Tuesday, April 12, 2016
A Departure from a Formalistic Approach in the Assessment of Restrictive Vertical Agreements in Favour of a More Economics-Based Approach? Case Comment to the Supreme Court Judgment of 15 May 2014 (Ref. No. III SK 44/13)
Małgorzata Sieradzka, Lazarski University offers A Departure from a Formalistic Approach in the Assessment of Restrictive Vertical Agreements in Favour of a More Economics-Based Approach? Case Comment to the Supreme Court Judgment of 15 May 2014 (Ref. No. III SK 44/13).
ABSTRACT: The discussed judgment of the Supreme Court is in line with its other jurisprudence with respect to the classification of price agreements as practices restricting competition under Article 6(1)(1) of the Competition and Consumer Protection Act 1 of 16 February 2007 (hereafter: Competition Act 2007). Despite the firm stance taken on the assessment of price agreements by the UOKiK President, the Supreme Court once again emphasizes the necessity for an economics-based approach 2. In the opinion of the Supreme Court, not every vertical price-fixing agreement results in a threat to the public interest. A departure from a rigorous application of the ban on competition restricting practices (Article 6(1)(1) of Competition Act 2007) to all types of vertical agreements has an impact on the application of legal provisions governing the imposition of financial penalties. Considering the optional nature of fines, the question arises about their purpose in cases where the public interest has not been jeopardized.
Philip Lowe (CMA), Mel Marquis (EUI), and Giorgio Monti (EUI) have produced European Competition Law Annual 2013.
ABSTRACT: This volume contains papers presented at the 18th Annual EU Competition Law and Policy Workshop. The papers examine means of balancing effective (public) competition law enforcement and the requirements of legitimate and accountable exercise of public authority. The authors address the design and performance of various enforcement tools at European and national levels, including sanctions and remedies but also distinctive instruments under Regulation 1/2003 (eg commitment procedures) and under the Treaty on the Functioning of the European Union (Article 106(3) when used as a basis for infringement procedures). From the perspective of legitimacy, reflections focus on the implications of fundamental rights standards and general principles of law for the EU’s complex and quasi-federal enforcement architecture. Issues that may sometimes escape judicial scrutiny are also discussed, such as how agencies prioritise their activities, and how investigation responsibilities are distributed within the European Competition Network. Effectiveness and legitimacy are then considered in the context of public enforcement cooperation beyond the EU, where international organisations, regional cooperation and a range of formal and informal modes of governance prevail.
Competition Laws of the Russian Federation: Introduction to the Legislative Framework Governing Market Protection
Trygve Ben Holland, University for Public Administration offers Competition Laws of the Russian Federation: Introduction to the Legislative Framework Governing Market Protection.
ABSTRACT: The competition laws of the Russian Federation have been re-drafted and amended several times. Law No 135-FZ of 2006 forms the basis of the modern laws governing competition issues in the Russian Federation. Present essay introduced to the rules on market protection at all levels (anti-trust, dominant market position, state aid, public procurement, and inter.institutional provisions).
Erik Lundin, Research Institute of Industrial Economics (IFN); Stockholm School of Economics provides Market Power and Joint Ownership: Evidence from Nuclear Plants in Sweden.
ABSTRACT: This paper presents an empirical test of the anticompetitive effects of joint ownership, by examining the operation of three nuclear plants in Sweden. Since maintenance is the main conduit explaining the variation in output, I formulate a model of intertemporal choice in which firms choose how to allocate a given amount of maintenance within each year. Using data on production and bidding curves on the day-ahead market, I test the model against data given three behavioral assumptions: Unilateral profit maximization; joint profit maximization; and a social planner. Modeling for joint profit maximization best matches data, indicating that joint ownership has facilitated coordination of maintenance decisions. Terminating the joint ownership and modeling for unilateral profit maximization would lead to a 5 percent decrease in prices and a 6 percent decrease in system production costs. I identify positive supply shocks in the form of inflow to the hydro power reservoirs as important determinants of the incentives to exercise market power. Therefore, the mechanisms discussed in this paper should be of relevance also in other electricity markets where the share of intermittent production is increasing. As a motivation for the structural exercise, I use a difference-in-differences estimator to identify a shift in the allocation of maintenance towards the winter season (when demand and prices are peaking) at the time of the introduction of the joint ownership. This is in line with the results from the structural model, as the ability to influence the price is also higher during the winter season.
Monday, April 11, 2016
Leemore Dafny (Northwestern), Kate Ho (Columbia), Robin S. Lee (Harvard) examine The Price Effects of Cross-Market Hospital Mergers.
ABSTRACT: So-called "horizontal mergers" of hospitals in the same geographic market have garnered significant attention from researchers and regulators alike. However, much of the recent hospital industry consolidation spans multiple markets serving distinct patient populations. We show that such combinations can reduce competition among the merging providers for inclusion in insurers' networks of providers, leading to higher prices. The result derives from the presence of "common customers” (i.e. purchasers of insurance plans) who value both providers, as well as (one or more) "common insurers" with which price and network status is negotiated. We test our theoretical predictions using two samples of cross-market hospital mergers, focusing exclusively on hospitals that are bystanders rather than the likely drivers of the transactions in order to address concerns about the endogeneity of merger activity. We find that hospitals gaining system members in-state (but not in the same geographic market) experience price increases of 6-10 percent relative to control hospitals, while hospitals gaining system members out-of-state exhibit no statistically significant changes in price. The former group are likelier to share common customers and insurers. This effect remains sizeable even when the merging parties are located further than 90 minutes apart. The results suggest that cross-market, within-state hospital mergers appear to increase hospital systems' leverage when bargaining with insurers.
Monolithic Copyright, Market Power and Market Definition - The Impact of Competition Law on the Licensing of Copyrighted Content
Martin Senftleben, VU University Amsterdam - Faculty of Law examines Monolithic Copyright, Market Power and Market Definition - The Impact of Competition Law on the Licensing of Copyrighted Content.
ABSTRACT: A monolith can be described as a geological feature “consisting of a single massive stone or rock, such as some mountains.” In architecture, it may refer to “a single large piece of rock placed as, or within, a monument or building.” A literary or artistic work may constitute a monolith in its own right. As a single large piece of information, it may stand out from works of the same category. Similarly, collections of works may become so dense that they resemble a single massive information monolith. In both cases, the market power resulting from copyright ownership may be considerable. Hence, the question arises whether competition law can serve as a vehicle to ensure reasonable access conditions and prevent an artificial supply shortfall.
The legendary Herb Hovenkamp gave a talk on Friday at the University of Florida on antitrust and innovation for our University of Florida Law Review's Dunwoody lecture. This link has his entire presentation.
Hovenkamp said that the European Commission's potential remedy against Google was misguided and would turn Google into a public utility. He said that high market share should not be confused with market power because switching costs are low. On DOJ's e-books case against Apple, Hovenkamp argued that the case was correctly decided as a matter of law and policy.
Jun Zhou Zhejiang, Wanli University; Tilburg Law and Economics Center (TILEC); Bruegel explores The Dynamics of Leniency Application and Cartel Enforcement Spillovers.
ABSTRACT: We study the timing of leniency applications using a novel application of multi-spell discrete-time survival analysis for a sample of cartels that were prosecuted by the European Commission (EC) between 1996 and 2014. The start of an EC investigation does not affect the rate at which conspirators apply for leniency in the market investigated but increases the rate of application in separate markets in which a conspirator in the investigated market also engaged in collusion. Our results shed light on enforcement efforts against cartels and other forms of conspiracy.
Rutger J.G. Claassen, Utrecht University Department of Philosophy and Anna Gerbrandy, Europa Institute Utrecht University School of Law are Rethinking European Competition Law: From a Consumer Welfare to a Capability Approach.
ABSTRACT: European competition law is predominantly focused on maximizing consumer welfare. This overarching purpose (which is supported by economic theory) leaves little place for safeguarding non-economic values, such as sustainability. This makes it difficult to allow cooperation between companies to contribute to such non-economic goals. In this article we explore whether it is possible to establish a different normative framework, in which such goals can be taken into account and can be balanced against the economic goal of consumer welfare. To answer this question, we take four steps. First, we discuss current EU competition law and the difficulty of fitting non-economic goals into the dominant interpretation of that law. Second, we propose a different normative framework, based on the capability approach advanced by philosopher Martha Nussbaum and economist Amartya Sen. Third, we argue that there are good principled reasons to incorporate non-economic goals into competition law. Fourth, we apply both the capability approach and the consumer welfare approach to three (illustrative) cases in which non-economic goals are at stake. Overall, we argue that the capability framework, although not without difficulties of its own, may provide a more legitimate theory for the interpretation of European competition law.
Saturday, April 9, 2016
Every year is a great year for the Spring Meeting. Because of teaching commitments, I had to leave Wednesday afternoon. My favorite conversation at the JW was with Irv Scher (who has moved plaintiff side to Hausfeld) on distributional restraints. The Concurrences dinner was fun on Tuesday and I congratulate the winners there and at the GCR awards. I moderated a panel Wednesday morning on Latin American enforcement with enforcers from Argentina, Brazil, Chile and Mexico. It was wonderful to welcome back Esteban Greco and the CNDC to the global antitrust community (perhaps the most missed Argentine performance since the gap between 1997 and 2007 when Soda Stereo broke up and didn't perform together). On Tuesday at Wilson Sonsini, Brent Kendall of the Wall Street Journal spoke about what makes antitrust interesting to a general business readership. I regret all of the amazing programs I did not see.
Friday, April 8, 2016
Luke Froeb, Vanderbilt University - Strategy and Business Economics, Vlad Mares, INSEAD, and Steven Tschantz, Vanderbilt University - Department of Mathematics theorize Horizontal Mergers in Optimal Auctions.
ABSTRACT: In this paper we study the impact of mergers among bidders when the auctioneer can respond optimally to changes in the market concentration. We find that the auctioneer's ability to exercise such "buyer power" limits the ability of the merged bidders to exercise "market power." In particular, while mergers always harm the auctioneer, the magnitude of the harm is much smaller than in an open auction benchmark. Bidder concentration matters but is less important than the auctioneer's reservation utility. We also find that mergers benefit non-merging bidders, and will become unprofitable when the potential surplus is small enough. Welfare effects are complex as they depend both on the profile of the merging parties as well as on the auctioneer's reservation utility.
King College: EU Competition Law: Current Issues in a Global Context Hilton Brussels Grand Place 20 May 2016
The Objectives of Competition Law and the Effective Conduct of the Infringement Proceedings: Judgments of the Court of Bosnia and Herzegovina in BH Telecom and Telekomunikacije RS. Case Comment to the Judgments of the Court of Bosnia and Herzegovina No. S
Alexandr Svetlicinii, University of Macau - Faculty of Law analyzes The Objectives of Competition Law and the Effective Conduct of the Infringement Proceedings: Judgments of the Court of Bosnia and Herzegovina in BH Telecom and Telekomunikacije RS. Case Comment to the Judgments of the Court of Bosnia and Herzegovina No. S.
ABSTRACT: On 16 February 2010 the Competition Authority of Bosnia and Herzegovina (KV) initiated an investigation into the potential margin squeeze and discriminatory practices applied by the incumbent telecom operator BH Telecom. The investigation was prompted by the complaint submitted by an independent telecom operator Akt. online, which claimed that BH Telecom abused its dominant position by obstructing access to the fixed line network and applying discriminatory pricing on call termination services to the domestic providers.
Thursday, April 7, 2016
Due Process Rights in Polish Antitrust Proceedings. Case Comment to the Judgment of the Polish Supreme Court of 3 October 2013 – PKP Cargo S.A. v. President of the Office of Competition and Consumers Protection (Ref. No. III SK 67/12)
Dariusz Eugeniusz Aziewicz, University of Warsaw describes Due Process Rights in Polish Antitrust Proceedings. Case Comment to the Judgment of the Polish Supreme Court of 3 October 2013 – PKP Cargo S.A. v. President of the Office of Competition and Consumers Protection (Ref. No. III SK 67/12).
ABSTRACT: The Polish Supreme Court delivered on 3 October 2013 an important ruling (Ref. No. III SK 67/12) concerning the case of PKP Cargo S.A. (hereafter, PKP Cargo) against the Polish Competition Authority – the President of the Office for Competition and Consumer Protection (hereafter, UOKiK). The reviewed judgment constitutes a crucial precedent with respect to procedural fairness (due process rights) in the enforcement of Polish competition law. It states that when examining appeals from administrative decisions issued by the UOKiK President, civil courts may also rule on violations of procedural provisions (administrative law) committed by the National Competition Authority (hereafter: NCA). Depending on the type and importance of procedural infringements indicated in the appeal, the 1st instance court revising the decisions of the UOKiK President, as well as other relevant courts of higher instances, may rule that an appeal is legitimate and quash the administrative decision of the UOKiK President on procedural grounds only (even without deciding on the infringement of competition law).
Michael A. Carrier , Rutgers Law School and Steve Shadowen, Hilliard & Shadowen LLP discuss Product Hopping: A New Framework. Worth downloading!
ABSTRACT: One of the most misunderstood and anticompetitive business behaviors in today’s economy is “product hopping,” which occurs when a brand-name pharmaceutical company switches from one version of a drug to another. The concern with this conduct is that some of these switches offer only a trivial medical benefit but significantly impair generic competition.
The antitrust analysis of product hopping is nuanced. It implicates the intersection of antitrust law, patent law, the Hatch-Waxman Act, and state drug product selection laws. In fact, the behavior is even more complex because it occurs in uniquely complicated markets characterized by doctors who choose the product but don’t pay for it, and consumers who buy the product but don’t choose it.
It thus should not be a surprise that courts have offered inconsistent approaches to product hopping. They have paid varying levels of attention to the regulatory structure, offered a simplistic version of consumer choice, adopted an underinclusive antitrust standard based on coercion, and focused on whether the brand firm removed the original drug from the market.
Entering this morass, we offer a new framework that courts, government enforcers, plaintiffs, and manufacturers can employ to analyze product hopping. The framework, which is balanced and rigorous, is the first to incorporate the characteristics of the pharmaceutical industry. For starters, it offers two safe harbors that are more deferential than current case law and that ensure that the vast majority of reformulations will not be subject to antitrust scrutiny.
The analysis then examines whether a brand sacrifices profits through its reformulation. Imposing antitrust liability on behavior involving “profit sacrifice” — that does not make business sense other than through its impairment of generic competition — offers a conservative approach and minimizes “false positives” in which courts erroneously find liability. Showing just how far the courts have veered from justified economic analysis, the test would recommend a different analysis than that used in each of the five litigated cases and a different outcome in two of them.
By carefully considering the regulatory environment, practicalities of prescription drug markets, manufacturers’ desire for clear-cut rules, and consumers’ needs for a rule that promotes price competition without deterring valued innovations, the framework promises to improve the antitrust analysis of product hopping.
Pal Szilagyi, Competition Law Research Centre; Péter Pázmány Catholic University and Andras Toth, Karoli University Faculty of Law ICT Law Department; Karoli University Faculty of Law Research Centre for Regulated and Network Industries offer Historical Developments of Cartel Regulation.
ABSTRACT: The regulation of cartels is not a new phenomenon, but has been part of doing business since the antiquity. The Sherman Act was a turning point in legislation regarding cartels. Although many decades had to pass until the current attitude towards cartels crystalized, the first half of the 20th century made many states realize what harm international cartels can do to the economy. Consequently, this paper gives an overview of the history of cartel regulation worldwide until 1931, the adoption of the first Hungarian legislation on cartels.
Andras Toth, Karoli University Faculty of Law ICT Law Department; Karoli University Faculty of Law Research Centre for Regulated and Network Industries describes CJEU Judgement in Post Danmark LI: Role of the Economic Evidences in Competition Cases.
ABSTRACT: On 6th October 2015, the Court of Justice of the European Union (‘CJEU’) delivered in Case C-23/14 Post Danmark A/S v Konkurrenceråd the first preliminary ruling related to the interpretation of Article 82 EC (now Article 102 TFEU) on rebate scheme applied by an undertaking enjoying dominant position. Themost important issue raised by the case and referred to the CJEU concerns the role of the economic evidences in the competition cases. The CJEU did not indeed share AG Kokott’s scepticism about the role of the economic evidences in the competition cases and maintained its general approach on the relevance of the ‘as-efficient competitor’ (‘AEC’) test in competition cases. Accordingly, the AEC test can be applied unless the structure of the market makes the emergence of an as-efficient competitor practically impossible. The CJEU re-confirmed the ‘safe harbour’ for volume rebates contrary to the proposals of the Advocate-General. The CJEU – in consistency with the General Court’s position in its Intel judgement – recalled that all relevant circumstances should be considered when determining whether a company has abused its dominant position by applying the third type of rebate, i.e. when grant of a financial incentive is not directly linked to a condition of exclusive or quasi-exclusive supply but where the mechanism for granting the rebate may also have a fidelity-building effect.
Wednesday, April 6, 2016
I was in DC earlier today at the Spring Meeting when I found out that antitrust legend Bernie Hollander passed away at 100 years. My personal interactions with Bernie, who retired from DOJ Antitrust at age 92 after 59 years at the Division, were limited but he was the living embodiment of antitrust and had very strong opinions about a number of the media cases he worked on over a long and distinguished career.