Antitrust & Competition Policy Blog

Leniency Policies and Cartel Success: An Experiment

Leniency Policies and Cartel Success: An Experiment

Jeong Yeol Kim

University of Arizona

Charles Noussair

University of Arizona

Abstract

Cartels are often fought by granting leniency, in the form of forgiveness of penalties, to whistle-blowers. This study employs a laboratory experiment to compare leniency programs that differ with respect to fine size and whether a second whistle-blower may apply for leniency. The results show that leniency does not affect the probability that a cartel forms, but is effective in exposing cartels and thereby inhibiting cartel success. Higher fines are more effective, but allowing leniency to a second whistle-blower is no more effective than granting leniency to only one whistle-blower.

Call for papers: EU Competition Law Enforcement: Challenges to Be Overcome

The Centre for Antitrust and Regulatory Studies (CARS) of the Faculty of Management of the University of Warsaw invites contributions to the conference ‘EU Competition Law Enforcement: Challenges to Be Overcome’ which will be held in Warsaw (Poland) on 27 May 2022. The conference is organised jointly with Bocconi University in the framework of the Jean Monnet Network of Enforcement of EU Law (EULEN).

We welcome abstract submissions from scholars conducting research in the area of the enforcement of EU competition law in all its dimensions. Anyone interested in being considered on the basis of this Call for Papers is requested to send an abstract (max 500 words) and a short bio to cars@wz.uw.edu.pl no later than 1 February 2022. Successful applicants will be notified by 15 February 2022. More information can be found in the attached poster.

On Sellers' Collusion in E-Commerce Marketplaces

On Sellers' Collusion in E-Commerce Marketplaces

 

Michele Bisceglia

University of Bergamo - Department of Management, Economics and Quantitative Methods; University of Toulouse 1 - Toulouse School of Economics (TSE)

 

Abstract

Motivated by a recent competition policy debate on retailers' collusion in online marketplaces, this paper studies a simple model to shed light on the competitive and welfare effects of this conduct. I find that, when retailers sell their products through a monopolistic e-commerce platform, consumers are not necessarily harmed by their collusive behaviour. Specifically, if the platform adopts the agency model and is vertically integrated (i.e., sells a private label in competition with third-party sellers), a cartel between third-party sellers induces it to charge them lower fees and to set a lower price for its private label. As a consequence, when products are sufficiently homogeneous, also the cartel members charge lower prices compared to the non-cooperative equilibrium, and collusion benefits consumers and increases total welfare. Notably, these results hold even though the platform has all the bargaining power vis-à-vis (competing or colluding) third-party sellers, and they collude explicitly.

Digital Platforms and the New 19a Tool in the German Competition Act

Digital Platforms and the New 19a Tool in the German Competition Act

 

Jens-Uwe Franck

University of Mannheim - Department of Law

Martin Peitz

University of Mannheim - Department of Economics

Date Written: May 2, 2021

Abstract

In this article we present and critically evaluate the newly introduced section 19a of the German Competition Act. The provision applies to operators of two-sided platforms and networks that the Bundeskartellamt classifies as being of ‘paramount significance for competition across markets’. Using examples of previous abuse cases, we discuss which firms may eventually be the addressees of the new instrument. We analyse the list of prohibitable practices and point to normative uncertainties as regards the assessment of platform activities. We discuss the merits of the abridged judicial review. Finally, we consider the pro-spect of continuing fragmentation in the legal treatment of digital platforms in the internal market and assess the interaction with the Digital Markets Act as proposed by the European Commission.

Oligopolistic Price Leadership and Mergers: The United States Beer Industry

Miller, Nathan H., Gloria Sheu and Matthew C. Weinberg.  "Oligopolistic Price Leadership and Mergers: The United States Beer Industry." American Economic Review, 111(10):3123-59.

Abstract: We study a repeated game of price leadership in which a firm proposes supermarkups over Bertrand prices to a coalition of rivals. Supermarkups and marginal costs are recoverable from data on prices and quantities using the model's structure. In an application to the beer industry, we find that price leadership increases profit relative to Bertrand competition by 17 percent in fiscal years 2006 and 2007, and by 22 percent in 2010 and 2011, with the change mostly due to consolidation. We simulate two mergers, which relax binding incentive compatibility constraints and increase supermarkups. These coordinated effects arise even with efficiencies that offset price increases under Bertrand competition.

Dynamic Games in Empirical Industrial Organization

Dynamic Games in Empirical Industrial Organization
Victor Aguirregabiria, Allan Collard-Wexler, and Stephen P. Ryan 

Abstract:

This survey is organized around three main topics: models, econometrics, and empirical applications. Section 2 presents the theoretical framework, introduces the concept of Markov Perfect Nash Equilibrium, discusses existence and multiplicity, and describes the representation of this equilibrium in terms of conditional choice probabilities. We also discuss extensions of the basic framework, including models in continuous time, the concepts of oblivious equilibrium and experience-based equilibrium, and dynamic games where firms have non-equilibrium beliefs. In section 3, we first provide an overview of the types of data used in this literature, before turning to a discussion of identification issues and results, and estimation methods. We review different methods to deal with multiple equilibria and large state spaces. We also describe recent developments for estimating games in continuous time and incorporating serially correlated unobservables, and discuss the use of machin! e learning methods to solving and estimating dynamic games. Section 4 discusses empirical applications of dynamic games in IO. We start describing the first empirical applications in this literature during the early 2000s. Then, we review recent applications dealing with innovation, antitrust and mergers, dynamic pricing, regulation, product repositioning, advertising, uncertainty and investment, airline network competition, dynamic matching, and natural resources. We conclude with our view of the progress made in this literature and the remaining challenges.

The Competitive Effects of Vertical Integration in Platform Markets

The Competitive Effects of Vertical Integration in Platform Markets

By:

Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School); Thomas Trégouët (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract:

We analyze vertical integration between platforms providing operating systems to manufacturers of devices in presence of indirect network effects between buyers of devices and developers of applications. Vertical integration creates market power over non-integrated manufacturers and application developers. That market power provides the merged entity with the ability to coordinate pricing decisions across both sides of the market, which allows to better internalize network effects. Vertical integration does not systematically lead to foreclosure and can benefit all parties, even in the absence of efficiency gains. Its competitive impact depends on the strength and the structure of indirect network effects.

The Competitive Effects of Mergers with Cournot Competition

The Competitive Effects of Mergers with Cournot Competition

 

Markus Reisinger

Frankfurt School of Finance & Management - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

Hans Zenger

European Union - Directorate General for Competition

Abstract

This paper provides a full characterization of the price effects of horizontal mergers in the Cournot model with heterogeneous firms and constant returns to scale. We show that the price change brought about by a merger only depends on the smaller merging firm's share and the number of firms, but is independent of the distribution of shares among other firms. Price effects are determined by factors that are either directly observable by competition authorities or can be bounded under relatively mild assumptions on demand curvature or pass-through. Estimates based on concentration measures can instead be seriously misleading. We also provide closed-form solutions for calibration that approximate merger effects on the basis of simple pre-merger parameters.

American Antitrust Criteria and Their Application to the Major Platforms

American Antitrust Criteria and Their Application to the Major Platforms

 

Sarah Oh

Technology Policy Institute

 

Abstract

In 2020-21, lawsuits have been filed raising antitrust complaints in state and federal district court by coalitions of state attorneys general, the U.S. Department of Justice, the Federal Trade Commission, and private firms against four large American technology companies, Amazon, Apple, Facebook, and Google. In this paper, I review the complaints and the criteria that will be used by judges and juries to assess whether Amazon, Apple, Facebook, and Google engaged in anticompetitive conduct. The courts will use the consumer welfare standard, rule of reason analysis, and other legal precedents in antitrust law and competition policy to prove harm. In each case, the courts will ask litigants to present evidence and develop theories of market definition, market concentration, market structure, and exclusionary agreements for different components of the digital economy.

Collusion among autonomous pricing algorithms utilizing function approximation methods

Collusion among autonomous pricing algorithms utilizing function approximation methods

By:

Jeschonneck, Malte

Abstract:

The increased prevalence of pricing algorithms incited an ongoing debate about new forms of collusion. The concern is that intelligent algorithms may be able to forge collusive schemes without being explicitly instructed to do so. I attempt to examine the ability of reinforcement learning algorithms to maintain collusive prices in a simulated oligopoly of price competition. To my knowledge, this study is the first to use a reinforcement learning system with linear function approximation and eligibility traces in an economic environment. I show that the deployed agents sustain supra-competitive prices, but tend to be exploitable by deviating agents in the short-term. The price level upon convergence crucially hinges on the utilized method to estimate the qualities of actions. These findings are robust to variations of parameters that control the learning process and the environment.

Part IIIB - Why There is No Economic Case for Additional Access Regulation

Part IIIB - Why There is No Economic Case for Additional Access Regulation

 

 

Stephen P. King

Monash University - Department of Economics; Productivity Commission

 

Abstract

Australia's competition laws include a general access regime for monopoly infrastructure (Part IIIA of the Competition and Consumer Act). Recently, there have been calls to extend this law - through a new 'Part IIIB'. This paper considers the proposed amendments and finds that there is no economic case for change.

Proponents of reform argue that the existing law has a gap. Our analysis shows that this is wrong and the current law can deal with both vertically integrated and separated facilities. We show that the current 'declaration criteria' identify both the relevant infrastructure services and the circumstances when regulatory action is warranted.

We also consider if there are either competition problems or economic distortions due to investment ‘hold up’ that could be fixed by Part IIIB? For competition, we conclude that any relevant concerns are already addressed by Part IIIA. For investment ‘hold up’ we note that this is a broad issue that arises in many industries. At best, Part IIIB would crowd out preferred business-to-business solutions to the hold-up problem. At worst, Part IIIB would create, rather than reduce, economic distortions.

Overall, we find that the case for further access regulation through a Part IIIB has not been established. Given Part IIIA, there is no regulatory gap for monopoly infrastructure industries in Australia that could be fixed by the proposed Part IIIB. Put simply, Part IIIB is a solution in search of a problem.

The Digital Markets Act and Private Enforcement: Proposals for an Optimal System of Enforcement

The Digital Markets Act and Private Enforcement: Proposals for an Optimal System of Enforcement

 

 

Assimakis Komninos

University College London - Faculty of Laws

 

Abstract

The DMA Proposal is silent about private enforcement, although the general view takes this as granted. Indeed, as the Commission’s Proposal currently stands, national courts would apply Articles 5 and 6 and enforce the related obligations in civil litigation. However, the prospect of unlimited private enforcement raises concerns about fragmentation, especially in view of the novel nature of the DMA rules. For this reason, the EU legislator would be well-advised to introduce certain limitations on private enforcement and provide for a rule of precedence for public enforcement. Private enforcement should be allowed in its follow-on but not in its stand-alone form. This limitation could be revisited after a number of years and once a body of precedent on the DMA has been built. The DMA should also include concrete mechanisms of co-ordination and co-operation with the European Commission, with a view to safeguarding the consistent application of its rules in the Union.

Contracts as a Barrier to Entry: Impact of Buyer's Asymmetric Information and Bargaining Power

Contracts as a Barrier to Entry: Impact of Buyer's Asymmetric Information and Bargaining Power

By:

David Martimort (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EHESS - École des hautes études en sciences sociales); Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School); Thomas Trégouët (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract:

An incumbent seller contracts with a buyer and faces the threat of entry. The contract stipulates a price and a penalty for breach if the buyer later switches to the entrant. Sellers are heterogenous in terms of the gross surplus they provide to the buyer. The buyer is privately informed on her valuation for the incumbent's service. Asymmetric information makes the incumbent favor entry as it helps screening buyers. When the entrant has some bargaining power vis-à-vis the buyer and keeps a share of the gains from entry, the incumbent instead wants to reduce entry. The compounding effect of these two forces may lead to either excessive entry or foreclosure, and possibly to a fixed rebate for exclusivity given to all buyers.

Dec 9, 3-4:30 PM (CET) UNCTAD online launch of the Report on Developing Countries' Experience with Extraterritoriality in Competition Law Enforcement

Save the Date: on Dec 9, 3-4:30 PM (CET) UNCTAD will be hosting an online launch of the Report on Developing Countries' Experience with Extraterritoriality in Competition Law Enforcement.

The Report reflects on developing countries’ experience with the extraterritorial application of competition law, by drawing from contributions from 40 developing countries and economies in transition. It results from a study conducted by Dr Marek Martyniszyn in the framework of the UNCTAD Research Partnership Platform.

Presentation of the Report will be followed by input from Brazil (Jade Lime of Conselho Administrativo de Defesa Econômica - CADE) and Turkey (Nesrin Ata of Turkish Competition Authority) and a Panel of Experts (Professor Alexey Ivanov, Professor  Imelda Maher, Professor Qianlan Wu and Professor Spencer Waller).

Register at: https://unctad.org/meeting/launch-report-extraterritoriality-competition-law-enforcement

The congressional debate over antitrust: It's about time

Richard Steuer (Fordham) has a an op-ed here.

Dynamic Games in Empirical Industrial Organization

Dynamic Games in Empirical Industrial Organization

By:

Victor Aguirregabiria; Allan Collard-Wexler; Stephen P. Ryan

Abstract:

This survey is organized around three main topics: models, econometrics, and empirical applications. Section 2 presents the theoretical framework, introduces the concept of Markov Perfect Nash Equilibrium, discusses existence and multiplicity, and describes the representation of this equilibrium in terms of conditional choice probabilities. We also discuss extensions of the basic framework, including models in continuous time, the concepts of oblivious equilibrium and experience-based equilibrium, and dynamic games where firms have non-equilibrium beliefs. In section 3, we first provide an overview of the types of data used in this literature, before turning to a discussion of identification issues and results, and estimation methods. We review different methods to deal with multiple equilibria and large state spaces. We also describe recent developments for estimating games in continuous time and incorporating serially correlated unobservables, and discuss the use of machine learning methods to solving and estimating dynamic games. Section 4 discusses empirical applications of dynamic games in IO. We start describing the first empirical applications in this literature during the early 2000s. Then, we review recent applications dealing with innovation, antitrust and mergers, dynamic pricing, regulation, product repositioning, advertising, uncertainty and investment, airline network competition, dynamic matching, and natural resources. We conclude with our view of the progress made in this literature and the remaining challenges.

The Alston Case: Why the NCAA Did not Deserve Antitrust Immunity and Did not Succeed under a Rule-of-Reason Analysis

The Alston Case: Why the NCAA Did not Deserve Antitrust Immunity and Did not Succeed under a Rule-of-Reason Analysis

 

 

Michael A. Carrier

Rutgers Law School

Chris Sagers

Cleveland-Marshall College of Law, Cleveland State University

 

Abstract

Fall Saturdays and college football. The March Madness basketball tournament. The NCAA plays an important role in many Americans’ lives. But for decades, the association has justified its restrictions on compensation to student-athletes on the basis of “amateurism.” Those attempts just ran into the brick wall of NCAA v. Alston.

This Article is adapted from a brief we filed on behalf of 65 professors in the Alston case. Because the arguments made by the NCAA and the athletic conferences (together, “NCAA”) have been employed so frequently and are so misguided, we address them here. After addressing them, we describe the Supreme Court’s rejection of the NCAA’s arguments.

Central to the Alston case is the NCAA’s pursuit of “amateurism.” For decades, the NCAA has relied on this concept, which involves some version of student-athletes not being paid or being paid limited amounts of money. In the Alston case, the NCAA restricted not only payments unrelated to education but also those related to education—covering, for example, tutoring, scientific equipment, and computers.

Part I of this Article shows how the NCAA’s attempt to obtain immunity is not consistent with fundamental underpinnings of antitrust law. Part II focuses on the Supreme Court’s 1984 decision in NCAA v. Board of Regents of the University of Oklahoma, in which the Court discussed amateurism in dicta in the course of holding that the NCAA’s restrictions on television contracts violated antitrust law. Part III focuses on the Rule of Reason, the form of antitrust analysis used by most courts today, to show how the NCAA’s restrictions were anticompetitive.

We conclude that in Alston, the NCAA sought the knockout punch of antitrust immunity. To put it mildly, it was not successful. Student-athletes will be the beneficiaries.

Monopoly and Monopsony: Antitrust Standing, Injury, and Damages

Monopoly and Monopsony: Antitrust Standing, Injury, and Damages

 

 

Tirza Angerhofer

University of Florida - Warrington College of Business Administration - Department of Economics; Duke University - Department of Economics

Roger D. Blair

University of Florida

 

Abstract

This article examines the economic consequences of collusion in both the output market and one of the input markets. It examines the results of sequential collusion, which leads to complications and inconsistencies in measuring antitrust damages. It also examines simultaneous collusion in both the input and output markets. Ultimately, the profit maximizing equilibrium is identical but there are complications along the way to the final collusive equilibrium. The article explores the private plaintiff problems involving antitrust standing, proving antitrust injury, and estimating antitrust damages.

EU Merger Control between Law and Discretion: When Is An Impediment to Effective Competition Significant?

EU Merger Control between Law and Discretion: When Is An Impediment to Effective Competition Significant?

Pablo Ibáñez Colomo

London School of Economics - Law Department

Abstract

This paper considers the interpretation of the substantive test laid down in Article 2 of Regulation 139/2004. It focuses on horizontal mergers in the so-called ‘gap’ cases, which would not result in the creation or the strengthening of a (single or collective) dominant position. In its practice and soft law instruments, the Commission has construed Article 2 in such a way that virtually any transaction involving actual or potential competitors could lead to a finding of a significant impediment to effective competition. Under this approach, the substantive test would be fulfilled, in principle, in every horizontal merger. In CK Telecoms, the General Court crafted an alternative framework that is capable of meaningfully constraining administrative action and ensures that judicial review in EU merger control remains effective.

Data Collaboratives, Competition Law and the Governance of EU Data Spaces

Data Collaboratives, Competition Law and the Governance of EU Data Spaces

 

 

Nicolo Zingales

Fundação Getulio Vargas (FGV); Tilburg Law and Economics Center (TILEC); Tilburg University - Tilburg Institute for Law, Technology, and Society (TILT); Stanford University -

Abstract

An increasing number of studies have suggested the imposition of data access and data sharing obligations for online platforms or gatekeepers. Some of these obligations have been included in the proposed Digital Markets Act and Digital Services Act, which either presuppose or encourage the creation of repositories of information accessible to qualified actors. In parallel, the European Commission is promoting for strategic economic sectors and domains of public interest the concept of common European data spaces, defined as “large pools of data in these sectors and domains, combined with the technical tools and infrastructures necessary to use and exchange data, as well as appropriate governance mechanisms”. However, we are yet to know the rules, procedures and institutional safeguards applicable to these data sharing mechanisms, which are undoubtedly crucial when it comes to determining their legality under competition law. This chapter sketches the challenges involved in this determination for a wide range of collaborations revolving around data access and data sharing, which we call “data collaboratives”.