, using Bork¹s own assumptions except one. Specifically Bork does not consider the fact that value in use may differ from prepurchase perceived value in use. We apply the value-in-use standard which exposes the loss in consumer surplus in Bork's model and reveals that even Bork¹s dissenters significantly underestimate their calculated losses to inframarginal consumers When consumer surplus is the antitrust/competition policy standard, our results suggest that a rule of reason regime in which competition/antitrust authorities or consumer protection agencies bear the burden of proof is inferior to a per se regime.
Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics, China) and Sougata Poddar (Department of Economics, Faculty of Business and Law, Auckland University of Technology) examine Patent Licensing in Spatial Models.
ABSTRACT: We show that a two-part tariff licensing contract is always optimal to the insider patentee in spatial models irrespective of the size of the innovation or any pre-innovation cost asymmetries. The result provides a simple justification of the prevalence of two-part tariff licensing contracts in industries.
Competition Regulation, Competition and Competitiveness: Implications for Indian Businesses, 20th November, 2013 New Delhi
IIM Kashipur Organizes An International Conference on
Wednesday, 20th November, 2013
Hotel Eros Hilton, Nehru Place, New Delhi 110019, India
Indian Institute of Management (IIM) Kashipur, India - a premium institute of management education set up by the Government of India - is pleased to announce that the international conference on Competition Regulation, Competition and Competitiveness: Implications for Indian Businesses will be held at Hotel Eros Hitlon, Nehru Place, New Delhi, India on November 20, 2013.
The conference is organized by the Centre of Excellence on Competitiveness (“CoE”), IIM Kashipur, India in association with Corporate Knowledge Foundation and AZB Partners. The set-up of CoE was announced by Hon’ble President of India, Dr. Pranab Mukherjee, during the first Convocation at IIM Kashipur in March 2013.
The Conference is being organized in association with Corporate Knowledge Foundation(CKF) and AZB Partners, India The objective of the conference is to build and provide a global networking and interaction platform to understand and examine recent developments and prospects of competition regulation to influence corporate strategy and operating practices of businesses and identify the actionable agenda for companies, market participants and policy makers. The conference is expected to be attended by company CEOs, top business executives, senior policy makers, eminent lawyers, economists, researchers, think tanks and thought leaders.
For more details see here.
Dr. Mudit Kulshreshtha (firstname.lastname@example.org) Mobile +91 8006900025
Dr. Barnali Nag (email@example.com) Mobile + 91 839380025
Indian Institute of Management Kashipur, Kashipur, Udham Singh Nagar, Uttarakhand 244713, INDIA
For any queries please write to: Center of Excellence - CoC@iimkashipur.ac.in
Gregory Pavlov (University of Western Ontario) discusses Correlated Equilibria and Communication Equilibria in All-pay Auctions.
ABSTRACT: We study cheap-talk pre-play communication in the static all-pay auctions. For the case of two bidders, all correlated and communication equilibria are payoff equivalent to the Nash equilibrium if there is no reserve price, or if it is commonly known that one bidder has a strictly higher value. Hence, in such environments the Nash equilibrium predictions are robust to preplay communication between the bidders. If there are three or more symmetric bidders, or two symmetric bidders and a positive reserve price, then there may exist correlated and communication equilibria such that the bidders’ payoffs are higher than in the Nash equilibrium. In these cases, pre-play cheap talk may affect the outcomes of the game, since the bidders have an incentive to coordinate on such equilibria.
Bruno Larue, Mohamed Jeddy and Sebastien Pouliot provide thoughts On the Number of Bidders and Auction Performance: when More Means Less.
ABSTRACT: We first show in the context of sequential multi-unit auctions under complete information that a seller’s revenue may increase or decrease as the number of buyers increases, even when the additional bidders win an object. We use data from the Quebec daily hog auction to empirically analyze the effect of invitations extended to bidders from Ontario. Our estimation accounts for the endogenous timing of these rare invitations, but we nevertheless uncover a negative “invitation” effect. We attribute this anti-competitive effect to the fact that the addition of bidders increases competition in late rounds, but not necessarily in early ones.
Monday, November 11, 2013
Faculty of Economics and Business
University of Amsterdam
1018 WB Amsterdam
Department of Economics
West Lafayette, IN 47906
The Art of Persuasion: Competition Advocacy at the Intersection of Antitrust and Intellectual Property
Lydia Cheung (Department of Economics, Faculty of Business and Law, Auckland University of Technology) discusses The Upward Pricing Pressure Test for Merger Analysis: An Empirical Examination.
ABSTRACT: The Upward Pricing Pressure (UPP) test developed by antitrust economists Joseph Farrell and Carl Shapiro marks a new era in antitrust and provides an alternative to the traditional concentration-based tests in merger analysis. In addition to being free of market definition, the UPP's appeal lies in its ease of use: one simple formula indicates whether a merging firm has an incentive to increase prices postmerger. This paper first establishes the theoretical relationship between the UPP and the standard structural merger simulation, namely, that the UPP is a singleproduct merger simulation" that ignores the re-equilibration of all other endogenous variables except that product's own price. To assess the consequence of this simplification, I compute "true" UPP values for a cross-section of airline markets using structurally estimated price elasticities, and confront them with the gold standard" of a merger simulation. I examine! the predictive accuracy of both the sign and magnitude of the UPP. I find that it gives wrong sign predictions to an average 10% of the observations, and its value has an average correlation of 0:92 with the structurally simulated price changes. However, since this test is meant to bypass a complicated demand estimation, I then use the example of a simple logit demand to illustrate the consequence of using inaccurate demand-side inputs in the UPP: the test will give a wrong sign prediction over a much larger range of cost synergies. Lastly, I discuss the pass-through conditions for Farrell and Shapiro's proposition, demonstrate empirically that they are not innocuous, and show that their violation can lead to false positive results (type I errors) in the UPP.
Sae Ran Koh (Yonsei University) and Jinook Jeong (Yonsei University) discuss LENIENCY PROGRAM IN KOREA AND ITS EFFECTIVENESS.
ABSTRACT: In this article, we examine the determinants that induce cartel members to apply for leniency in the case of Korea, using data on detected cartel cases covered from 2005 to April 2012. Factors such as fines before deduction, past years' total fines, total market share of participating firms, number of firms involved, and more are used to test which variables increase the probability that a firm will apply for leniency. We also analyze whether leniency-invoked cases have higher fines before deduction, and whether those cases account for shorter durations of investigation, using the simultaneous equations model with endogenous switching. Our main findings show that cases with a small number of cartelists during the years 2008 and 2009 indicate a higher probability of leniency applications. In addition, fines before leniency were shown to be larger and the lengths of investigation shorter for leniency-applied cases from the estimated sample selection model.
A Response to Chief Justice Roberts: Why Antitrust Must Play a Role in the Analysis of Drug Patent Settlements
Michael A. Carrier, Rutgers University School of Law - Camden offers A Response to Chief Justice Roberts: Why Antitrust Must Play a Role in the Analysis of Drug Patent Settlements.
ABSTRACT: The Supreme Court’s decision in FTC v. Actavis has justly received widespread attention for its antitrust analysis of settlements by which brand-name drug companies pay generics to delay entering the market. Much of the attention has focused on the application of the Court’s standard and the logistics of applying its rule-of-reason analysis to “reverse payment” settlements.
One overlooked issue, however, has been the position of Chief Justice Roberts in dissent that the antitrust analysis of these settlements must assume that the patent at issue is invalid or not infringed, since this is a problem of patent, not antitrust, law.
This symposium essay critiques Roberts’ position. It explains that this position (1) shortchanges patent law, which includes a policy goal of testing invalid patents to make sure they do not block competition; (2) downplays antitrust law’s role in monitoring behavior that can resemble market division between potential competitors; (3) and ignores the Hatch-Waxman Act’s encouragement of challenges to patents that are invalid and not infringed. In a nutshell, the appropriate antitrust treatment of reverse-payment settlements is more nuanced than the version presented by Roberts.
Robert M. Feinberg, American University - Department of Economics, and Thomas A. Husted, American University - Department of Economics, and Florian Szucs, German Institute for Economic Research (DIW Berlin) ask Does State Antitrust Enforcement Drive Establishment Exit?
ABSTRACT: Previous work has shown that state-level antitrust enforcement activity may have impacts on entry and relocation behavior by U.S. firms. Significant state-level antitrust activity may be an indicator of a perceived adverse business environment and it is found to deter establishment entry, particularly for larger firms in the retail and wholesale sectors. An obvious question is whether establishment exit is affected in a symmetric way, or whether sunk costs of market entry may lead to a smaller impact in terms of the exit decisions. We first combine US Census establishment exit panel data with data for 1998-2006 on US state-level antitrust activity and other measures of state-level business activities that may affect establishment exit. We also consider establishment exit across different broad industry types -- manufacturing, retail and wholesale -- and several firm size categories. Local business cycle factors seem to be the primary driver of exit, though there is some evidence of political and antitrust determinants as well. In another approach, we examine firm-level exit decisions and the extent to which these respond to state antitrust enforcement, with some indication of antitrust enforcement effects here as well, especially in the wholesale and retail sectors.
Sunday, November 10, 2013
As with politics, competition law institutional design is local. The institutional structure of a particular system reflects underlying political and economic structures of organization. These may shift over time due to global norms and domestic changes.
Capturing the complexity of institutional changes is not easy. Eleanor Fox and Michael Trebilcock have filled in a gap in the antitrust/competition law and policy literature by providing the first ever comparative book on institutional structures of competition law with their edited book The Design of Competition Law Institutions: Global Norms, Local Choices. In doing so, they also have done an excellent job in bringing together a number of excellent analyses and integrating them through the use of a common template. As a result, the book allows the reader to better analyze the complexity and richness of different competition law systems.
Eleanor Fox (NYU) and Michael Trebilcock (Toronto) are path-breaking luminaries in comparative and international antitrust. As ambassadors of the field, they have probably trained and kept up with more students as academics and practitioners in the area of antitrust than anyone else in the western hemisphere and arguably the world. In doing so, they have shaped some of the very institutional structures studies in this book.
Some chapters stand out for their rigor and clear understanding. The US chapter by First, Fox and Hemley is an excellent, concise and clearly written overview of the United States system. If I were teaching in a non-US jurisdiction and wanted a something on the US system, I would assign this chapter as required reading. The authors have done a good job in integrating legal analysis and academic discussion on the changing dynamics of US institutions. Likewise, the Iacobucci and Trebilcock chapter on Canada does a excellent job.
Of course, we expect an excellent job from best in class writers from the most important jurisdictions. One strength of the book is that Trebilcock and Fox brought in a new generation to author or co-author many of the chapters. Simon Peart did a fine job with the Australia and New Zealand chapter - why is this guy not a full time academic? Simon, are you reading this? You can't get to a full time teaching job fast enough. One thing that Simon does well is to compare and contrast the Australian and New Zealand systems with each other. He also teases out a number of complexities and limitations of the two systems.
I will focus on contributions on two other Pacific Rim chapters. The first is the Chilean contribution by Aguero and Montt, each professors at the University of Chile. Chile has undergone a number of important structural transformations. These are analyzed well in the Chilean contribution. Whereas the antitrust system seemed not to work so well before, as a result of institutional design changes, it seems to work better now. However, as with any set of changes, the limits of these changes along both procedural and substantive lines will be tested in coming years.
Wang Xiaoye is a transformation figure in Chinese competition law. In various fora I have even called her (with great respect and admiration) the "mother" of the Chinese Anti-Monopoly Law. She co-authored her chapter with Jessica Su. The Chinese antitrust reality is a complex and rapidly changing one. However, this chapter has done an excellent job in capturing the institutional complexities that underlies Chinese competition policy. Wang and Su highlight a number of significant problems with the Chinese competition law system. My own sense is that given what they have written, the three agency model of enforcement is not sustainable.
If I have a complaint about the book is that it does too little. I would have liked to see chapters on Brazil and India. However, this is a minor complaint. The book is well done and a valuable addition to any academic library.
Ana Paula Martinez & Mariana Tavares de Araujo (Levy & Salomao Advogados) describe Resale Price Maintenance in Brazil: A Moving Target.
ABSTRACT: Resale price maintenance is one of the current hot topics in the antitrust community, not only in the Europe and China, but also in Brazil. Brazil's antitrust authority issued an unprecedented decision in February 2013—departing from previous case law—when, by majority, CADE's Commissioners took the view that RPM shall be deemed to be illegal unless the defendant is able to prove efficiencies. While fixed-price RPM and minimum-price RPM agreements are considered to be hardcore restrictions by agencies like the European Commission, until February 2013 CADE had taken the view that such practices were not presumed to be illegal, reviewing them under the "rule of reason".
This article provides an overview of what is the law and practice regarding abuse of dominance cases in Brazil and specifically discusses whether the current approach to RPMs is expected to be followed by CADE in the future.
Saturday, November 9, 2013
Heather Irvine (Norton Rose) asks Behind the Curve? The Treatment of Minimum Resale Price Maintenance in South Africa.
ABSTRACT: The South African Competition Act imposes an outright prohibition on minimum
resale price maintenance, and even a first time offense is punishable by an administrative penalty of up to 10 percent of turnover. Since the inception of the Act in 1999, the South African competition authorities have collected more than R49.6 million in fines from companies for imposing minimum resale prices.