Antitrust & Competition Policy Blog

Competition Commission of India's 'Control' Quandary - Practice, Precedent, and Proposals

Competition Commission of India's 'Control' Quandary - Practice, Precedent, and Proposals

 

Prateek Bhattacharya

OP Jindal Global University - Jindal Global Law School

Abstract

The Competition Commission of India’s (CCI) journey with “control” has been the subject of much discussion among competition law practitioners, businesses, and within the halls of the regulator’s office itself. As the new decade witnesses an increase in the reliance of technology as well as a consolidation in conventional industries, both catalysed by the Covid-19 pandemic, there is a corresponding increase in activity in the Indian merger market. It is therefore crucial for businesses contemplating mergers and/or acquisitions, to have a clear sense of the hurdles they need to cross, particularly if the merger activity in question is in the same or in a related industry. Since such activity may have an impact on competition in the market, the CCI would need to provide clarity on what constitutes control, and in which situations transacting parties are to approach the CCI. In addition, the CCI must be transparent in what factors it considers when assessing whether a control transaction causes anti-competitive effects. This paper proposes that the CCI provide a clear and concise list of scenarios which it considers as amounting to control, from the perspectives of both notifiability as well as from competitive effects and suggests a way forward for the CCI to resolve its control quandary.

Open Banking and the Ambiguous Competitive Effects of Data Portability

Open Banking and the Ambiguous Competitive Effects of Data Portability

 

 

Giuseppe Colangelo

University of Basilicata, Department of Mathematics, Computer Science and Economics; Stanford Law School; LUISS Guido Carli, Department of Business and Management

Oscar Borgogno

Bank of Italy; University of Turin, Faculty of Law; University of Oxford, Saïd Business School, Faculty of Law

 

 

Abstract

In recent years several interventions have been undertaken to encourage competition by promoting access to data and facilitating data sharing and portability. The banking sector has been usually designated as a testing ground. Indeed, data play a central role in the provision of FinTech-enabled services and, since transaction data are jealously conserved by legacy banks, the commercial viability of FinTech players is undermined by the lack of access to this essential resource. Against this backdrop, by reducing switching costs and promoting multi-homing the Open Banking has emerged as a new competitive paradigm which would allow firms and consumers to enjoy simultaneous and frictionless services and products offered by different providers. However, the sharing of account information may also favour the entry of large online platforms. Therefore, concerns have been raised about the effectiveness of data portability in fostering market competition.

Competition in Pricing Algorithms

Competition in Pricing Algorithms

Zach Y. Brown & Alexander MacKay

 

Increasingly, retailers have access to better pricing technology, especially in online markets. Using hourly data from five major online retailers, we show that retailers set prices at regular intervals that differ across firms. In addition, faster firms appear to use automated pricing rules that are functions of rivals' prices. These features are inconsistent with the standard assumptions about pricing technology used in the empirical literature. Motivated by these facts, we consider a model of competition in which firms can differ in pricing frequency and choose pricing algorithms rather than prices. We demonstrate that, relative to the standard simultaneous price-setting model, pricing technology with these features can increase prices in Markov perfect equilibrium. A simple counterfactual simulation implies that pricing algorithms lead to meaningful increases in markups in our empirical setting, especially for firms with the fastest pricing technology.

Anything, Anytime, Anywhere: Is Antitrust Ready for Flexible Market Arrangements?

Anything, Anytime, Anywhere: Is Antitrust Ready for Flexible Market Arrangements?

 

Barak Orbach

University of Arizona

Abstract

The migration of business and social activities from physical to virtual venues, once known as the transition to the “New Economy,” is one of the defining characteristics of the digital revolution. This article explores a relatively underdeveloped aspect of the migration: the proliferation of fluid forms of arrangements, which, in the absence of a better term, I call flexible market arrangements (FMAs). In their essence, FMAs are alternatives to some of the structured arrangements that pervaded the brick-and-mortar economy. The core feature of FMAs—the flexibility—is derived from the elimination of economic constraints that are inherent to activities in physical spaces, such as the location of workers and consumers, capital investments, long-term contracts, employment relations, and preferences for in-person interactions. Concerns about competition in digital and labor markets and long-term trends in income and wealth inequality have shaped debates over antitrust policies in recent years. These debates, I argue, have failed to identify adequately the significance of the increasing prevalence of FMAs.

This article explains why the rapid spread of FMAs will become the subject of antitrust litigation, investigations, and legislative proposals. It further reviews changes in antitrust law and antitrust analysis that the proliferation of FMAs is likely to trigger.

Owning the Agent: Hospital Influence on Physician Behaviors

Owning the Agent: Hospital Influence on Physician Behaviors

Haizhen Lin, Ian M. McCarthy & Michael R. Richards

 

 

The organizational structure of U.S. health care has changed dramatically in recent years, with nearly half of physicians now employed by hospitals. This trend toward increasing vertical alignment between physicians and hospitals may alter physician behavior relative to physicians remaining in independent or group practices. We examine the effects of such vertical alignment using an instrumental variable strategy and a clinical context facilitating well-defined episodes of care. We find relatively modest positive effects (point estimates of 7% or lower) on total Medicare payments per episode, characterized by an increase in billable activity among other integrated physicians alongside a large decrease in activity among non-integrated providers. Acquiring hospitals ultimately capture more revenue following a physician practice acquisition; yet, the smaller overall bundle of care generates no net savings to Medicare due to location-based payment rules favorable to hospitals.

Market Size and Research: Evidence from the Pharmaceutical Industry

Market Size and Research: Evidence from the Pharmaceutical Industry

Dennis Byrski, Fabian Gaessler & Matthew J. Higgins

 

 

Prior literature has established a link between changes in market size and pharmaceutical innovation; whether a link exists with scientific research remains an open question. If upstream research is not responsive to these changes, the kinds of scientific discoveries that flow into future drug development could be disconnected from downstream demand. We explore this question by exploiting the effects of quasi-experimental variation in market size introduced by Medicare Part D. We find no causal relationship between market size and biomedical research in the decade following the implementation of Medicare Part D. While many factors have been shown to motivate scientists to conduct research, this result suggests that changes in market size provide no such incentive. We do find, however, limited support for a response by corporate scientists conducting applied research. Implications for pharmaceutical innovation policy are discussed.

Digitization and Pre-purchase Information: The Causal and Welfare Impacts of Reviews and Crowd Ratings

Digitization and Pre-purchase Information: The Causal and Welfare Impacts of Reviews and Crowd Ratings

Reimers, Imke and Joel Waldfogel. 2021. "Digitization and Pre-purchase Information: The Causal and Welfare Impacts of Reviews and Crowd Ratings." American Economic Review, 111(6):1944-71.

Abstract: Digitization has led to many new creative products, straining the capacity of professional critics and consumers. Yet, the digitization of retailing has also delivered new crowd-based sources of pre-purchase information. We compare the relative impacts of professional critics and crowd-based Amazon star ratings on consumer welfare in book publishing. Using various fixed effects and discontinuity-based empirical strategies, we estimate their causal impacts on sales. We use these causal estimates to calibrate a structural demand model. The aggregate effect of star ratings on consumer surplus is, in our baseline estimates, more than ten times the effect of traditional review outlets.

CCP Conference 2021 24-25 June

CCP Conference 2021 Rethinking Consumer Policy Lessons Learned and Options for Reform 24-25 June | Online | Free to Attend CCP’s annual conference is a flagship event for fostering exchanges between professionals, policymakers and academic researchers.   This year’s topic focuses on the intersection of consumer policy and competition. The conference will be fully online. At this conference you can be informed by a diverse set of voices, including:   Oren Bar-Gill (Harvard University) Marshini Chetty (University of Chicago) Kate Collyer (FCA) Jonathan Faull (Brunswick Group) Amelia Fletcher (CCP) Nathan Francis (Ofcom) Paul Heidhues (Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine Universität Düsseldorf) William Kovacic (GW Law) Jan Krämer (University of Passau & CERRE) Kai-Uwe Kühn (CCP) David Laibson (Harvard University) George Lusty (CMA) Bruce Lyons (CCP) Danilo Montesi (University of Bologna) Agustín Reyna (BEUC) Christine Riefa (Brunel University) Grant Saggers (NERA) Fiona Scott-Morten (Yale University) Jennifer Storey (Clifford Chance) Bob Sugden (CCP) With thanks to our 2021 Conference sponsor NERA Economic Consulting   Consumer protection is in the policy spotlight like never before, with new digital regulation and proposals to revise consumer law. It is timely to take stock of what we have learned about the effectiveness of past consumer interventions, consider new challenges, and implications for policy developments. The conference will bring together academics from various disciplines, policymakers and practitioners to address these topical and difficult questions. The discussions should prove of interest for academics, policymakers and practitioners. At CCP we adopt a position of academic neutrality, and as such seek to present a balanced and informed position on the issues discussed.   The conference should be of interest to academics, policymakers and practitioners with an interest in cutting edge economic and legal thinking on digital platforms from a competition and consumer policy perspective.   Full Programme Available Here Register Here! Industrial Organisation Summer School Platform Economics Summer School In addition to the CCP annual conference, please note that the School of Economics and CCP are running an IO Summer School on Platform Markets this June. This virtual school will involve lectures with Kai-Uwe Kuhn in the morning and case discussions on the same themes in the afternoon with inter-disciplinary faculty participation.  For more information and registration, please contact ccp@uea.ac.uk. Click here to view the programme for the Summer School

The Dirty Dozen of football and Anti-trust

The Dirty Dozen of football and Anti-trust

Christian Bergqvist

University of Copenhagen - Faculty of Law

Abstract

One of the notable perks of being an academic is the ability to not only combine business and pleasure, but also to take an interest in cases that, for political or practical reasons, are unlikely to come about. An anti-trust investigation into the planned creation of a new European football league, called the Super League, merges all of these. Not only because it involves anti-trust and football, but also because it appears less likely that any cases will emerge. It is not that they are unwarranted, but rather, for more substantial reasons. Primarily because the project looks dead on arrival, as clubs are starting to renege on their earlier promises of support. Equally important, no (sane) enforcers would freely meddle with issues and questions that are guaranteed to alienate somebody (if not everybody), providing very little incentive to intervene unless compelled to do so. This should not prevent us, however, from exploring the matters including any potential anti-trust issues embedded in the plans for a new football league.

How Tullock Dissipated the Whole Monopoly Model

How Tullock Dissipated the Whole Monopoly Model

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

Abstract

Tullock tried to inflate the damage caused by a monopolist by including its profit. This paper proves that his attempt was unsuccessful. Instead, Tullock had successfully dissipated the whole monopoly model. Congratulations!

India's Cartel Penalty Practices, Optimal Restitution and Deterrence

India's Cartel Penalty Practices, Optimal Restitution and Deterrence

 

Aditya Bhattacharjea

Delhi School of Economics, University of Delhi

Oindrila De

Institute of Economic Growth

Abstract

We review the cartel penalty and leniency practices of the Competition Commission of India (CCI), in light of the law and economics literature on optimal penalties, as well as current practices in different jurisdictions. Our analysis reveals that although India’s Competition Act allows for a much harsher penalty than other jurisdictions in cartel cases, the actual practices followed by the CCI are often inconsistent and non-transparent, resulting in a large number of court cases and very low penalty recovery. This inconsistency also weakens the leniency programme adopted by the CCI in order to induce cartelists to come forward with evidence. In the majority of cases, penalties fall short of restitution and deterrence benchmarks suggested by some earlier literature. We conclude with some suggestions to improve India's penalty and leniency regime.

Dynamic Competition in Digital Markets: A Critical Analysis of the House Judiciary Committee's Antitrust Report

Dynamic Competition in Digital Markets: A Critical Analysis of the House Judiciary Committee's Antitrust Report

 

Tracy Miller

Mercatus Center at George Mason University

Trace Mitchell

NetChoice; George Mason University - Mercatus Center

Abstract

This paper provides a critical analysis of the antitrust report from the Subcommittee on Antitrust, Commercial, and Administrative Law of the House Committee on the Judiciary, based on the consumer welfare standard, which has governed antitrust policy since the late 1970s. It also proposes a theoretical framework for refutation of the report’s allegations about anticompetitive conduct of the big four tech companies that we hope will be useful for future empirical work. Using this framework, we find that the report likely overstates the market power held by these tech companies and the extent to which their conduct is actually harmful to consumers. In addition, our framework leads us to hypothesize that the reforms advocated in the report may actually make consumers worse off by interfering with market dynamism and slowing innovation.

Competition policy during pandemics: how to urgently produce healthcare goods and services while avoiding economic disaster

Competition policy during pandemics: how to urgently produce healthcare goods and services while avoiding economic disaster 

Nicolo Banks

 

Abstract

Pandemics present two emergencies: a war against a pathogen and an economic recession. Historically, the US has been forced to relax its antitrust enforcement policies during its largest wartime mobilizations in order to urgently produce goods and services needed in the war effort. Likewise, when the COVID-19 pandemic began, companies should have been allowed to collaborate with each other and with the US government to adequately respond to the increased demand for healthcare goods and services. Guidance from antitrust agencies during the coronavirus pandemic suggested a willingness to allow such collaborations, but the guidance lacked specificity. This article suggests specific policies that the antitrust agencies should implement during pandemics in order to give companies confidence that they can legally engage in collaborations that will hasten the production and distribution of urgently needed healthcare goods and services.

However, relaxing antitrust laws has historically caused and prolonged economic downturns. Thus, during a pandemic, the federal government should relax antitrust laws, but that relaxation could exacerbate the inevitable economic downturn caused by social distancing policies. Accordingly, this article suggests how the US government could use non-antitrust regulations to mitigate the systemic financial risk created by that relaxation in antitrust laws.

Mergers, Antitrust, and the Interplay of Entrepreneurial Activity and the Investments that Fund it

Mergers, Antitrust, and the Interplay of Entrepreneurial Activity and the Investments that Fund it

Gary Dushnitsky

London Business School; University of Pennsylvania - Management Department

D. Daniel Sokol

University of Florida Levin College of Law; USC Gould School of Law; USC Marshall School of Business

Abstract

This paper addresses the potentially negative implications of proposed antitrust legislation on the entrepreneurial ecosystem in general and particularly focuses on the Venture Capitalists (VCs) that fund it. First, it offers a review of how antitrust merger law currently works and how proposed legislative changes to antitrust may threaten the innovative VC-backed ecosystem that has made the United States the center of global innovation across many different industries. Accompanying this review are some empirical observations. Second, recognizing that understanding innovative entrepreneurial activity calls for a deep appreciation of those who back it, the paper provides an overview of the entrepreneurial ecosystem and the motivations of VCs. In so doing, it identifies the drivers of entrepreneurial innovation and explain why changes to merger law may threaten these models of facilitating innovative growth-orientated entrepreneurs. Lastly, the paper concludes that changes to merger law may have negative effects on the entire entrepreneurial ecosystem and hinder US innovation.

Rawlsian Antitrust

Rawlsian Antitrust

Chris Pike

University of East Anglia (UEA) - Centre for Competition Policy

Abstract

This paper attempts to reconcile the goals of competition and equality within antitrust, and in doing so, suggests that this task can be seen to correspond to the efforts that John Rawls made to reconcile liberalism and equality within his principles of justice. Applying a Rawlsian analysis to this problem, I propose the adoption of inclusivity as a secondary objective within competition law (not as an additional primary objective, as for example under a public interest test), and suggest that this approach might therefore be labelled Rawlsian Antitrust. In locating this approach amongst the existing established schools of thought, I emphasise both its economic basis, and the clarity of its values, and how the reconciliation between those might be operationalised. I identify the existence of both pro-enforcement and more cautious factions within this approach. However, I suggest that identifying the common ground between them might form the basis for enabling competition policy to contribute to the fight for greater inclusivity, arguably the great challenge of our time, which was first stirred, and then made urgent by successive crisis that have shaken our world, and which now threaten to burn down the technocratic antitrust chateau.

Does Common Ownership Really Increase Firm Coordination?

Does Common Ownership Really Increase Firm Coordination?

 

Katharina Lewellen

Dartmouth College - Tuck School of Business

Michelle Lowry

Drexel University; European Corporate Governance Institute (ECGI)

Abstract

A growing number of studies suggest that common ownership caused cooperation among firms to increase and competition to decrease. We take a closer look at four approaches used to identify these effects. We find that the effects that some studies have attributed to common ownership are caused by other factors, such as differential responses of firms (or industries) to the 2008 financial crisis. We propose a modification to one of the previously used empirical approaches that is less sensitive to these issues. Using this to re-evaluate the link between common ownership and firm outcomes, we find little robust evidence that common ownership affects firm behavior.

The Price Fixer: Compliance Tales from the Other Side

The Price Fixer: Compliance Tales from the Other Side

 

Andreas Stephan

University of East Anglia (UEA) - Centre for Competition Policy

Abstract

This paper fills an important gap in the antitrust compliance literature by exploring the perspective of the price fixer in breaches of competition law. It provides a critical analysis of statements made by price fixers, their competition lawyers and in-house counsel involved in cartel cases. The study draws on a combination of publicly available statements and anonymised accounts collected over 15 years of engaging with each of these three groups. It concludes that those responsible for cartels are motivated by varying factors and do not necessarily understand or accept that cartel behaviour is wrongful. Also, disciplining those individuals is complicated by the incentives created through leniency and settlement programmes. These findings highlight the importance of continued investment in compliance and the broader need for education in competition law to make it less likely that infringements will occur in the first place.

The Legal Causes of Labor Market Power in the U.S. Agriculture Sector

The Legal Causes of Labor Market Power in the U.S. Agriculture Sector

 

Candice Yandam Riviere

University of Chicago - Law School; Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Abstract

Recent developments in law and economics have shown that labor market power is a pervasive antitrust issue contributing to earnings inequality and slower growth. In the agriculture sector, workers—and especially H-2A temporary agricultural workers—have consistently suffered from low, stagnating wages and poor working conditions. This paper evaluates the extent of labor market power in the agriculture sector and how conflicting antitrust law and immigration policy norms exacerbate labor monopsony.

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 

Katalin J Cseres, Agustin Reyna

 

• The current flexibility offered in the State Aid law Temporary Framework has been used by some Member States’ governments to support undertakings, while, at the same time, governments have also tolerated breaches of consumer protection rules, as it was the case of airlines.

• Such practices harm consumers and lead to double burden for consumers: once as purchasers of services and second, as taxpayers financing the state aid measures.

• The article assesses how state aid law and consumer protection rules interact in EU law and what lessons these interactions can provide for managing the current economic crisis in a way that takes equal account of consumer interests as required by the horizontal consumer protection clauses of the TFEU.

• By conducting two case studies (air transport and energy), the article offers an explanation how the coordination and enforcement of these two policies and legal fields can be managed in the current crisis but also beyond.

Parental Liability, the Expansion of the Presumption of Decisive Influence to Full Ownership of Voting Rights: Case C-595/18 P Goldman Sachs Group

Parental Liability, the Expansion of the Presumption of Decisive Influence to Full Ownership of Voting Rights: Case C-595/18 P Goldman Sachs Group

Clio Angeli, Rebecca Williams

 

The European Court of Justice ruled that a parent company able to exercise all the voting rights of a subsidiary is presumed to exercise decisive influence over that subsidiary and therefore can be held jointly and severally liable for its anticompetitive conduct.