Antitrust & Competition Policy Blog

Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition?

Angela Zheng, HKU asks Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition?

Blockchain Neutrality

Sam Weinstein, Yeshiva has written on Blockchain Neutrality.

ABSTRACT: Blockchain technology is transforming how markets work. Blockchains eliminate the need for trusted gatekeepers like banks to execute, verify, and record transactions. In the financial markets, their disruptive potential threatens Wall Street and Silicon Valley venture capitalists. How blockchain technology is regulated will determine whether it encourages or inhibits competition. Some blockchain applications present serious fraud and systemic risks, complicating regulation. This Article explores the antitrust and competition policy challenges blockchain presents and it proposes a regulatory strategy to unlock blockchain’s competitive potential, modeled on Internet regulation and net neutrality principles. It contends that financial regulators should promote blockchain competition — and the resulting market decentralization — except in cases where specific applications are shown to harm consumers or threaten systemic safety. Regulators also should ensure open access and non-discrimination on blockchain networks. This approach will serve not only traditional antitrust goals of lowering prices and promoting innovation, but also might achieve broader economic and social reform by reducing the power and influence of the biggest financial institutions.

The Paramount Decrees: Lessons for the Future

Barak Orbach, Arizona offers The Paramount Decrees: Lessons for the Future.

ABSTRACT: There are some striking similarities between the tech giants of the 21st century and the powerful Hollywood studios in the second quarter of the 20th century. In their respective eras, each group of companies symbolized the acquisition of economic power by innovative firms and inspired calls to use antitrust law to break up large corporations, deconcentrate the economy, and protect small businesses.

In their pursuit of growth, each group of companies harnessed efficiencies and acted aggressively to exclude competition. The studios developed supply chains for mass production and mass distribution of entertainment products. Their success devastated less efficient entertainment industries, such as the “legitimate theater,” vaudevilles, and nickelodeons. They also acted to eliminate competition from rivals in the motion picture industry. The tech giants developed digital platforms, whose success devastated brick-and-mortar industries. They have also acted to eliminate competition from other tech companies.

The studios were the target of the most ambitious campaign to reform markets through antitrust enforcement. The story of this campaign could benefit contemporary debates about the future of antitrust law, including assessments of antitrust policy in periods of rapid technological change, vertical arrangements, conspiracy inference, divestitures, and behavioral remedies. This paper summarizes this episode in antitrust history and lessons that it offers.

Exclusionary Contracts and Incentives to Innovate

Simen A. Ulsaker, Norwegian School of Economics (NHH) offers Exclusionary Contracts and Incentives to Innovate.

ABSTRACT: The article considers a situation where several firms have the opportunity to sell an identical product to a set of buyers, and where each seller can invest in R&D to develop a higher quality version of the product in question. I consider the possibility of allowing the sellers to offer exclusionary contracts, prior to deciding how much to invest in R&D. In equilibrium every buyer will sign an exclusionary contract with the same seller. Since all buyers are locked to one seller, only this seller will have an incentive to invest in R&D. Whether or not banning exclusionary contracts increases the aggregate probability of successful innovation depends on the R&D technology. More specifically, banning exclusionary contracts will increase the aggregate probability of innovation and joint surplus of buyers and sellers only when the R&D technology exhibits sufficient diseconomies of scale.

Steering Incentives of Platforms: Evidence from the Telecommunications Industry

Steering Incentives of Platforms: Evidence from the Telecommunications Industry Brian McManus, Aviv Nevo, Zachary Nolan, and Jonathan W. Williams #27083 Abstract: We study the trade-offs faced by Internet Service Providers (ISPs) that serve as platforms through which consumers access both television and internet services. As online streaming video improves, these providers may respond by attempting to steer consumers away from streaming video toward their own TV services, or by attempting to capture surplus from this improved internet content. We augment the standard mixed bundling model to demonstrate the trade-offs the ISP faces when dealing with streaming video, and we show how these trade-offs change with the pricing options available to the ISP. Next, we use unique household-level panel data and the introduction of usage-based pricing (UBP) in a subset of markets to measure consumers' responses and to evaluate quantitatively the ISP's trade-offs. We find that the introduction of UBP led consumers to upgrade their internet service plans and lower overall internet usage. Our findings suggest that while steering consumers towards TV! services is possible, it is likely costly for the ISP and therefore unlikely to be profitable. This is especially true if the ISP can offer rich pricing menus that allow it to capture some of the surplus generated by a better internet service. The results suggest that policies like UBP can increase ISPs' incentive to maintain open access to new internet content.

GDPR and the Importance of Data to AI Startups

James E. Bessen, Technology & Policy Research Initiative, BU School of Law, Stephen Michael Impink, New York University (NYU) - Leonard N. Stern School of Business, Lydia Reichensperger, Technology & Policy Research Initiative, BU School of Law, and Robert Seamans, New York University (NYU) - Leonard N. Stern School of Business have an interesting paper on GDPR and the Importance of Data to AI Startups.

ABSTRACT: What is the impact of the European Union’s General Data Protection Regime (“GDPR”) and data regulation on AI startups? How important is data to AI product development? We study these questions using unique survey data of commercial AI startups. AI startups rely on data for their product development. Given the scale and scope of their business models, these startups are particularly susceptible to policy changes impacting data collection, storage and use. We find that training data and frequent model refreshes are particularly important for AI startups that rely on neural nets and ensemble learning algorithms. We also find that firms with customers in Europe are significantly more likely to create a new position to handle GDPR-related issues or to reallocate firm resources due to GDPR.

České dráhy, a.s. v European Commission: No Obligation for the Commission to Assess Exculpatory Evidence If There Is Already Sufficient Incriminating Evidence to Order an Inspection

Emily Xueref-Poviac identifies České dráhy, a.s. v European Commission: No Obligation for the Commission to Assess Exculpatory Evidence If There Is Already Sufficient Incriminating Evidence to Order an Inspection.

ABSTRACT: České dráhy is the Czech state-owned railway operator, active in markets for (i) the supply of passenger transport services and (ii) the provision of railway infrastructure management in the Czech Republic.

In January 2012, the Czech Competition Office opened an investigation into České dráhy due to suspicions of predatory pricing on the Prague–Ostrava train line. 

The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration

Robert H. Lande, University of Baltimore - School of Law and Richard O. Zerbe, University of Washington - Daniel J. Evans School of Public Affairs; University of Washington - School of Law advocate The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration.

ABSTRACT: Section 2 of the Sherman Act was designed to impose sanctions on all monopolies and attempts to monopolize regardless whether the firm had engaged in anticompetitive conduct. This conclusion emerges from the first ever textualist analysis, a form of statutory interpretation vigorously championed by Justice Scalia, of the language in Section 2. This article analyzes contemporaneous dictionaries, legal treatises, and cases, and demonstrates that when the Sherman Act was passed, the word “monopolize” simply meant that someone had acquired a monopoly. The term was not limited to monopolies acquired through anticompetitive conduct. A textualist analysis therefore demonstrates that Section 2 was designed to impose sanctions on all monopolies and attempts to monopolize.

A textualist approach to statutory construction does not imply or create unstated exceptions. Since Section 2 of the Sherman Act contains no explicit exception for a monopoly acquired without proof of anticompetitive conduct, none should be implied or created. Current case law requiring plaintiffs to prove the corporation involved had engaged in improper conduct must be overturned.

This article then briefly analyzes the practical economic implications likely to follow from adopting a “no-fault” approach to monopolization law. The overall economic effects will be shown to be uncertain, and to depend upon empirical issues whose net effect is speculative or ambiguous. They nevertheless are likely to be beneficial on the whole, and they provide some support for the no-fault position, and a fortiori demonstrate that the article’s textualist conclusions should be implemented.

Imposing sanctions on all monopolies could improve economic welfare in many ways. It should increase innovation and international competitiveness. It should prevent the allocative inefficiency effects of monopoly pricing and the form of exploitation that arises when monopolies acquire wealth from consumers. It would be likely to decrease the inefficiencies that result from monopolies enjoying a “quiet life”. It should avoid the waste that can arise as a firm struggles to attain and protect its monopoly, and some of the time and cost of Section 2 litigation. It should tend to improve privacy and decrease income inequality.

The new standard would admittedly also cause some costs and difficulties. For example, imposing sanctions on all monopolies could sometimes send a confusing or perverse signal to firms engaging in hard but fair competition, especially as a firm’s market share neared the ambiguous level required for a violation. It could enable competitors to file baseless lawsuits. The transaction costs involved in imposing sanctions on monopolies could be significant. It also could lead to difficult remedy issues in cases involving natural and patent monopolies. We believe, however, that the benefits of no-fault are likely to outweigh the costs.

In recent years there have been many calls, from very different parts of the political spectrum, for imposing sanctions on, and even breaking up, monopolies without inquiring whether they engaged in anticompetitive conduct. This issue has not, however, been analyzed seriously either from a legal or an economic perspective in roughly a half century. The purpose of this article is not to resolve all the relevant questions. Rather, its goal is to re-kindle debate about the legal and economic issues involved in imposing sanctions on all monopolies and attempts to monopolize under the Sherman Act and also, a fortiori, under Section 5 of the FTC Act. And to demonstrate that the textualist conclusion also constitutes a reasonable policy option.

Libra: A Concentrate of 'Blockchain Antitrust'

Thibault Schrepel, Utrecht University School of Law describes Libra: A Concentrate of 'Blockchain Antitrust'.

ABSTRACT: Mark Zuckerberg introduced Libra to the world in June 2019 with the goal of “enabl[ing] a simple global currency and financial infrastructure that empowers billions of people.” Two months after, and without waiting for the project to be launched, the European Commission sent a questionnaire to various parties connected to Libra in order to investigate “potential anti-competitive behaviors.” The U.S. House of Representatives also conducted a series of hearings at the end of October 2019 questioning the intentions behind Libra.

Against this background, Part I of this Essay analyzes the type of governance that Libra is aiming for, as it indicates the nature and frequency of certain anti-competitive risks. Part II offers an assessment of the anti-competitive collusion and monopolization that Libra governance might yield. The discussion concludes by assessing the desirability of the adversarial approach adopted by antitrust agencies and governments thus far.

State Cartels

James W. Coleman, Southern Methodist University - Dedman School of Law identifies State Cartels.

ABSTRACT: The United States is emerging from history’s biggest commodity boom as the meteoric rise of fracking has made America the center of global oil production and the engine of the world’s economy. But haste makes waste. These new American oil wells are releasing natural gas as well, which is prized as a clean and reliable fuel around the world, but must be simply burned off or “flared” if there are no pipelines to bring it to the customers that need it. The pace of the oil boom, and the challenges of building new gas pipelines have forced oil companies to flare staggering quantities of natural gas. In recent months, Texas and North Dakota have both flared — that is, wasted — more natural gas than many states or even nations consume. This Article shows that to stop this tremendous economic and environmental waste, states must develop a new approach to antitrust law. It makes the case for state energy cartels.

One of the few consensus grounds for regulation is combating market power — preventing dominant suppliers from increasing their profits by selling less at higher prices. States break up producer cartels so that competition provides consumers with lower prices. But what happens when a state’s interest coincides with producers rather than consumers? The economic health of major energy exporters depends on the price of the products they export. That is, these states, provinces, and countries can benefit by increasing the price of the oil and gas that they export. For the first half of the twentieth century, the United States was the world’s premier oil exporter; during that time, U.S. states cooperated as a de facto cartel to ensure higher oil prices. When other countries overtook the U.S. as the world’s premier oil producers, they formed the Organization of Petroleum Exporting Countries to play a similar role.

This article establishes a new theory of market regulation — state cartels. It explains how these cartels offer the best solution to the flaring crisis and a unique opportunity for productive global cooperation to address climate change. It shows how states can slow production, protect the environment, and increase their industry’s profits by adapting and perfecting tools that the United States stumbled upon in the first half-century of oil production. And it shows how these tools can be tailored to protect consumers, industry, and the environment.

Major League Baseball’s Antitrust Exemption and Pay

Louis-Daniel Pape, CREST - Institut Polytechnique de Paris addresses Major League Baseball’s Antitrust Exemption and Pay.

ABSTRACT: The U.S. Supreme Court exempted Major League Baseball from the Sherman Antitrust Act. As a result, debuting players are still precluded from switching teams, rendering owners de facto monopsonies. By how much does this lower wages? Using a quasi-random discontinuity in the rule determining eligibility for Arbitration, by which a third party determines the player’s wage to a level commensurate with his market value, this exemption is found to have lowered wages by at least 30%.

Challenging Consummated Mergers Under Section 2

Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia Circuit; George Mason University - Antonin Scalia Law School, Faculty Koren Wong-Ervin, Axinn, Veltrop, & Harkrider LLP investigate Challenging Consummated Mergers Under Section 2.

ABSTRACT: In the last year, officials at the U.S. Antitrust Agencies have taken a number of troubling positions with respect to what is required to challenge consummated mergers under Section 2 of the Sherman Act. These include: (1) the contention that Section 2 presents a “lower bar” than Section 7 of the Clayton Act in that Section 2 requires mere proof that the merger was “reasonably capable of” contributing significantly to the acquisition or maintenance of monopoly power; (2) suggestions that evidence of intent may be used as a proxy for probable harm; and (3) the idea that Section 2 can be used to challenge a series of acquisitions no one of which by itself was problematic but which together form an anticompetitive course of conduct. In this article we explain why these contentions are unfounded.

Respectful Consideration, but Not Deference: Chinese Sovereign Amici in the US Supreme Court Vitamin C Judgment

Qingxiu Bu identifies Respectful Consideration, but Not Deference: Chinese Sovereign Amici in the US Supreme Court Vitamin C Judgment.

ABSTRACT: The legality of resale price agreements has been heavily discussed in the EU and the USA.

It is now time to examine the position adopted by courts and authorities in other jurisdictions.

In China, courts are progressively developing their approach and authorities are doing the same—not necessarily in the same direction.

Competition Policy and the Profitability of Corporate Acquisitions

Gishan Dissanaike, Wolfgang Drobetz, and Paul P.Momtaz discuss Competition Policy and the Profitability of Corporate Acquisitions

ABSTRACT: Merger control exists to help safeguard effective competition. However, findings from a natural experiment suggest that regulatory merger control reduces the profitability of corporate acquisitions. Uncertainty about merger control decisions reduces takeover threats from foreign and very large acquirers, therefore facilitating agency-motivated deals. Valuation effects are more pronounced in countries with stronger law enforcement and in more concentrated industries. Our results suggest that competition policy may impede the efficiency of the M&A market.

Old abuses in new markets? Dealing with excessive pricing by a two-sided platform

Zeynep Ayata asks Old abuses in new markets? Dealing with excessive pricing by a two-sided platform.

ABSTRACT: Exploitative abuses, especially excessive pricing, have been one of the most debated forms of abuse of dominant position. Unlike exclusionary abuses, they have been prohibited only under certain jurisdictions and on rather rare occasions. In Europe there have been few recent decisions and investigations that have reiterated existing approaches and tests for establishing excessive pricing. The Turkish Competition Authority’s Sahibinden.com decision has come at such a time where the discussion on excessive pricing has been somewhat revived. However, this decision stands out as it is the first one where a competition authority has found prices to be excessive and therefore abusive in the context of a two-sided platform. Competition in platform markets display unique dynamics that may be very different from what may be observed in traditional markets especially in terms of pricing strategies. This article aims to demonstrate, through the Turkish Competition Authority’s recent decision, the difficulties in applying existing tests and criteria on excessive pricing to a two-sided platform. A thorough analysis of this decision demonstrates that competition enforcement in what may be called ‘new’ platform markets necessitates new approaches or adjustments of existing ones.

 

Future-Mapping the Three Dimensions of EU Competition Law: Modernisation Now and After COVID-19

Francisco Costa-Cabral, Tilburg Law and Economics Center (TILEC) identifies Future-Mapping the Three Dimensions of EU Competition Law: Modernisation Now and After COVID-19.

ABSTRACT: EU competition law is traditionally understood in two-dimensions: judicial control and enforcement. This paper considers a third dimension: its normative concerns in the context of EU law. In mapping the future of these dimensions, the paper asks if the understanding behind the modernisation of the Commission’s enforcement is still tenable. In relation to judicial control, the effects-based approach of modernisation has either been incorporated by the case law at the cost of its coherence or ignored. Regarding enforcement, modernisation has resulted in the Commission having to step outside its guidance and in multiple proposals to adjust competition rules. As for the normative dimension, modernisation’s emphasis on consumer welfare has not prevented openness to broader concerns and setting this priority aside in reaction to COVID-19. The direction of modernisation will thus continue to raise judicial difficulties and, should it hamper enforcement, possibly lead to legislation that marginalises competition law. A better alternative would be, as was done for COVID-19, to reinforce the normative connection with the rest of EU law.

Antitrust Antitextualism

Daniel A. Crane, University of Michigan Law School has written on Antitrust Antitextualism.

ABSTRACT: Judges and scholars frequently describe antitrust as a common law system predicated on open-textured statutes, but that description fails to capture a historically persistent phenomenon; judicial disregard of the plain meaning of the statutory texts and manifest purposes of Congress. This pattern of judicial nullification is not evenly distributed: When the courts have deviated from the plain meaning or Congressional purpose, they have uniformly done so to limit the reach of antitrust liability or curtail the labor exemption to the benefit of industrial interests. This phenomenon cannot be explained solely or even primarily as a tug-of-war between a progressive Congress and conservative courts. The judges responsible for these decisions were far from uniformly conservative, Congress has not mobilized to overturn the judicial precedents, nor, despite opportunities to do so, have the courts constitutionalized their holdings to prevent Congressional overriding. Antitrust antitextualism is best understood as an implicit political arrangement in which Congress writes broad statutes expressing anti-bigness republican idealism, and then the courts read down the statutes pragmatically to accommodate competing demands for efficiency and industrial progress.

Old abuses in new markets? Dealing with excessive pricing by a two-sided platform

Zeynep Ayata asks Old abuses in new markets? Dealing with excessive pricing by a two-sided platform.

ABSTRACT: Exploitative abuses, especially excessive pricing, have been one of the most debated forms of abuse of dominant position. Unlike exclusionary abuses, they have been prohibited only under certain jurisdictions and on rather rare occasions. In Europe there have been few recent decisions and investigations that have reiterated existing approaches and tests for establishing excessive pricing. The Turkish Competition Authority’s Sahibinden.com decision has come at such a time where the discussion on excessive pricing has been somewhat revived. However, this decision stands out as it is the first one where a competition authority has found prices to be excessive and therefore abusive in the context of a two-sided platform. Competition in platform markets display unique dynamics that may be very different from what may be observed in traditional markets especially in terms of pricing strategies. This article aims to demonstrate, through the Turkish Competition Authority’s recent decision, the difficulties in applying existing tests and criteria on excessive pricing to a two-sided platform. A thorough analysis of this decision demonstrates that competition enforcement in what may be called ‘new’ platform markets necessitates new approaches or adjustments of existing ones.

FTC Hot Topics with Commissioner Christine Wilson: Regulatory Reform, Privacy, Antitrust, & Beyond

Svetlana Gans interviewed Christine Wilson for FedSoc.

 

 

 

A Model of Data and Data Exchange in Competitive Markets

António M. Osório C., Universitat Rovira i Virgili offers A Model of Data and Data Exchange in Competitive Markets.

ABSTRACT: Companies are increasingly using data to predict behavior, automate and improve the relation with their customers. In this context, data exchange rises important concerns regarding competition, concentration and welfare. This paper presents a novel linear demand model that capture data and information effects in competitive markets, which are summarized in a precision parameter. Subsequently, this modelling approach is applied to study the firms incentives to exchange data and the implications in terms of market variables, welfare and concentration measures. We found that incentives to data exchange between competitor firms emerge providing that the information gains are relatively stronger than the competitor information gains, and the associated strategic correlation effect is not too strong. The results also suggest that market concentration tends to increase after data exchange, but both consumers and producers benefit from it. The reason is that better data allows firms to delivering varieties closer to consumers' needs.