Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Thursday, April 30, 2015

Collective Redress: Will Portugal Show the way?

Miguel Sousa Ferro, University of Lisbon Law School asks Collective Redress: Will Portugal Show the way?

ABSTRACT: Portugal is a small country by European standards and, with the financial and economic crisis, it has not always been in the limelight, for positive reasons, in the last years. Here is one area in which, however, this small country, with unlimited access to the gigantic ocean resources, could show the path, or at least, a possible path, to the rest of Europe. That path concerns collective redresses in damages competition proceedings. When the decision was made not to include provisions on collective redress in the EU Antitrust Damages Actions Directive, it became clear that each Member State would have to find its own way of interpreting the principle of effectiveness and its implications for actions relating to mass damages arising from antitrust infringements.

April 30, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 29, 2015

Dynamic Equilibrium at a Congestible Facility Under Market Power

Erik T. Verhoef, VU University Amsterdam - Department of Spatial Economics; VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) and Hugo Silva, VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) explore Dynamic Equilibrium at a Congestible Facility Under Market Power.

ABSTRACT: Various contributions to the recent literature on congestion pricing have demonstrated that when services at a congestible facility are provided by operators with market power, the case in point often being a few airlines jointly using a congested airport, optimal congestion pricing rules deviate from the familiar Pigouvian rule that tolls be equal to the marginal external costs. The reason is that an operator with market power has an incentive to internalize the congestion effects that its customers and vehicles impose upon one-another, so that Pigouvian tolling would lead to overpricing of congestion. More recent contributions to this literature, however, have brought to the fore that when congestion at the facility takes on the form of dynamic bottleneck congestion à la Vickrey (1969), where trip scheduling is the key behavioural margin, there may exist no Nash e quilibrium in arrival schedules for oligopolistic operators also under rather plausible assumptions on parameters. This paper investigates whether in such cases, an equilibrium does exist for another congestion technology, namely the Henderson-Chu dynamic model of flow congestion. We find that a stable and unique equilibrium exists also in cases where it fails to exist under bottleneck congestion (notably when the value of schedule late exceeds the value of travel delays). Our results suggest that self-internalization with only two firms leads to a considerable efficiency gain compared to the atomistic equilibrium (83% or more of the gain from first-best pricing in our numerical exercises).

April 29, 2015 | Permalink | Comments (0) | TrackBack (0)

The European Food Sector: Are Large Retailers a Competition Problem?

Philippe Chauve and An Renckens, DG Competition ask The European Food Sector: Are Large Retailers a Competition Problem?

ABSTRACT: Concerns have emerged about the extent of retailers’ bargaining power vis-à-vis their suppliers as retailers have become more concentrated, have joined forces in buying alliances, and have significantly developed their own brands (private labels). To address these concerns, several EU Member States have put in place laws on fair trading and/or modified their competition laws, obliging the competent authorities to scrutinise and (if necessary) sanction retailers’ business practices. The ‘modern retail study’ recently published by the European Commission sheds light on the matter as it puts forward empirical evidence that innovation is more likely to be hampered by highly concentrated food manufacturers than by powerful retailers—even if further investigation is needed to assess highly concentrated retail markets and situations where shop assortments are dominated by private labels.

April 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Exclusive or "Exclusive Enough"? Lessons on Exclusive Dealing Standards from McWane v. FTC

Exclusive or "Exclusive Enough"?  Lessons on Exclusive Dealing Standards from McWane v. FTC                                                                                            

 
Date:
May 4, 2015                                    
Time:
12:30 PM - 2:00 PM ET                                    
 
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On April 15, 2015, the Eleventh Circuit issued its anticipated opinion in McWane v. FTC  and affirmed the FTC’s decision that certain exclusive dealing practices of McWane, a manufacturer of ductile iron pipe fittings, were unlawful.  The case started over 3 years ago with a seven count administrative complaint under Section 5 of the FTC Act.  Ultimately, only the monopolization count survived.  That count alleged that McWane abused its monopoly power in the market for domestically produced ductile iron pipe fittings by implementing a “full support” program which discouraged customers from switching business from McWane to its competitor, Star.  As a result Star was unable to achieve significant scale in the domestic fittings market and won only limited market share. 

Given that Star did enter and increase its market share during the relevant period, the case raises interesting questions about the standards for harm in exclusive dealing cases.  How much foreclosure is sufficient?  Should the government need to establish a minimum efficient scale to prove its case?  Under what circumstances does winning against a less efficient competitor expose companies with high market share to litigation risks?  Join our panel as we explore the implications McWane has for exclusive dealing practices as well as what the case reveals about current FTC enforcement strategy.

Moderators:

* Steven J. Cernak, Schiff Hardin LLP * Justin P. Hedge, Arnold & Porter LLP

Speakers:

* Joseph Baker, Federal Trade Commission * David A. Balto, Law Offices of David A. Balto * Richard M. Brunell, American Antitrust Institute * Mary T. Coleman, Compass Lexecon * Daniel A. Crane, University of Michigan Law School   FREE:  Antitrust Section Members, Government, Nonprofit Employees and Students $25.00:  Other Non-Members

Learn about Section Membership or call 800-285-2221 to join with source code:  RAT14IP25.  Instructions for accessing the live program will be provided in a confirmation email.  For this and all upcoming events visit:  http://AmBar.org/ATEvents.

CLE The ABA is not seeking CLE credit for this program.

April 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Economic Arguments in the Amex Trial: Considering Market Definition and Market Power with a Two-Sided Platform

Henry McFarlane, Economics Incorporated discusses Economic Arguments in the Amex Trial: Considering Market Definition and Market Power with a Two-Sided Platform.

ABSTRACT: This paper addresses issues concerning how to present and assess economic evidence that arose in the recent antitrust litigation involving the U.S. Department of Justice (DOJ) and America n Express (Amex). It focuses on how Amex’s nature as a two-sided platform affected market definition and the analysis of market power. DOJ proposed a market definition based on one side of the platform, general purpose credit and charge card services sold to merchants. The court accepted that definition. DOJ also analyzed market power that was exercised solely on one side of the platform — against merchants. The court was willing to find market power based on one side of the platform if there was no compelling offsetting evidence pertaining to the other side. Defining markets and looking for market power on only one side of a two-sided platform risks missing conditions on the other side that would undermine those findings.

April 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Vertical Effects in Competition Law and Regulatory Decisions in Pay-Television in France, the United Kingdom and the United States

Agustin Diaz Pines describes Vertical Effects in Competition Law and Regulatory Decisions in Pay-Television in France, the United Kingdom and the United States.

ABSTRACT: Vertical effects, such as input or customer foreclosure, are at the core of competition and regulatory decisions in pay-television markets. In particular, vertical effects have raised important concerns by competition authorities and regulators in France, the United Kingdom and the United States in the context of merger decisions and antitrust proceedings. Given the increasing convergence of television and telecommunication services and of bundles’ uptake, the importance of an adequate treatment of vertical effects remains crucial.

This paper addresses vertical effects in competition law and regulatory decisions in these three countries, with a focus on vertical input and customer foreclosure, exclusive dealing, countervailing buyer power and some aspects of the implementation of remedies. The empirical evidence is formed by an exhaustive analysis of antitrust, merger and regulatory decisions in these countries from 1996 to 2014.

First, I examine the different treatment of buyer power and its use as an argument to justify relaxing requirements for the authorisation of mergers in France and the United Kingdom (countervailing buyer power). A more consistent and evidence-based treatment of bargaining power could improve the overall merger review process.

Authorities in these three countries largely share the concerns about input and customer foreclosure in pay-television markets and do not underestimate the risks for competition in those markets. The approaches taken and the starting point in terms of market structures, are somewhat different. In the United States, where competition in pay-tv markets has improved in the past twenty years, the regime is transitioning from an ex-ante framework (programme access rules) to an ex-post regime with arbitration procedures and engagements from providers as a result of mergers and acquisitions. In the United Kingdom and France, in contrast, regulation is moving from ex-post enforcement only (through merger review) to, though more slowly, a set of ex-ante obligations.

Exclusive dealing is another source of competition concerns. Bidding rules for sports and movies rights have been found anti-competitive in France and the United Kingdom (e.g. holdback clauses, joint selling agreements, most-favoured nation clauses) and can, in the presence of powerful pay-television incumbents, foreclose efficient entry for many years. Therefore, a careful control of these negotiations is an important condition for promoting competition in pay-television markets. In France and the United States, some limitations have been placed on how exclusive dealing may be conducted even though high market concentration may suggest stronger action.

In view of the recent emergence of Online Video Distributors (OVD), a major opportunity may be arising for Europe. Being its broadband markets, in general terms, more competitive than in the United States, OVDs may encounter fewer barriers to become a credible alternative to traditional pay-television providers. Nevertheless, this is reliant on developments in network neutrality and, more broadly, in competition in broadband markets in the coming years.

The overall conclusion is that, while the United States has been moving away from stringent ex-ante regulation in pay-television markets, justified by an improvement in competition dynamics, France and United Kingdom have only partially succeeded in addressing these concerns – in many ways more serious that in the United States- due to a lack of a legal framework to issue ex-ante regulation.

April 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 28, 2015

Do Tying, Bundling, and Other Purchase Restraints Increase Product Quality?

James D. Dana Jr., Northeastern University - Department of Economics; Northeastern University - Department of International Business and Strategy; Harvard Business School and Kathryn E. Spier, Harvard University - Law School - Faculty; National Bureau of Economic Research (NBER) ask Do Tying, Bundling, and Other Purchase Restraints Increase Product Quality? Worth downloading!

ABSTRACT: Tying, bundling, minimum purchase requirements, loyalty discounts, exclusive dealing, and other purchase restraints can create stronger incentives for firms to invest in product quality. In our first example, the firm sells a durable experience good and a complementary non-durable good to a representative consumer. Tying shifts profits from the durable to the non-durable good, making profits more sensitive to the consumer's experience. In our second example, the firm sells a single experience good to consumers with heterogeneous demands. Minimum purchase requirements screen out the low-volume consumers who would otherwise free ride on the superior monitoring of the high-volume consumers. The examples illustrate that purchase restraints can increase both firm profits and consumer surplus by making firm profits more sensitive to consumer experience, either directly by giving the consumer more control over the stream of profits or indirectly by constraining consumers to monitor more intensively.

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Call for Papers - CLaSF conference “Competition Law Public Enforcement Across the EU”

Call for Papers

The Competition Law Scholars Forum (CLaSF) and 

LUMSA University, Roma – Law School

Invite contributions to a workshop

  “Competition Law Public Enforcement Across the EU”

At LUMSA Law School, Via Pompeo Magno, Roma on Thursday 10 September 2015

 

The conference will consist of seminar-based sessions. Papers are invited from scholars, regulators and practitioners on any of these issues or other topics which fall generally within the broad theme of “Competition Law Public Enforcement Across the EU”.

 

Suggestions are invited in the field of the following matters:

 

  • Comparative analysis of competition law enforcement institutions in EU Member States
  • NCA and European Commission enforcement processes and remedies;
  • The workings of the ECN;
  • Judicial Review of competition law administrative enforcement processes and outcomes;
  • Comparative analysis of leniency processes and outcomes in different legal systems

The conference will consist of a mix of invited speakers and contributions chosen following this call for papers.

  • Any person interested in being considered on the basis of the call for papers at the conference is asked to contact Professor Barry Rodger at barry.j.rodger@strath.ac.uk. An abstract is required of approximately 500-1000 words, to be submitted by no later than Monday June 1, 2015, and decisions on successful submissions will be taken by June 9, 2015. Submission of presentation/draft paper is also required a week prior to the workshop.
  • Papers presented at the conference can be submitted to the Competition Law Review editorial board with a view to being published in the Review. Note that the Review is a fully refereed scholarly law journal: submission does not guarantee publication.

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

ICC SME toolkit released

Designed by business for smaller businesses, this International Chamber of Commerce (ICC) guide on competition law compliance aims to ensure that small and medium-sized enterprises (SMEs) and their employees understand why complying with competition law makes good business sense.

Drawn from the ICC Antitrust Compliance Toolkit released in 2013, the idea of an SME-specific toolkit emerged after two years of active advocacy work led by Anne Riley, Chair of the ICC Task Force on Compliance and Advocacy.

The ICC SME toolkit does not delve into the complexities of competition law. In a concise and user-friendly format, the SME toolkit aims to ensure that smaller businesses understand the rules and operate both ethically and legally.

This global SME toolkit provides a brief overview of areas smaller businesses should be aware of and practical tips to assist them in building and reinforcing a credible approach to competition law compliance.

The ICC SME Toolkit covers:

  • Three danger areas
  • Five elements of compliance
  • Checklist to help identify competition law risks
  • Examples of basic dos and dont's
  • ICC's top ten tips

The ICC SME Toolkit was launched on 27 April 2015 at the 7th ICC Roundtable on Competition Policy in Sydney and can be downloaded free of charge below.

ICC SME Toolkit

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Financial Market Bottlenecks and the 'Openness' Mandate

Felix Chang, University of Cincinnati has written on Financial Market Bottlenecks and the 'Openness' Mandate.

ABSTRACT: Financial market infrastructures (“FMIs”), which facilitate the execution of financial transactions, exhibit such strong economies of scale that they are natural monopolies. In each market, production is controlled by a few dominant players. Federal courts have traditionally checked the abuses of natural monopolies under the Sherman Act. Yet recent Supreme Court decisions have reined in the role of antitrust in regulated industries, where administrative bodies set and enforce standards. To this effect, financial regulations require certain FMIs to grant open, nondiscriminatory access to users.

This Article argues that weak “openness” regulations must be buttressed by their antitrust counterpart — specifically, the essential facilities doctrine, which enables an excluded user to sue for wrongful denial of access to an FMI.

This Article situates FMIs at the intersection of four seismic trends. First, the role of FMIs as a mitigant of systemic risk renders their growth inevitable. Second, open access has become fashionable in the regulation of other natural monopolies (e.g., net neutrality rules), but this approach requires precise standards. Third, essential facilities can supplement weak open access regulations, but the doctrine was nearly dismantled by the Supreme Court a decade ago. Finally, the balance between antitrust and regulation is due to be reset, and the next move will likely come from FMIs.

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Discovering the Miracle of Large Numbers of Antitrust Investigations in Russia: The Role of Competition Authority Incentives

Svetlana Avdasheva, National Research University Higher School of Economics, Dina Tsytsulina, National Research University Higher School of Economics, Svetlana Golovanova, National Research University Higher School of Economics - Department of Economic Theory and Econometrics, and Yelena Sidorova , National Research University Higher School of Economics are Discovering the Miracle of Large Numbers of Antitrust Investigations in Russia: The Role of Competition Authority Incentives.

ABSTRACT: Many antitrust investigations in Russia continue to present a challenge for the assessment of competition policy and international enforcement ratings.  On the one hand, many infringement decisions may be interpreted as an indicator of high enforcement efforts in the context of rigid competition restrictions and the significant related harm to social welfare. On the other hand, many investigations proceed under poor legal and economic standards; therefore, the impact of decisions and remedies on competition is questionable. In fact, large number of investigations may indicate the ineffectiveness of antitrust enforcement.

The article explains the possible effects of antitrust enforcement in Russia. Using a unique dataset of the appeals of infringement decisions from 2008-2012, we classify the investigated cases according to their potential impact on competition. A case-level analysis reveals that the majority of cases would never be investigated under an appropriate understanding of the goals of antitrust enforcement, restrictions on competition and basic cost-benefit assessments of agency activity. There are diverse explanations for the distorted structure of enforcement, including the incompleteness and imperfection of sector-specific regulations, rules concerning citizen complaints against the executive authorities and the incentives of competition authorities. Our analysis shows that competition agencies tend to pay more attention to the investigation of cases, which requires less input and, at the same time, results in infringement decisions with a lower probability of being annulled.

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Cliff Discounts by a Dominant Producer Threatened by Partial Entry

Michael Salinger, BU has an interesting paper on Cliff Discounts by a Dominant Producer Threatened by Partial Entry.

ABSTRACT: I analyze cliff discounts when an incumbent monopolist faces competition from a competitor that can compete for a portion (but not all) of the market, and compare them with both simple pricing and pricing formulas in which the incumbent can cut prices just in the competitive portion of the market. The optimal cliff discount does not require exclusivity by the buyer. By leaving a portion of the market to the competitor, the incumbent gives it the choice between accepting its allocated share at a high price and offering deep discounts for any increase in market share. The optimal contract allows the competitor to earn higher profits by charging a high price for its allocated share, which in turn allows the incumbent to charge a high price. Average prices are higher with the cliff discount than with pricing that targets price cuts to the competitive segment. The model can apply to bundled discounts for multiple products as well as all-units discounts on a single product.

April 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Monday, April 27, 2015

Can Market Power Be Controlled by Regulation of Core Prices Alone?: An Empirical Analysis of Airport Demand and Car Rental Price

Achim Ingo Czerny, VU University Amsterdam - Faculty of Economics and Business Administration, Zijun Shi, Carnegie Mellon University, and Anming Zhang, University of British Columbia (UBC) - Sauder School of Business ask Can Market Power Be Controlled by Regulation of Core Prices Alone?: An Empirical Analysis of Airport Demand and Car Rental Price.

ABSTRACT: Many firms offer “core” and “side” goods in the sense that side-good consumption is conditional on core-good consumption. Airports are a common example where the supply of runway and terminal capacity is the core good and the supply of various concession services (for example, car rental services) is the side good. While side-good supply can be responsible for a major share in total revenue, monopoly regulation typically concentrates on the control of core-good prices (“core prices” in short). Whether market power can indeed be effectively controlled by the regulation of core prices alone then depends on whether core-good consumption is a function of the price for side goods. This study empirically shows that a one-dollar increase in the daily car rental price reduces passenger demand at 199 US airports by more than 0.36 percent. A major implication of our findings is that for the case of airports, the effective control of market power may require regulation of both prices for core and side goods.

April 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche

Damien Geradin, George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC) has a timely paper on Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche. His analysis is correct.

ABSTRACT: In June 2014, the GCEU confirmed the Decision of the European Commission that condemned Intel for breaching Article 102 TFEU by adopting exclusive rebates and “naked restrictions”. This judgement, in which the GCEU considered that in line with Hoffman-La Roche loyalty rebates should be quasi-per se illegal has been subject to many criticisms as not in line with the teachings of economics. This paper discusses the shortcomings of this judgment and argues that it is great time for the CJEU to abandon the application of its quasi-per se rule of illegality approach to exclusive dealing and loyalty rebates and replace it by a structured rule of reason. Such an approach would have many advantages and create greater coherence in the case-law of the CJEU on unilateral pricing conduct.

 

 

April 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Dominant Market Position and Ordoliberalism

Massimiliano Vatiero, Università della Svizzera italiana discusses Dominant Market Position and Ordoliberalism.

ABSTRACT: Since it is still difficult to translate in economic terms both the definition of “dominant position” and its “abuse”, the work reappraises, using a simple game-theory framework, the ordoliberal thought — from which derives the current European competition law. This leads to a wider idea of dominance which includes not only the economic domain but also the impact of private economic power on the political sphere.

April 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Resale in Second-Price Auctions with Costly Participation

Gorkem Celik (Department of Economics, ESSEC Business School and THEMA Research Center, Cergy-Pontoise, France)  and Okan Yilankaya (Department of Economics, Koc University) analyze Resale in Second-Price Auctions with Costly Participation.

ABSTRACT:  We investigate efficiency properties of sealed-bid second-price auctions with costly participation and resale. Each bidder chooses to participate in the auction if her valuation is higher than her optimally chosen participation cutoff. If resale is not allowed and the bidder valuations are drawn from a strictly convex distribution function, the symmetric equilibrium (where all bidders use the same cutoff) is less efficient than a class of two-cutoff asymmetric equilibria. Existence of these equilibria without resale is sufficient for existence of similarly constructed two-cutoff equilibria with resale. Moreover, these equilibria with resale are more asymmetric and (under a sufficient con! dition) more efficient than the corresponding equilibria without resale.

April 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Saturday, April 25, 2015

Off to the ICN Annual Meeting in Sydney

I am off tonight to Sydney, Australia for the ICN annual meeting.  The pre-ICN events are spectacular and I am participating in two of them.  The first is a discussion I am co-hosting on Procedural Fairness in Asian Antitrust on Monday.  The second is a panel at the World Bank/IBA conference on Tuesday, where I will be on the cartels panel.  With a long flight from Los Angeles to Sydney (and the Gainesville to Atlanta to Los Angeles legs are short by comparison), I thought to suggest to others flying out a play list of some of the most famous Australian music:

Iggy Azalea - Black Widow

 

   

AC/DC Thunderstruck

 

INXS - What You Need

 

Midnight Oil - Beds Are Burning

 

Men At Work - Down Under

 

Bee Gees - How Deep Is Your Love

 

As wonderful as Sydney is, as thought provoking the panels may be, and however gracious the spectacular ACCC is, whenever I travel I think of my family and how much I miss them when I am away.  The same is true for so many people coming to the ICN meeting. 

April 25, 2015 | Permalink | Comments (1) | TrackBack (0)

Friday, April 24, 2015

The Death of the Comcast Deal

Tim Wu, Columbia Law has an op-ed in the New Yorker on The Death of the Comcast Deal.

April 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Optimal production channel for private labels: Too much or too little innovation?

Claire Chambolle (INRA-UR1303 ALISS), Clemence Christin (Normandie Université, UCBN, CREM-UMR CNRS 6211) and Guy Meunier (INRA-UR1303 ALISS) ask Optimal production channel for private labels: Too much or too little innovation?

ABSTRACT: We analyze the impact of the private label production channel on innovation. A retailer may either choose to integrate backward with a small firm (insourcing) or rely on a national brand manufacturer (outsourcing) to produce its private label. The trade-off between insourcing and outsourcing strategies is a choice between too much or too little innovation (i.e. quality investment) on the private label. When insourcing, an outside-option effect leads the retailer to over-invest to increase its buyer power. When outsourcing, a hold-up effect leads to under-investment. In addition, selecting the national brand manufacturer may create economies of scale that spur innovation.

April 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Comcast Corporation Abandons Proposed Acquisition of Time Warner Cable After Justice Department and the Federal Communications Commission Informed Parties of Concerns

The DOJ press release explains:

 

"The companies' decision to  abandon this deal is the best outcome for American consumers," said  Attorney General Eric Holder.  "The  Antitrust Division of the United States Department of Justice has demonstrated,  time and again, that it can and will defend the interests of the American  consumer no matter the complexity of the issue or the size of the opponent.  This is a victory not only for the Department  of Justice, but also for providers of content and streaming services who work  to bring innovative products to consumers across America and around the  world.  I commend the Antitrust attorneys  and investigators whose outstanding work led to this outcome, and I know that  the Department of Justice will continue to fight for fair access and free  competition in every industry and every market."

April 24, 2015 | Permalink | Comments (0) | TrackBack (0)