Antitrust & Competition Policy Blog

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

Thursday, September 8, 2016

Exploitative Abuses of Intellectual Property Rights

Harry First, NYU reports on Exploitative Abuses of Intellectual Property Rights.

ABSTRACT: It is the standard view in the United States that U.S. antitrust law does not reach acts of exploitation by a monopolist, particularly monopoly pricing (“rent extraction”). Even more so for intellectual property, where U.S. courts have emphasized the right of an intellectual property right holder to raise prices and exploit its rights to the fullest, constrained only by market demand. Competition law in the rest of the world appears to be otherwise, however, with many countries generally condemning excessive high prices by dominant firms, even if often reluctant to invoke such provisions in practice.

Despite apparent differences in legal approaches, current enforcement practice worldwide with regard to price-raising exploitation of intellectual property rights by monopolists shows a uniform willingness to condemn such conduct as anticompetitive. This paper describes this concern for exploitation, focusing on competition law enforcement in the United States, China, Europe, Japan, and Korea in three substantive areas: patents subject to FRAND licensing obligations, disclosure requirements imposed on patent holders with monopoly power to prevent them from exploiting licensees or potential licensees, and post-expiration royalties.

This paper argues that this concern for exploitative behavior is consistent with sound competition policy. Preventing the undue exploitation of intellectual property rights is an important aspect of economizing on the reward we give to incentivize innovation. Antitrust has traditionally favored placing some limits on intellectual property rights and placing greater reliance on the incentives for innovation that competitive markets can provide.

September 8, 2016 | Permalink | Comments (0)

Regulating from the Demand Side: Public Health Insurance with Monopolistically Competitive Providers and Optional Spot Sales

Gilad Sorek and Randolph T. Beard are Regulating from the Demand Side: Public Health Insurance with Monopolistically Competitive Providers and Optional Spot Sales.

ABSTRACT:We study the implications of extending public-insurance coverage to an existing medical market in Salop’s spatial model of imperfect competition. In this setup a public insurer sets a price to medical providers, which must maintain their reservation pro.t from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation profit by setting the coinsurance rate, and that setting the coinsurance rate properly yields the market first best product diversification. The results survive generalizations including moral hazard and incomplete coverage. When adding quality choice to the analysis, a minimum quality standard that is combined with a proper coinsurance rate can still support market efficiency.  

September 8, 2016 | Permalink | Comments (0)

Wednesday, September 7, 2016

Can non-alcoholic beer be a substitute for beer? Evidence from differentiated product demand model estimation using scanner data

Toru Nakajima asks Can non-alcoholic beer be a substitute for beer? Evidence from differentiated product demand model estimation using scanner data.

ABSTRACT: Non-alcoholic (NA) beer, a beverage that tastes like beer and contains no/little alcohol, has seen growing world-wide popularity as a potential substitute of beer. To elucidate consumer demand and profitability of NA beer, this study estimated price elasticities and price-cost margins of beer and NA beer at brand level in the case of Japan, using a structural demand model of differentiated products and a purchase data scanned by 30,000 consumers. According to the empirical result, NA beer demand is responsive to prices of some regular and premium beer brands as well as NA beer brands while beer demand is not responsive to NA beer prices. This implies that (1) some consumers of regular and premium beers consider NA beer as a substitute although NA beer consumers do not recognize beer as a replacement; (2) although low-malt, new-genre (alcoholic drinks with beer-like taste), and NA beers have some common product characteristics, consumers of low-malt and ne! w-genre beers have different preference from that of NA beer consumers; (3) unless prices of NA beer brands increase, certain amount of demand for NA beer can be expected to remain irrespective of price levels of beer brands. Price-cost margins of producing NA beer were found to be similar to those of regular and new-genre beers while price-cost margins for premium beer were small and those for low-malt beer were large.

September 7, 2016 | Permalink | Comments (0)

Switching costs and financial stability

Stenbacka, Rune and Takalo, Tuomas explore Switching costs and financial stability.

ABSTRACT: We establish that the effect of intensified deposit market competition, measured by reduced switching costs, on the probability of bank failures depends critically on whether we focus on competition with established customer relationships or competition for the formation of such relationships. With inherited customer relationships, intensified competition (i.e., lower switching costs) destabilizes the banking market, whereas it stabilizes the banking market if we shift our focus to competition for the formation of customer relationships. These findings imply that the proportion between new and locked-in depositors is decisively important when determining whether intensified competition destabilizes the banking market or not.

September 7, 2016 | Permalink | Comments (0)

A Theoretical Analysis of Multiproduct Mergers: Application in the Major Meat Sectors

Benjamin L. Sanderson, Mississippi State University, Kalyn T. Coatney, Mississippi State University, Bryon J. Parman, Mississippi State University, and Jesse B. Tack, Mississippi State University provide A Theoretical Analysis of Multiproduct Mergers: Application in the Major Meat Sectors.

ABSTRACT: This paper develops a theoretical model applicable to mergers with differentiated products, with an application in the meat sector. Results show that mergers across submarkets may raise competitive concerns if sufficient economies of scope are not gained by the merger.

September 7, 2016 | Permalink | Comments (0)

An Economic Policy Perspective on Online Platforms

Bertin Martens (European Commission – JRC - IPTS) offers An Economic Policy Perspective on Online Platforms.

ABSTRACT: This report provides an overview of the relevant economic research literature on platforms or multi-sided online markets. It discusses platforms from a regulatory policy angle, including potential market failures in platforms, the extent of self-regulation and possible regulatory responses through existing competition policy, consumer protection and data protection instruments. It covers selected policy issues associated with these platforms including possible sources of bias in search engines and search rankings, data protection and the use of personal data in platforms, and platform liabilities within and beyond the e-commerce directive.

September 7, 2016 | Permalink | Comments (0)

Tuesday, September 6, 2016

Information Exchanges among Firms and Their Welfare Implications (Part ‡U): Alternative Duopoly Models with Different Types of Risks

Yasuhiro Sakai (Faculty of Economics, Shiga University) explores Information Exchanges among Firms and Their Welfare Implications (Part ‡U): Alternative Duopoly Models with Different Types of Risks.

ABSTRACT: The purpose of this paper is to overview and evaluate the problem of information exchanges in oligopoly, an important topic in contemporary economics. It is intended as a synthesis of the two streams of economic theories, the economics of imperfect competition and the economics of risk and information. This long series of papers consist of three parts. The previous paper, which dealt with Part I, discussed the dual relations between the Cournot and Bertrand duopoly models in the absence of risk. This paper turns to Part II, focusing on many duopoly models in which a common risk is present. The starting point of discussion is the Cournot duopoly model with an industry-wide common demand risk. Many other duopoly models such as the Cournot duopoly with cost risk and the Bertrand duopoly with demand or cost risk are successively discussed. It will be seen that the existence of various risk factors and the informational exchanges between Cournot or Bertrand firms influence the welfare implications on consumers and the society in many complicated ways. The next paper which deals with Part III will be concerned with more complicated problems such as private risks and/or oligopoly models.

September 6, 2016 | Permalink | Comments (0)

Tacit collusion and market concentration under network effects

Rupayan Pal (Indira Gandhi Institute of Development Research) and Marcella Scrimitore (University of Salenta) explore Tacit collusion and market concentration under network effects.

ABSTRACT:  In an infnitely repeated Cournot game with trigger strategy punishment, we demonstrate that the relationship between market concentration and collusion sustainability depends on the strength of network externalities. The latter is shown to interact with the number of firms and to affect the profitability of cooperation vs. competition, which delivers the result, challenging conventional wisdom, that lower market concentration can make collusion more stable.

September 6, 2016 | Permalink | Comments (0)

Exclusive dealing with costly rent extraction

Giacomo Calzolari, University of Bologna, Vincenzo Denicolo and Piercarlo Zanchettin study Exclusive dealing with costly rent extraction. This is an interesting paper - worth downloading!

ABSTRACT: We analyze the impact of exclusive contracts on the intensity of competition among firms that supply substitute products. Exclusive contracts would be neutral if firms priced at marginal cost and extracted buyers' rent by means of non distortionary fixed fees. We focus instead on the case in which rent extraction is costly, and hence firms distort marginal prices upwards. We show that in this case exclusive contracts are anti-competitive when the dominant firm enjoys a large enough competitive advantage over its rivals, and are pro-competitive, or neutral, when the competitive advantage is small. These effects appear as soon as marginal prices are distorted upwards, irrespective of which specific factors impede perfect rent extraction.

September 6, 2016 | Permalink | Comments (0)

Entry Games and Free Entry Equilibria

Michele Polo, Boconni summarizes Entry Games and Free Entry Equilibria.

ABSTRACT: This Chapter reviews the theoretical liteature on entry games and free entry equilibria. We show that a wide range of symmetric oligopoly models share common comparative statics properties. Individual profits and quantities decrease in the number of firms, and tend to competitive or monopolistic competitive equilibria when the number of firms increases indefinitely. The maximum number of firms sustainable in a symmetric long run equilibrium depends on technology (economies of scale), preferences (market size) and strategies (toughness of price competition). On the normative side, in homogeneous product markets the business stealing effect drives the result of excessive entry, whereas adding product differentiation and the utillity from variety may revert the result. We then consider asymmetric free entry equilibria that exploit the aggregative nature of many oligopoly models. Finally, we discuss endogenous sunk costs and persistent concentration and frict! ionless entry and contestable markets.

September 6, 2016 | Permalink | Comments (0)

Monday, September 5, 2016

A glimpse into Brazil’s experience in international cartel investigations: Legal framework, investigatory powers and recent developments in Leniency and Settlements Policy

Amanda Athayde, Head of the Leniency Unit, Brazilian Competition Authority (CADE) Chief of Staff, General Superintendence of the Administrative Council for Economic Defense, CADE, Brazil and Marcela Campos Gomes Fernandes,offer A glimpse into Brazil’s experience in international cartel investigations: Legal framework, investigatory powers and recent developments in Leniency and Settlements Policy Competition Lawyer and Researcher, University of Sao Paulo (USP) Former Head of the International Cartel Unit, Administrative Council for Economic Defense, CADE, Brazil offer A glimpse into Brazil’s experience in international cartel investigations: Legal framework, investigatory powers and recent developments in Leniency and Settlements Policy.

ABSTRACT: This article analyzes the Brazilian experience in international cartels enforcement within 2000-2016. Initially, it presents four central aspects of the enforcement activities in Brazil. First, the legal framework on fighting cartels. Second, the main investigatory powers of the Brazilian Competition Authority, the Administrative Council for Economic Defense (CADE). Third, the Brazilian Leniency Program. Fourth, the Settlement Policy adopted by CADE. Subsequently, the article hint at some improvements accomplished in Brazil`s performance investigating international cartels. The authors provide statistics of CADE`s international cartel investigations, which highlight some recent developments as well as some of the main challenges to overcome. The authors then suggest, as a strategy to overcome those challenges in international cartels enforcement, some measures for strengthening cooperation between competition authorities.

September 5, 2016 | Permalink | Comments (0)

Vertical Integration and Downstream Collusion

Sara Biancini (Normandie Universite, UNICAEN, CREM CNRS, France) and David Ettinger (Paris Dauphine, PSL, LEDa and CEREMADE, France) examine Vertical Integration and Downstream Collusion.

ABSTRACT: We investigate the effect of a vertical merger on downstream firms' ability to collude in a repeated game framework. We show that a vertical merger has two main effects. On the one hand, it increases the total collusive profits, increasing the stakes of collusion. On the other hand, it creates an asymmetry between the integrated firm and the unintegrated competitors. The integrated firm, accessing the input at marginal cost, faces higher profits in the deviation phase and in the non cooperative equilibrium, which potentially harms collusion. As we show, the optimal collusive profit-sharing agreement takes care of the increased incentive to deviate of the integrated firm, while optimal punishment erases the difficulty related to the asymmetries in the non cooperative state. As a result, vertical integration generally favors collusion.

September 5, 2016 | Permalink | Comments (0)

Sunday, September 4, 2016

Antitrust and Regulating Big Data

Daniel Sokol and Roisin Comerford analyze Antitrust and Regulating Big Data in a forthcoming article in the George Mason Law Review.

ABSTRACT: The collection of user data online has seen enormous growth in recent years. Consumers have benefitted from this growth through an increase in free or heavily subsidized services, better quality offerings, and rapid innovation. At the same time, the debate about Big Data, and what it really means for consumers and competition, has grown louder. Many have focused on whether Big Data even presents an antitrust issue, and whether and how harms resulting from Big Data should be analyzed and remedied under the antitrust laws. The academic literature, however, has somewhat lagged behind the policy debate, and a closer inspection of existing scholarly works reveals a dearth of thorough study of the issue. Commentators generally are split into two camps: one in favor of more proactive antitrust enforcement in the Big Data realm, and one opposing such intervention, considering antitrust inappropriate for regulation of Big Data. The academic case for the former has not, as yet, been fully developed, and is relatively light at present. Meanwhile, policy-focused work by academics and practitioners in this arena suggests that antitrust intervention in Big Data would be premature and misguided, especially considering the myriad pro-competitive benefits offered by Big Data.
This article reviews the scholarly work on the implications of Big Data on competition, and considers the potential role of antitrust in the regulation of Big Data. Part I provides an overview of the scarce, academic literature specifically addressing the role of antitrust in Big Data issues. Parts II and III delve into the policy issues surrounding Big Data and whether it poses a risk to competition that warrants antitrust intervention. Part II details the ways in which Big Data may prove pro-competitive while Part III reviews and critiques the suggested potential harms to competition from Big Data. Part IV discusses the suitability of antitrust as the institutional choice for Big Data issues, and Part V concludes that, at present, antitrust is ill suited as the institutional choice. Further, the scholarly case for such harm has not yet been adequately established. Overall, this Article finds much noise as to potential “problems” around whether current antitrust tools and policy are adequate to deal with a Big Data “challenge.” In reality, there is no challenge at all, as the arguments for antitrust intervention when Big Data has come up as an issue have never carried the day for any merger or decided conduct case in any Department of Justice Antitrust Division (“DOJ”), Federal Trade Commission (“FTC”) or Directorate-General for Competition (“DG Competition”) case to date.

 

September 4, 2016 | Permalink | Comments (0)

Competition and Regulation in Digital Markets Date: 9 September 2016, University of Leeds

Competition and Regulation in Digital Markets

Date: 9 September 2016
Location: Moot Court Room, Liberty Building

09.30-09.40: Welcome from the Head of School, Professor Alastair Mullis

09.40-10.20: Keynote Speech: Dr Andrea Coscelli (Acting Chief Executive, Competition and Markets Authority)

10.20-11.50: Panel 1: Market Definition and Market Power in Digital Markets

Moderator: Professor Joan Loughrey (School of Law, University of Leeds)

  • Professor Pinar Akman (School of Law, University of Leeds)
  • Andrew Byrne (Head of Public Policy for the UK & Ireland, Uber)
  • Geoffrey A. Manne (Executive Director, International Centre for Law and Economics)
  • Dr Florence Thépot (Lecturer, School of Law, University of Glasgow)

11.50-12.45: Lunch

12.45-14.15: Panel 2: Regulation vs. Competition in Digital Markets

Moderator: Dr Peter Whelan (Associate Professor, School of Law, University of Leeds)

  • Professor Damien Geradin (School of Law, Tilburg University)
  • Dr Konstantinos Stylianou (Lecturer, School of Law, University of Leeds)
  • James Waterworth (Vice President for Europe, Computer & Communications Industry Association)

14.15-14.30: Coffee

14.30-16.00: Panel 3: Goods and Data in Online Markets

Moderator: Professor Rita de la Feria (School of Law, University of Leeds)

  • Professor Michal Gal (Faculty of Law, University of Haifa): Algorithmic consumers
  • Bruce Kilpatrick (Partner, Addleshaw Goddard LLP):  The UK perspective: can online data also be part of the solution?
  • Alfonso Lamadrid de Pablo (Principal Associate, Garrigues LLP): Much ado about nothing
  • Dr Nicolo Zingales (Lecturer, School of Law, University of Sussex): Data markets and privacy harms

16.00-16.20: Coffee

16.20-17.50: Panel 4: Vertical Restraints in the Online World

Moderator: Dr Sarah Brown (Associate Professor, School of Law, University of Leeds)

  • Dr Avantika Chowdhury (Senior Consultant, Oxera): Vertical restraints: new evidence on the short and long-term impact
  • Adam Collinson (Partner, Eversheds LLP): Selective distribution: a cloak of respectability to disguise attempts to limit online price competition?
  • Professor Kai-Uwe Kühn (Centre for Competition Policy, University of East Anglia)
  • Professor Giorgio Monti (European University Institute): Shaping vertical restraints in digital markets

17.50-18.00: Final Comments: Professor Pinar Akman (School of Law, University of Leeds)

 

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This looks like a really great conference.  It also gives me an opportunity to pull together a number of papers on online markets, some of which are in my inbox and some of which have come out in the last year or two:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482780

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2834611

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2830586

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2185373

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2813855

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2613325

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2655794

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2795992

http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2561563

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2490651

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2591874

September 4, 2016 | Permalink | Comments (0)

Friday, September 2, 2016

Does Competition Eliminate Discrimination? Evidence from the Commercial Sex Market in Singapore

Huailu Li (Fudan University); Kevin Lang (Boston University & NBER) and Kaiwen Leong (Nanyang Technological University) study Does Competition Eliminate Discrimination? Evidence from the Commercial Sex Market in Singapore.

ABSTRACT:  The street sex worker market in Geylang, Singapore is a highly competitive market in which clients can search legally at negligible cost, making it ideal for testing Diamondís hypothesis regarding search and monopoly pricing. As Diamond predicts, price discrimination survives in this market. Despite an excess supply of workers, but consistent with their self-reported attitudes and beliefs, sex workers charge Caucasians (Bangladeshis) more (less), based on perceived willingness to pay, and are more (less) likely to approach and reach an agreement with them. Consistent with taste discrimination, they avoid Indians, charge more and reach an agreement with them less frequently.

September 2, 2016 | Permalink | Comments (0)

Non-Sequential Search, Competition and Price Dispersion in Retail Electricity

Klaus Gugler (Department of Economics, Vienna University of Economics and Business); Sven Heim (ZEW Centre for European Economic Research and MaCCI Mannheim Centre for Competition and Innovation); and Mario Liebensteiner (Department of Economics, Vienna University of Economics and Business)  examine Non-Sequential Search, Competition and Price Dispersion in Retail Electricity.

ABSTRACT: We investigate the impact of consumer search and competition on pricing strategies in Germany’s electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer sear! ch. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-González (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants.

September 2, 2016 | Permalink | Comments (0)

A new approach to identify market power along agri-food supply chains – the German dairy supply chain

Aaron Grau, Leibniz Institute of Agricultural Development in Transition Economies (IAMO) and Heinrich Hockmann, Leibniz Institute of Agricultural Development in Transition Economies (IAMO) identify A new approach to identify market power along agri-food supply chains – the German dairy supply chain.

ABSTRACT: In this paper a new approach for the estimation of oligopsony market power along a supply chain is developed. The theoretical framework relies on NEIO theory. Two subsequent markets with oligopsony power are modeled. Price equations, farm-processor and processor-retailer, are embedded in a price transmission framework. The reduced error correction representation is estimated via the Kalman-Filter to allow for time-variation in the long-run cointegration parameters. A dynamic factor model is applied to extract common factors from the time-varying coefficients and with the estimated results the processing industry’s and retail sector’s average input conjectural variations are calculated. The framework is applied to the German dairy supply chain over the time period January 2000 to March 2011. Results indicate lower levels of market imperfections on the raw milk and dairy output market.

September 2, 2016 | Permalink | Comments (0)

Thursday, September 1, 2016

Fordham Law Conference on Future of Antitrust in Asia Offers Free Registration for New Associates

Fordham Law Conference on Future of Antitrust in Asia Offers Free Registration for New Associates
 
Fordham’s annual International Antitrust Law and Policy Conference on 22-23 September in New York City will address “The Future of Antitrust in Asia.” Keynote speakers include antitrust agency heads from FTC, DOJ, and EU Commission. Panelists include senior officials from antitrust authorities in China, Japan, Germany, Chile, and Mexico; leading practitioners from Cleary Gottlieb, Gibson Dunn, Freshfields, Wilson Sonsini, and Winston & Strawn; and in-house counsel from American Express, General Electric, Honeywell, Qualcomm, and Uber. The pre-conference Antitrust Economics Workshop on 21 September will cover working with economic experts from the beginning of a case through trial. Participants earn CLE credit and gain valuable opportunities to network with influential antitrust leaders from around the world. Full conference details and registration are available at law.fordham.edu/fcli.
 
In addition, law firm associates who are in their first two years of bar admission may register to attend for free by completing the special registration form at law.fordham.edu/antitrustassociate.
 

September 1, 2016 | Permalink | Comments (0)

Surge Pricing and Price Gouging: Public Misunderstanding as a Market Imperfection

Steven Suranovic (Department of Economics/Institute for International Economic Policy, George Washington University) analyzes Surge Pricing and Price Gouging: Public Misunderstanding as a Market Imperfection.

 ABSTRACT: This paper evaluates the economic and ethical effects of sudden excess demand for goods or services. The normal market response of surge prices or price gouging invokes sharp negative reactions by consumers who consider the profit seeking market response to be unethical. Public condemnation often prevents merchants from following market signals, or induces governments to intervene by implementing price ceilings. This paper argues that public misunderstanding preventing efficient and fair outcomes is the true market imperfection in these cases. The paper provides reasons for the public misunderstanding and suggests that demonstration effects would be the most effective way to induce more favorable market outcomes.

September 1, 2016 | Permalink | Comments (0)

THE RELATIONSHIP BETWEEN PRICE AND MARKET STRUCTURE: EVIDENCE FROM THE US FOOD RETAIL INDUSTRY

Vardges Hovhannisyan and Marin Bozic explore THE RELATIONSHIP BETWEEN PRICE AND MARKET STRUCTURE: EVIDENCE FROM THE US FOOD RETAIL INDUSTRY.

ABSTRACT: This study utilizes unique product barcode, store, and retail real estate data to calculate consistent estimates of the effects of retail market structure on food prices in the US. Our uniquely disaggregated data allow for identification strategy that corrects for the type of endogeneity that plagues many previous studies on price-concentration relationship. Empirical findings from an instrumental-variables fixed-effects model indicate that retail concentration is endogenous to price determination. Further, retail prices are found to rise with retail concentration. Importantly, ignoring endogeneity results in a severe downward bias in the estimated effects of concentration on food prices.

September 1, 2016 | Permalink | Comments (0)