Thursday, August 13, 2020
Feeding the nation in times of crisis: the relaxation of competition law in the United Kingdom
Feeding the nation in times of crisis: the relaxation of competition law in the United Kingdom
Okeoghene Odudu
ABSTRACT
In order to respond to the COVID-19 pandemic it has been recognized universally that cooperation between competitors will be necessary. It is also recognized that some of the cooperation contemplated will infringe competition law. A number of techniques are available by which conduct that infringes competition law can escape prohibition. Two techniques used have been to issue guidance on how the competition authority understands the law to apply and to articulate how it will exercise its discretion when deciding to take enforcement action. The combination of these two techniques provides a degree of comfort. In the United Kingdom, the government has gone further by identifying necessary cooperation and excluding such cooperation from competition law on grounds of public policy, in one instance for those in the groceries supply chain. The use of an exclusion order means that there is political accountability for the consequences the decision to set aside competition law will have, both for competitors, others in the supply chain, and for different consumer groups. For parties to excluded agreements, there is certainty ex ante that the cooperation is immune from competition challenge. Avoiding the need to assess the compatibility of an agreement with competition law, rather than permission to engage in incompatible behaviour, can be seen as the real value of the public policy exclusion order granted in relation to groceries.
August 13, 2020 | Permalink | Comments (0)
Antitrust & Corruption: Overruling Noerr
Antitrust & Corruption: Overruling Noerr Worth reading!
We live in a time when concerns about influence over the American political process by powerful private interests have reached an apogee, both on the left and the right. Among the laws originally intended to fight excessive private influence over republican institutions were the antitrust laws, whose sponsors were concerned not just with monopoly, but also its influence over legislatures and politicians. While no one would claim that the antitrust laws were meant to be comprehensive anti-corruption laws, there can be little question that they were passed with concerns about the political influence of powerful firms and industry cartels.
Since the 1960s, however, antitrust law’s scrutiny of corrupt and deceptive political practices has been sharply limited by the Noerr-Pennington doctrine, which provides immunity to antitrust liability for conduct that can be described as political or legal advocacy. The doctrine was created through apparent First Amendment avoidance, based on the premise that the Sherman Act could not have been intended to interfere with a right to petition government.
The Noerr decision, dating from 1961, was strained when it was decided and has not aged well. As an interpretation of the antitrust laws, it ignored Congressional concern with political mischief undertaken by conspiracy or monopoly. Its legitimacy has always rested on avoidance of the First Amendment, and while Noerr itself may have legitimately reflected such avoidance, the subsequent growth of a Noerr immunity has blown past any First Amendment-driven defense of its existence. For that reason, others have suggested a reformulation of the doctrine. The better answer is that, lacking constitutional or statutory foundation, Noerr should be overruled.
The First Amendment guarantees freedom of speech, assembly, and “to petition the government for a redress of grievances.” It therefore protects efforts to influence political debate as well as legitimate petitioning in the legislative, judicial or administrative processes. The First Amendment does not, however create a right to bribe government officials, deceive agencies, file false statements, or abuse government process through repeated filings designed only to injure a competitor. Nonetheless, each of these activities has, in some courts at least, been granted immunity under the overgrown Noerr immunity. It is an extra-constitutional outlier ripe for reexamination.
Overruling Noerr would not make political petitioning illegal. It would, instead, require defendants to rely on the First Amendment when seeking to defend what would otherwise be conduct that is illegal under the antitrust laws. Doctrinally, this is to force courts to address whether conduct in question is actually an antitrust violation, and if, so whether it is protected by the First Amendment or not, drawing on an established jurisprudence for some of the problems presented in the Noerr context.
August 13, 2020 | Permalink | Comments (0)
Competition and Investment: Empirical Evidence from Hotel Industry in Taiwan
Competition and Investment: Empirical Evidence from Hotel Industry in Taiwan
Abstract
This paper studies the relationship between competition and investment incentives in the Taiwanese hotel industry. Using detailed firm-level investment, revenue, and sales data, I estimate a discrete choice model for consumer demand, then incorporate these estimates into a dynamic model for investment and entry. This model is then used to evaluate the welfare effects of competition policies. Counterfactual analysis shows that a 20% reduction in entry costs leads to more hotels and lower prices; however, investments decrease by 13%, and thus the overall average quality of hotels decreases. This indicates that consumers may not actually benefit from more competitive market structures.
August 13, 2020 | Permalink | Comments (0)
Wednesday, August 12, 2020
Can Antitrust Trust Blockchain?
Can Antitrust Trust Blockchain?
Abstract
Governments must anticipate today’s fast moving technologies to be effective. Blockchain potentially is the ideal tool to assist antitrust in enforcing regulation and fully exploiting its core principles—competition and consumer welfare. Blockchain offers antitrust an enormous opportunity and as any powerful tool it also has the capacity to harm as well as benefit if abused and left totally uncontrolled. Blockchain is not immune from the economic principle of trust. This chapter explores the delicate balance between regulation of and for blockchain.
August 12, 2020 | Permalink | Comments (0)
Use and Abuse of Bargaining Models in Antitrust
Bargaining is all around us. Bargaining is how prices are set across a range of economic activities such as between licensors and licensees of intellectual property, employees and employers, content providers and distributors, health insurers and hospitals, and in many intermediate product markets. Recently, bargaining has played a central role in a number of high-profile antitrust matters. In 2018, the U.S. Department of Justice challenged AT&T’s acquisition of Time Warner — largely on the basis of a bargaining model. Also, in 2018, the U.S. Federal Trade Commission argued that Qualcomm’s market position in cellular chipsets allowed it to leverage higher royalty rates for its standard essential patents (“SEPs”), in violation of its commitment to license its SEPs on fair, reasonable, and non-discriminatory (“FRAND”) terms. In this article, we assess the value of economic bargaining models to predict outcomes for both horizontal and vertical mergers and for unilateral conduct. To that end, we first provide an overview of the economics of bargaining models and their primary features, including the vertical GUPPI variant. We then discuss these models in the context of recent antitrust cases and detail the uneven judicial adoption of bargaining models. Next, we examine whether the current judicial reticence is justified. We review a body of emerging scholarship that suggest some caution on the use of methodologies to predict harm based on bargaining models. This suggests that a healthy degree of judicial skepticism is warranted — whether coherently articulated in opinions or not. In conclusion, we offer some policy recommendations for the use of bargaining models, which we believe will lead to a more balanced approach regarding their use in antitrust matters.
August 12, 2020 | Permalink | Comments (0)
Attention Intermediaries: Regulatory Options and their Institutional Implications
Attention Intermediaries: Regulatory Options and their Institutional Implications
Abstract
Further regulation of digital platforms is on the horizon. Three types of solution are posited: more aggressive use of competition law, a new dedicated competition law instrument for the European Commission that allows swifter and more effective intervention, and a fresh regulator for systemically significant platforms. The debate contains two gaps. First, at a substantive level the role of other rules is downplayed (e.g. data protection & consumer laws). In other words, the Commission and most commentators wishing for greater regulation look to new tools rather than considering the potential of existing rules. Second, at an institutional level little is said about the impact that the policy proposals may have on other rules and other regulatory authorities. This paper addresses these two issues: it suggests that there are other regulatory options to competition law that should be explored and that investments should be made in facilitating cooperation among regulators to optimize the regulation of attention intermediaries.
August 12, 2020 | Permalink | Comments (0)
Tuesday, August 11, 2020
Follow the Crowd or Follow the Trailblazer? The Differential Role of Firm Experience in Product Entry Decisions in the US Video Game Industry
Follow the Crowd or Follow the Trailblazer? The Differential Role of Firm Experience in Product Entry Decisions in the US Video Game Industry
Date Written: November 2019
Abstract
Firms take cues from their external environment under uncertainty and imitate the actions of others. However, a firm’s own experience may either substitute for these external clues because the firm can evaluate uncertain situations more accurately, or it may complement them because the firm can act more successfully on the external cues. We argue that the type of external cues determines which of the two holds in the context of product entry decisions into market niches. If firms observe a large wave of entrants, own experience conveys more information than the imprecise signal of a mass of other firms. Conversely, if firms observe trailblazers, i.e., highly successful and influential products in a niche, own experience can help firms develop a strategy as a fast follower in a growing niche. We expect the supporting role of own experience in following trailblazers to be especially pronounced in niches that have not been discovered by a large mass of other firms. We study and test our hypotheses in the context of the US PC video game industry between 1991 and 2010 and find support for both the substitutive relationship between own experience and niche popularity and the complementary relationship of own experience and niche trailblazers. However, support for the complementary relationship is limited to less populated niches.
August 11, 2020 | Permalink | Comments (0)
EU State Aid Law and Consumer Protection: An Unsettled Relationship in Times of Crisis
EU State Aid Law and Consumer Protection: An Unsettled Relationship in Times of Crisis
Amsterdam Law School Research Paper No. 2020-32
Amsterdam Centre for European Law and Governance Research Paper No. 2020-05
As a result of the global lockdown, countries around the globe are now facing multiple crises at the same time: a health crisis, a financial crisis, and a collapse in commodity prices, which all interact in complex ways. As a reaction governments and policymakers are providing unparalleled support to firms, financial markets, and households. The effectiveness of these policies is considered central to project worse consequences. In order to coordinate the economic response of the Member States and to mitigate the negative repercussions on the EU economy, the European Commission has adopted a Temporary Framework, which enables Member States to use the full flexibility foreseen under EU state aid rules to support the economy in the context of the COVID-19 outbreak.
However, in the current crisis the world economy and national economies are also shuttered in their micro-elements, at the demand side. As a result of the measures taken by governments to contain the virus, consumers have seen retail choices limited with hundreds of thousands of shops being required to close their doors, a situation that has exposed consumers to a floodgate of unfair, misleading or abusive business practices. Price gouging for essential consumer products coupled with unfair commercial practices have amplified forcing governments to take various measures, for example introducing price caps. Nevertheless, besides these unfair practices more indirect forms of consumer harm is taking place as a result of some of the current state aid measures that many policy makers may not have immediately realized and acted upon.
The current flexibility offered in the State Aid law Temporary Framework has been used by some governments also to tolerate non-compliance with consumer protection rules by undertakings. Such exceptions in fact lead to double burden for consumers. Once as consumers and purchasers of, for example, travel or transport services and second, as taxpayers financing the state aid.
Moreover, this may lead to a violation of EU law that lays down the obligation to take consumer protection requirements “into account in defining and implementing other Union policies and activities” (Article 12 TFEU), a principle also laid down in the EU Charter of Fundamental Rights (Article 38). This normative precedent creates a constitutional basis for considering the requirements of consumer protection in the whole body of EU competition law and policy including the Treaty’s state aid provisions.
The main question this article aims to answer is how state aid law and consumer protection rules interact in EU law and what lessons these interactions provide for managing the current economic crisis in a coordinated and balanced way that takes equal account of interests on the supply and demand side. While the interaction between consumer law and competition law has been subject to various legal and economic studies in the past, the relationship between state aid rules and consumer protection has not been studied so far.
This article fills this gap, by making three novel contributions. First, the article sets out the EU law framework that structures the analysis of how state aid rules and consumer protection interact. It analyses the goals of these two legal areas and how these goals complement or conflict. Second, by presenting two case studies (air transport and energy) it explains and illustrates the constituents of the interaction between these two legal fields and offers an illustration why these intersections should be analyzed in-depth. Third, the article offers policy recommendations that can be applied not only in the current crisis but also beyond, on the coordination and enforcement of these two policies and legal fields.
August 11, 2020 | Permalink | Comments (0)
Impact of the COVID-19 Pandemic on European Antitrust. Mere Adaptations or Real Changes?
Impact of the COVID-19 Pandemic on European Antitrust. Mere Adaptations or Real Changes?
Abstract
The European Commission and the competition authorities of the EU member states responded to the coronavirus crisis with assurances about sufficient flexibility of their instruments. They enabled temporary cooperation between competitors to ensure the supply of essential medical products and services. At the same time, they warned against any misuse of the crisis for overpricing or other monopolistic practices. However, the crisis has also intensified long-term pressures for a fundamental adaptation of European competition rules. The first challenge is represented by Chinese state-backed enterprises as potential acquirers of weakened European competitors. The second source of pressure is the increasingly dominant role of global online platforms. Their role as an irreplaceable infrastructure for management, communication, counselling and distance learning was reinforced in the coronavirus crisis. The Commission and other experts are already discussing appropriate responses. This paper maps the discussion on possible EU responses to these challenges and tries to show the strengths and weaknesses of the proposed solutions and on this basis to estimate the future development of EU antitrust in the post-coronavirus period.
August 11, 2020 | Permalink | Comments (0)
Monday, August 10, 2020
Dynamic Oligopoly and Price Stickiness
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Dynamic Oligopoly and Price Stickiness How does market concentration affect the potency of monetary policy? The ubiquitous monopolistic-competition framework is silent on this issue. To tackle this question we build a model with heterogeneous oligopolistic sectors. In each sector, a finite number of firms play a Bertrand dynamic game with staggered price rigidity. Following an extensive Industrial Organization literature, we focus on Markov equilibria within each sector. Aggregating up, we study monetary shocks and provide a closed-form formula for the response of aggregate output, highlighting three measurable sufficient statistics: demand elasticities, market concentration, and markups. We calibrate our model to the empirical evidence on pass-through, and find that higher market concentration significantly amplifies the real effects of monetary policy. To separate the strategic effects of oligopoly from the effects this has on residual demand, we compare our model to one with monopolistic firms after modifying ! consumer preferences to ensure firms face comparable residual demands. Finally, the Phillips curve for our model displays inflation persistence and endogenous cost-push shocks. |
August 10, 2020 | Permalink | Comments (0)
Concentration Screens for Horizontal Mergers
Concentration Screens for Horizontal Mergers
Volker Nocke and Michael D. Whinston #27533
Abstract:
Concentration-based screens for horizontal mergers, such as those employed in the US DOJ and FTC Horizontal Merger Guidelines, play a central role in merger analysis. However, the basis for these screens, in both form and level, remains unclear. We show that there is both a theoretical and an empirical basis for focusing solely on the change in the Herfindahl index, and ignoring its level, in screening mergers for whether their unilateral effects will harm consumers. We also argue, again both theoretically and empirically, that the levels at which the presumptions currently are set may allow mergers to proceed that cause consumer harm.
August 10, 2020 | Permalink | Comments (0)
An Event Study Analysis of the Impacts of the European Interchange Fee Regulation
August 10, 2020 | Permalink | Comments (0)
Friday, August 7, 2020
A 'Primarily Property' Presumption Is – Still – Really Needed for the IP/Antitrust Interface
A 'Primarily Property' Presumption Is – Still – Really Needed for the IP/Antitrust Interface
Date Written: May 28, 2020
Abstract
Antitrust discussions in the U.S. have a long tradition of describing intellectual property (IP) – primarily patents and copyrights – in unqualified terms of “monopoly”. Although there have been substantial efforts over the past two decades to pull back from this automatic association, the presumption of unqualified monopoly continues to appear in important legal decisions -- as well as in legal and social sciences academic discussions -- that involve IP.
There is another place where these decisions and discussions might start: with a presumption that any IP is “primarily property” – albeit with some important distinctions that separate IP from “garden variety” tangible property and that raise the possibility of market power in some instances.
This paper explores the important similarities – and differences – between “garden variety” property, such as real estate, and IP; it concludes that the similarities are substantial, so that the presumption that IP is “primarily property” is a reasonable alternative starting point for antitrust/IP discussions. It then discusses some beneficial differences that this alternative starting point could have made and/or could still make.
August 7, 2020 | Permalink | Comments (0)
Are Payment Card Systems' Multilateral Interchange Fees Anticompetitive by Object under EU Competition Law?
Are Payment Card Systems' Multilateral Interchange Fees Anticompetitive by Object under EU Competition Law?
Competition Policy International (May 2020)
Csongor István Nagy
Hungarian banks fixed the interchange fee to be used in the two major payment card systems (MasterCard and Visa) on a multilateral basis. This fee is used in inter-bank clearing and is paid by the acquiring bank (which operates the bankcard terminal installed at the merchant) to the issuing bank (which issued the bankcard used for the payment). When the customer pays by card, the acquiring bank charges a fee to the merchant. Afterwards, the acquiring bank passes a portion of the merchant fee on to the issuing bank. In this system, the issuing bank has two sources of income: the cardholder may pay a fee for the issuance of the payment card, and the acquiring bank shares a part of the merchant fee. This makes the payment card industry a two-sided market.
These fees were normally not fixed on a bilateral basis but by means of a single uniform multilateral interchange fee ("MIF"). This practice gave rise to various competition investigations in Europe, where competition authorities approached the MIF in various ways: some considered it to be an agreement to be assessed by its effects, some pronounced this arrangement anticompetitive by object. In the end, the controversies about the MIF resulted in a European legislative intervention in the form of a regulatory cap.
While the MIF may have the appearance of price fixing, as the fee paid in consideration of the services provided by the issuing bank is fixed uniformly by competitors, this conclusion is overshadowed by the fact that the agreement embraces both sides of the market (sellers and buyers), and the MIF may be regarded as ancillary to the effective operation of the payment card system and as a means to encourage use of this payment method.
In Case Vj-18/2008 MIF, the Hungarian Competition Office ("HCO") used a combination of the two approaches: it condemned Hungarian banks for fixing the domestic MIF and for treating the two payment card companies alike as anticompetitive both by object and effect. The decision was appealed, and the Hungarian Supreme Court ("Kúria") submitted four preliminary questions. The Court of Justice of the European Union ("CJEU") answered the first two questions, but deemed the remainder to be inadmissible. The first question raised no difficult issues of interpretation. The Court confirmed that anticompetitive object and anticompetitive effect may be used as parallel legal bases by competition authorities and private plaintiffs: it is not against the law to pronounce the same agreement to be anticompetitive both by object and effect. The second question proved to be more difficult: the Hungarian Supreme Court requested the CJEU's guidance as to whether Hungarian banks' fixing of the interchange fee on a multilateral basis and uniformly in respect of the two payment card systems (MasterCard and Visa) was anticompetitive by object.
August 7, 2020 | Permalink | Comments (0)
Use and Abuse of Bargaining Models in Antitrust
Bargaining is all around us. Bargaining is how prices are set across a range of economic activities such as between licensors and licensees of intellectual property, employees and employers, content providers and distributors, health insurers and hospitals, and in many intermediate product markets. Recently, bargaining has played a central role in a number of high-profile antitrust matters. In 2018, the U.S. Department of Justice challenged AT&T’s acquisition of Time Warner — largely on the basis of a bargaining model. Also, in 2018, the U.S. Federal Trade Commission argued that Qualcomm’s market position in cellular chipsets allowed it to leverage higher royalty rates for its standard essential patents (“SEPs”), in violation of its commitment to license its SEPs on fair, reasonable, and non-discriminatory (“FRAND”) terms. In this article, we assess the value of economic bargaining models to predict outcomes for both horizontal and vertical mergers and for unilateral conduct. To that end, we first provide an overview of the economics of bargaining models and their primary features, including the vertical GUPPI variant. We then discuss these models in the context of recent antitrust cases and detail the uneven judicial adoption of bargaining models. Next, we examine whether the current judicial reticence is justified. We review a body of emerging scholarship that suggest some caution on the use of methodologies to predict harm based on bargaining models. This suggests that a healthy degree of judicial skepticism is warranted — whether coherently articulated in opinions or not. In conclusion, we offer some policy recommendations for the use of bargaining models, which we believe will lead to a more balanced approach regarding their use in antitrust matters.
August 7, 2020 | Permalink | Comments (0)
Thursday, August 6, 2020
Exploitative Pricing in the Time of Coronavirus—The Response of EU Competition Law and the Prospect of Price Regulation
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Article 102 (a) TFEU can apply to coronavirus profiteering despite the difficulties of proof associated with finding an exploitative abuse of collective dominant position.
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According to ABG Oil case, it can be argued that the firms selling goods in high demand due to the coronavirus outbreak have ‘transitory market power’ and so they hold a temporary position of market strength.
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The issuance of ‘commitment decisions’ by the European Commission is preferable to the imposition of fines to firms, because it could reset prices to a non-excessive level, rather than merely alleviating the harmful effects of excessive pricing.
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Price regulation is a much-disputed enterprise in contemporary regulatory practice, but in the absence of self-correcting excessive prices, the pragmatism calls for it.
August 6, 2020 | Permalink | Comments (0)
Openness and Integrity in Antitrust
Openness and Integrity in Antitrust
Stavros Makris
ABSTRACT
Reasonable disagreements are pervasive in antitrust, yet the leading antitrust systems function in a broadly effective and consistent manner. How can we explain this paradox? The tentative reply to this question is that the two main antitrust jurisdictions have managed to do so by adopting the features of ‘responsive law’ (RL). Therefore, antitrust institutions could further benefit if they adopt the RL framework to understand and deal with reasonable disagreements.
To support this argument, I contend that reasonable disagreements are endogenous in antitrust systems, as they derive from antitrust’s fuzzy mandate, conceptually elastic vocabulary, and rules and standards mode of analysis. In a nutshell, reasonable disagreements are the by-product of two complementary yet antithetical forces of antitrust: openness and integrity. Nonetheless, conventional wisdom has it that such disagreements are temporary indeterminacies that will eventually be eradicated. This view stems from a conceptualization of antitrust as a form of ‘autonomous law’. However, this model of law does not take reasonable disagreements seriously and as a result offers an inadequate modus operandi for dealing with them. The ‘RL’ model, on the contrary, recognizes the endogeneity of reasonable disagreements and the underlying forces that generate them. Instead of attempting to eliminate them, therefore, the RL model suggests that antitrust institutions should seek to tame and exploit them. For this purpose, this model proposes a legal-institutional modus operandi for calibrating the eliciting forces of reasonable disagreements, that is, openness and integrity. The hallmarks of this approach are constructive teleological interpretation, experimentalist network-based enforcement by postbureaucratic enforcers, and courts operating as catalysts.
August 6, 2020 | Permalink | Comments (0)
The Data Sharing Paradox: BigTechs in Finance
The Data Sharing Paradox: BigTechs in Finance
The European wave of regulatory interventions aimed at promoting access to data and data sharing shows no signs of stopping. However, concerns are being expressed about alleged unintended consequences of data portability in financial markets. In particular, new calls have been voiced to contain the engagement of BigTech platforms with retail banking. The paper argues that asymmetrical regulatory measures imposed on BigTechs entry in the financial industry are likely to tilt the market in favor of incumbent banks to the detriment of small players as well as consumer welfare. Such an early regulatory intervention would actively help larger traditional banks to entrench their market power further, ultimately frustrating the pro-competitive potential of the access to account rule enshrined in the revised Payment Service Directive (PSD2).
August 6, 2020 | Permalink | Comments (0)
Wednesday, August 5, 2020
Competition, Innovation and the Use of Innovations
Competition, Innovation and the Use of Innovations
The Journal of Industrial Economics, Vol. 67, Issue 3-4, pp. 565-592, 2019
Date Written: September‐December 2019
Abstract
I examine the effect of competition on the production and use of innovations using evidence from a natural experiment of policy reform, the introduction of cartel legislation in the U.K. in the late 1950’s. I compare manufacturing industries which had been collusive and were therefore affected by the policy with those that had been competitive and were not affected. The intensification of competition following the abolition of cartels caused a short‐run decrease in innovations produced, but had no significant effect in the long run. In contrast, innovations used increased both in the short run and in the long run.
August 5, 2020 | Permalink | Comments (0)
Oliver E. Williamson: A Personal Appreciation
By virtually any measure, Oliver Williamson has been one of the most influential scholars in the economic organization and institutions. He is widely credited (including by Ronald Coase himself) with rescuing transaction cost economics from its tautological origins by showing how the advantages and liabilities of alternative organizational arrangements could be related to features of transactions in a way that allowed refutable hypotheses to be generated and tested. In doing so, Williamson opened the door to the systematic investigation of a host of organizational problems that had previously resisted economic analysis. Though firmly rooted in economics, Williamson’s scholarship drew on and had a tremendous influence on law, political science, and organization theory. Indeed, there is hardly a niche in the social sciences that has not been affected in some way by Williamson’s writings.
In this essay, I try to convey some of the personal and professional qualities of Oliver Williamson drawn from recollections of my relationship with him over the years.
August 5, 2020 | Permalink | Comments (0)
