Antitrust & Competition Policy Blog

Reconsidering the ‘rule’ against cross- market justifications in conduct cases

Reconsidering the ‘rule’ against cross- market justifications in conduct cases

 

 

Erika Douglas

Temple University - James E. Beasley School of Law

Abstract

Does antitrust law credit out-of-market procompetitive effects? Since Philadelphia National Bank, courts have consistently found a bar against such cross-market efficiencies in merger cases, supported by the statutory text of the Clayton Act. For non-merger, anticompetitive “conduct” claims, though, the relevant statute and cases are much less clear, and yet increasing important to high-stakes litigation. Certain lower courts and commentators have declared a “rule” against cross-market justifications in conduct cases as well, based on the Supreme Court’s decision in United States v. Topco Associates, Inc.

This chapter re-examines the Topco decision and its lineage, and finds the case does not establish such a rule against cross-market justifications, despite its common citation for this principle. Instead, from Topco onward, it finds that judicial decisions have left a persistent and troubling gap in the law on cross-market justifications. Judges have either engaged in workarounds that distort established principles of market definition, as in Ohio v. American Express Co.,22 or simply not addressed the law at all, as in National Collegiate Athletic Association v. Alston et al.23  This chapter argues the longstanding gap has become increasingly problematic. Cross-market justifications are arising in important digital platform cases, which tend to involve multiple, interconnected markets, yet there is no clear law to apply.

The chapter concludes with guidance for courts who seek to develop this long overdue rule of law. First, it clarifies that such law is undecided—nothing in the existing jurisprudence prevents courts from developing legal rules on cross-market justifications. Second, while existing cases do not settle the law,  they provide some directional indicators: cases express more theoretical concern over permitting such effects than limiting them, and are primarily worried about fairness and judicial administrability in analyzing such justifications. Still, the chapter finds support in appellate, commentator, and agency guidance for consideration of cross-market justifications in at least one narrow situation: when the procompetitive effects are significant in magnitude, and closely related to relatively minor competitive harms.

Potential Competitors’ Antitrust Standing Against Preemptive Acquisitions

Potential Competitors’ Antitrust Standing Against Preemptive Acquisitions

 

 

C. Paul Rogers

Southern Methodist University - Dedman School of Law

Lior Frank

University of Haifa

Abstract

This article revolves around potential competitors' "antitrust standing" rights in private merger litigation, especially against preemptive acquisitions. It builds upon various cases in which courts have explicitly recognized that a potential competitor has standing to challenge an allegedly anti-competitive merger that foreclosed it from entering the market dominated by an incumbent firm. Such mergers can be categorized as "strategic preemptive acquisitions". Specifically, the courts held in these cases that the potential competitor's "antitrust injury"; that is-exclusion from the relevant market-stems from the incumbent's intentional and strategic acquisition of a company or set of assets that were required for the successful entry of the potential competitor into the market. Accordingly, it was held that the "antitrust injury" that the potential competitor suffered is inseparable from the alleged harm to competition caused by the merger, and thus, potential competitors are eligible to bring antitrust claims against such strategic preemptive acquisitions. Hence, the main objective of this article is to provide a coherent framework, supported by the caselaw, that aims to assist courts in the analysis of potential competitors' standing rights against strategic preemptive acquisitions.

Legal Tests for Excessive Pricing and Their Implementation Under China's Anti-Monopoly Law

Legal Tests for Excessive Pricing and Their Implementation Under China's Anti-Monopoly Law

 

 

Sinchit Lai

City University of Hong Kong (CityU) - School of Law

Yihan Wang

Central University of Finance and Economics (CUFE)

Abstract

China's anti-monopoly law prohibits undertakings from abusing their dominant market position by charging excessively high customer prices. Nevertheless, objectively determining if a price is too high is not easy. The law entrusts the antitrust authorities with deciding which tests to use to assess the price excessiveness. The authorities published provisions that set out a few quantitative tests they intend to use when deciding excessive pricing cases so that undertakings could comply with the law. These provisions include a fallback clause indicating that the authorities could employ tests unspecified in the provisions. When making decisions, authorities rely heavily on these unspecified tests, which are based on the fallback clause. Hence, to gain a comprehensive understanding of the excessive pricing regime in China, one must refer not only to the statutes but also to the authorities' penalty decisions. To clarify on this uncertainty, this article reviewed the relevant precedents decided since the AML came into effect in August 2008 and until October 2024 and prepared summary statistics for the tests used. Moreover, this article identified issues related to the implementation of tests for excessive pricing and offered suggestions to the country.

Digital Regulation Synthesis: Comparative Analysis of the DMA, Sec. 19a and the DMCCA

Digital Regulation Synthesis: Comparative Analysis of the DMA, Sec. 19a and the DMCCA

 

Jasper van den Boom

Heinrich Heine University Dusseldorf, Faculty of Law, Students

Sarah Hinck

Heinrich-Heine-University Düsseldorf

Oles Andriychuk

University of Exeter - School of Law

Rupprecht Podszun

Heinrich Heine University Dusseldorf - Faculty of Law

Abstract

An increasing number of jurisdictions are amending their competition policy or introducing laws to regulate competition in digital markets. The Digital Markets Act (DMA) in the European Union, the Digital Markets, Competition & Consumers Act (DMCCA) in the United Kingdom, and Section 19a of the Gesetz Gegen Wettbewerbeschränkungen (GWB) in Germany, are the first digital regimes that have been adopted and implemented. While each of these regimes aims to tackle similar problems, namely structural competition issues in digital markets and the power of digital platforms, they each adopt a distinct regulatory approach. This article compares the three legal regimes to identify their shared characteristics and differences. With this comparison, we aim to develop a taxonomy for the comparison of digital regulation that can be applied to novel forms of digital regimes implemented globally. Such a taxonomy helps to structure the comparison of different initiatives as to study the impact of the design of these interventions on enforcement and ultimately on competition in digital markets in a subsequent step. The article consists of two parts. The first part provides a structured overview of the provisions of the DMA, DMCCA, and Sec. 19a GWB. The second part compares and analyses the laws as to develop generalisable characteristics and lessons.

Capabilities: The Next Step For The Economic Construction Of Competition Law

Capabilities: The Next Step For The Economic Construction Of Competition Law

 

Nicolas Petit

European University Institute - Department of Law (LAW)

David Teece

Institute for Business Innovation

Abstract

Competition policy can help promote an economy's innovation potential. To advance this goal, a shift toward studying firm-level capabilities is essential. Capabilities offer a nuanced understanding of the endogeneity and heterogeneity of innovation, complementing mainstream competition economics.  Just as competition policy has previously embraced new paradigms like game theory, behavioral economics, and multisided markets, it is now time for a process of disciplined heterodoxy towards business & management science.  

Market or Markets? Investigating Google Search's Market Shares under Vertical Segmentation

Market or Markets? Investigating Google Search's Market Shares under Vertical Segmentation

 

 

Desheng Hu

University of Zurich

Jeffrey Gleason

Northeastern Univeristy

Muhammad Abu Bakar Aziz

Northeastern Univeristy

Alice Koeninger

Northeastern Univeristy

Nikolas Guggenberger

University of Houston Law Center; Yale University - Yale Information Society Project

Ronald E. Robertson

Northeastern Univeristy

Christo Wilson

Northeastern University - College of Computer and Information Science

 

Abstract

Is Google Search a monopoly with gatekeeping power? Regulators from the US, UK, and Europe have argued that it is based on the assumption that Google Search dominates the market for horizontal (a.k.a. "general") web search. Google disputes this, claiming that competition extends to all vertical (a.k.a. "specialized") search engines, and that under this market definition it does not have monopoly power. In this study we present the first analysis of Google Search's market share under vertical segmentation of online search. We leverage observational trace data collected from a panel of US residents that includes their web browsing history and copies of the Google Search Engine Result Pages they were shown. We observe that participants' search sessions begin at Google greater than 50% of the time in 24 out of 30 vertical market segments (which comprise almost all of our participants' searches). Our results inform the consequential and ongoing debates about the market power of Google Search and the conceptualization of online markets in general.

What Is an Exclusionary Abuse?

What Is an Exclusionary Abuse?

Jorge Padilla

Compass Lexecon

Abstract

In this essay I critically review the notion of exclusionary abuse in the Commission's Draft Guidelines on the Application of Article 102 TFEU to abusive exclusionary conduct by dominant undertakings ("Draft Guidelines") from an economic viewpoint. I agree with the Draft Guidelines that the conduct of a dominant is liable to be abusive (or constitute an exclusionary abuse) when it departs from competition on the merits, and it is capable of having exclusionary effects. However, unlike the Draft Guidelines, I maintain that the only rigorous way as a matter of economics to operationalize the notion of competition on the merits is to say that "dominant companies compete on the merits when their conduct does not distort the competitive process" and that the "replicability test" should be the one and only test applied to assess whether a dominant undertaking's conduct constitutes competition on the merits. Moreover, the Draft Guidelines appear equate "exclusion" with "mere" foreclosure, but "mere" foreclosure is not necessarily "anticompetitive" foreclosure, and only the latter is consistent with an abuse. Finally, I also disagree with the causation standard in the Draft Guidelines; that is, I do not consider it sufficient to establish that the conduct contributes to increasing the likelihood of those effects. On the contrary, I am in favour of the "but-for standard of proof".

Ownership Concentration and Strategic Supply Reduction

Ownership Concentration and Strategic Supply Reduction
	Ulrich Doraszelski, Katja Seim, Michael Sinkinson, and Peichun Wang
	We explore the implications of ownership concentration for the recently concluded incentive auction that repurposed spectrum from broadcast TV to mobile broadband usage in the United States. We document significant multilicense ownership of TV stations. We show that in the reverse auction, in which TV stations bid to relinquish their licenses, multilicense owners have an inventive to withhold some TV stations to drive up prices for their remaining TV stations. Using a large-scale valuation and simulation exercise, we find that this strategic supply reduction increases payouts to TV stations by between 13.5 percent and 42.4 percent.

Improving Economic Analysis in Merger Guidelines

Improving Economic Analysis in Merger Guidelines

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

Abstract

Merger review should reflect basic precepts of decision analysis, best practices in industrial organization economics, and teachings from related fields. Unfortunately, the analytical methods in modern merger guidelines fall short. Protocols violate standard prescriptions for information collection and decision-making, rely on a market definition paradigm that deviates significantly from core models of competitive interaction, fail to leverage central advances in understanding the efficiency consequences of mergers, and contravene or ignore fundamental dynamics relating to entry. This article elaborates correct analysis and contrasts it with that embodied in modern merger guidelines generally employed throughout the developed world, including the 2023 Merger Guidelines revision in the United States.

Two Hands Up for GUPPI: A GUPPI Measuring Both Merging Firms’ Incentives to Raise Prices

Two Hands Up for GUPPI: A GUPPI Measuring Both Merging Firms’ Incentives to Raise Prices

Shawn W. Ulrick

U.S. Federal Trade Commission (FTC)

Seth B. Sacher

Independent

Paul R. Zimmerman

U.S. Federal Trade Commission - Bureau of Economics

John M. Yun

George Mason University - Antonin Scalia Law School

Abstract

GUPPIs continue to be a common tool in antitrust investigations and court decisions since they were introduced in the 2010 Horizontal Merger Guidelines. The standard GUPPI is calculated under the assumption that a merger of two single-product firms results in the combined entity raising only one product’s price, not both. We introduce a two-product GUPPI that relaxes this restriction, allowing for the merged firm to raise both products’ prices. GUPPIs are also commonly used as a scaled-down merger simulation to predict post-merger price effects. We illustrate with a simulation method that—in the context of a linear-demand model—the two-product GUPPI more accurately predicts the price increase.  Our simulation method can be used to examine other demand forms (this research is in progress).

The Spoils of Algorithmic Collusion: Profit Allocation Among Asymmetric Firms

The Spoils of Algorithmic Collusion: Profit Allocation Among Asymmetric Firms

Simon Martin

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Hans-Theo Normann

Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods

Paul Henri Püplichhuisen

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Tobias Werner

Center for Humans and Machines / Max Planck Institute for Human Development; Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Abstract

We study the propensity of independent algorithms to collude in repeated Cournot duopoly games. Specifically, we investigate the predictive power of different oligopoly and bargaining solutions regarding the effect of asymmetry between firms. We find that both consumers and firms can benefit from asymmetry. Algorithms produce more competitive outcomes when firms are symmetric, but less when they are very asymmetric. Although the static Nash equilibrium underestimates the effect on total quantity and overestimates the effect on profits, it delivers surprisingly accurate predictions in terms of total welfare. The best description of our results is provided by the equal relative gains solution. In particular, we find algorithms to agree on profits that are on or close to the Pareto frontier for all degrees of asymmetry. Our results suggest that the common belief that symmetric industries are more prone to collusion may no longer hold when algorithms increasingly drive managerial decisions.

AI Review Summary, Customer Ratings, and Performance Entrenchment

AI Review Summary, Customer Ratings, and Performance Entrenchment

Wesley W Koo

Johns Hopkins University - Carey Business School

Jingchuan Pu

University of Florida - Warrington College of Business Administration

Nianqing Gao

Johns Hopkins University

Abstract

AI review summaries have emerged on digital platforms worldwide, making inroads into industries ranging from e-commerce to travel. An AI review summary condenses existing human reviews into informative bits and categorizes product dimensions based on what customers like and dislike. In this study, we theorize that an AI review summary guides customers to focus more on the product dimensions emphasized in the summary, especially the positive dimensions praised by previous customers (i.e., a guidance mechanism). Using data from Newegg.com, we apply a sharp regression discontinuity (RD) design that leverages the fact that Newegg assigned AI review summaries only to products with 10 or more reviews. We find that, on average, AI review summaries increased customer review ratings by 0.492 stars (out of five). Our follow-up analyses provide no support for the uncertainty reduction mechanism. However, the results are consistent with the guidance mechanism. Specifically, (i) customer reviews generated with an AI review summary became more similar to AI summaries, especially to the positive dimensions, (ii) convergence toward AI was associated with greater rating increases, (iii) customer reviews generated with an AI summary exhibited more positive sentiments, and (iv) the rating increase was more pronounced for high-end products. These results suggest that AI review summaries may inflate subsequent review ratings and alter the competitive dynamics on platforms, leading to entrenched performance advantages for some businesses (e.g., highly reviewed businesses) at the expense of others. Platforms, businesses, and customers must heed this cautionary tale when designing or interacting with AI-summarized content.

Dynamic Consumer Search

Dynamic Consumer Search

Andrew Rhodes

University of Toulouse 1 - Toulouse School of Economics (TSE)

Alexei Parakhonyak

University of Oxford - Department of Economics

Abstract

We consider a model in which consumers wish to buy a product repeatedly over time, but need to engage in costly search to learn prices and find a product that matches them well. The optimal search rule has two reservation values, one for newly-searched products, and another for products that were searched in the past. Depending on the search cost, firms either keep price steady over time, or gradually raise price to take advantage of a growing pool of high-valuation repeat customers. The model generates rich search and purchase dynamics, as consumers may optimally "stagger" search over time, initially trying different products, settling on one and buying it for a while, before choosing to search again for something better. We also show that consumers may be better off when firms can offer personalized prices based on their search history.

AAI Public Service Fellowship program for fired or displaced government antitrust enforcers

Government civil servants are essential to protecting competition and free markets. The United States has long benefitted from a culture of service at the federal antitrust agencies, which has led many of the world’s foremost antitrust experts to work for the American public at substantially below-market pay. The current presidential administration’s policies have led to the dismissal of many of these specialists or induced them to resign from the federal government, hindering their ability to contribute to the public good.

On April 1, 2025, the American Antitrust Institute (“AAI”) announced the creation of the AAI Public Service Fellowship, a new fellowship program for antitrust lawyers, economists, and other competition experts who have left or been dismissed from the Federal Trade Commission, the Department of Justice, or another government agency. This fellowship program responds to the current administration’s policies in two ways. First, it offers support, community, and a temporary home to public servants during a period of instability. Second, it helps prevent valuable expertise from going to waste by enabling displaced competition experts to continue serving the public interest.

About the Fellowship

AAI actively seeks former governmental competition experts to work on approved public interest research, writing, or other projects as soon as possible. Eligible fellowship applicants must be lawyers, economists or other competition experts who resigned or were dismissed from a government agency within the last year. Included among the eligible applicants are former probationary federal employees and entry-level attorneys whose offers from the DOJ or FTC Honors Programs were rescinded.

Approved applicants will receive a stipend of at least $5,000 for timely completion of approved public interest projects. They will be given the title of “Public Service Fellow” and will work full time or part time on approved projects to be completed within 3-6 months. Project selection and work will be overseen by a Fellowship Committee comprised of specialists from AAI’s Advisory Board and co-chaired by AAI founder and former president, Albert A. Foer, and AAI Director and Venable Professor of Law Emeritus at the University of Baltimore School of Law, Robert H. Lande. Applicants may propose their own individual or small-group projects, or work with the Fellowship Committee to design a new project. Approved projects must promote vigorous competition, improve the administration of the antitrust laws, or otherwise advance AAI’s mission.

Projects may involve, but are not limited to, research and writing or empirical studies in the following areas:

• Legal or Economic Analysis of Doctrine, including with respect to the evidentiary, liability, or remedial standards for collusion, monopolization, mergers, or unfair methods of competition under the Sherman, Clayton, or FTC Acts.
• Important Markets or Sectors, such as, for example, food & agriculture, healthcare, energy, banking, transportation, or communications.
• The Intersection of Antitrust and Other Bodies of Law, such as intellectual property law, environmental law, national security law, civil rights law, labor law, or sectoral regulation.
• The Application of Antitrust Law to Novel Technologies, such as artificial intelligence, algorithmic price setting, cloud computing, chipsets, data processing, crypto currency, or blockchain.
• The Application of Other Academic or Professional Disciplines to Antitrust Law, such as strategic management, business administration, behavioral economics, or labor economics.
• Legislation, such as past, present, or future proposed antitrust legislation involving evidentiary, liability, or remedial standards, important markets or sectors, whistleblower protections and rewards, funding for the antitrust agencies, or structural or institutional changes to the antitrust agencies.

Fellowship Terms and Conditions

Fellows will be subject to AAI’s policies regarding independence, transparency, conflicts of interest, document retention, and reporting. They must sign a Memorandum of Understanding that, among other things, certifies compliance with these policies and with all restrictions and obligations applicable to former government employees.

At AAI’s discretion, completed projects may be published under the researcher’s name(s) on AAI’s website, including as a working paper. Researchers also will be free to seek outside publication of their work, under their own name, in a law review, economics journal, or other publication of their choosing.

Fellows will work out of their homes or another location of their choosing. AAI will endeavor to provide fellows with access to legal research databases. Other reasonably necessary expenses approved in advance also may be reimbursed.

AAI understands that most fellows will be actively looking for permanent employment while they complete their fellowships. We will work with fellows to ensure a smooth transition if they obtain permanent employment during the fellowship term. However, fellows must complete their fellowship projects in a timely manner to receive a stipend.

How to Apply

To apply, submit a résumé and cover letter to [email protected]. The cover letter should (1) summarize the nature and timing of your relevant government service, and (2) describe your areas of subject matter interest and expertise. If you intend to propose your own public interest project, please also include a written description of the project in 2-3 pages or less. If you wish to work with the Fellowship Committee to design a new project, please indicate subject matter areas of interest in your cover letter. We will consider applications on a rolling basis.

The Committee would like to award fellowships and have fellows begin work on their projects as soon as possible. Our goal is for some fellows to begin work in April 2025. We will work flexibly with applicants to find agreeable timeframes for completing approved projects.

Fellowship Funding

To date, the AAI Public Service Fellowship has been funded entirely by charitable contributions, including contributions from former federal antitrust enforcers. Additional funding is still needed. If you are willing to help support this program by making a contribution, please visit the Support page of our website or contact AAI President Randy Stutz. AAI is a 501(c)(3) not-for-profit organization. All donations are tax deductible. Donors will receive a report on the use of Fellowship funds at the conclusion of the project.

Contact Information

For general questions about this fellowship program or to help support it, please contact AAI President Randy Stutz, [email protected].

For questions about the terms of the fellowship or the application process, please contact AAI Vice President & Director of Legal Advocacy Kathleen Bradish, [email protected].

To brainstorm or discuss the content of project proposals, please contact the Fellowship Committee Co-Chairs, Albert A. Foer, [email protected], and Robert H. Lande, [email protected].

Illumina’s Light on Article 22 EUMR: The Suspended Step and Uncertain Future of EU Merger Control Over Below-Threshold “Killer” Mergers

Illumina’s Light on Article 22 EUMR: The Suspended Step and Uncertain Future of EU Merger Control Over Below-Threshold “Killer” Mergers

 

Anna Tzanaki

University of Leeds School of Law; Stigler Center at Chicago Booth Business School; University College London - Centre for Law, Economics and Society

Abstract

Illumina/Grail marks a “critical juncture” in EU merger control. Breaking with the past, reliance on a centralized and predictable administrative system of ex ante merger control is no longer a given in the EU. The expansive use of the ad hoc Article 22 referral mechanism under the EU Merger Regulation would de facto erode its “brightline” jurisdictional rules and upend the allocation of “exclusive” EU and Member State merger competences based on turnover thresholds: the exception could override the rule with significant systemic consequences. The unprecedented face-off between the Commission and Member States over who is to rule over potentially problematic but non-reportable “killer” mergers has been resolved, for now and in part, by the EU Courts. But albeit the “new” Article 22 may be declared dead in a landmark reversal by the European Court of Justice, its legacy lives on and shadows of uncertainty loom over the future of EU merger control.

Control Capture and Competition

Control Capture and Competition

Robert J. Rhee

University of Florida Levin College of Law

D. Daniel Sokol

USC Gould School of Law; USC Marshall School of Business

Abstract

This Essay identifies an emerging problem in antitrust law and policy, particularly in the technology industry. Antitrust doctrine has historically revolved around internal control of firm, i.e., equity acquisition. It focuses on the capture of internal control. Mergers and acquisitions trigger regulatory review. In these deals, the locus of anticompetitive behavior lies in ownership and internal governance. However, one can capture control through various ways. An emerging problem in antitrust law is external exertion of control through contract. Competition can be stifled, and thus price, non-price, and innovation factors can be controlled or manipulated through the levers of control existing outside of the legal ownership governance boundary of the firm. Contracts enable all manners of control without internal control of governance; thus, they can achieve the same outcome of anticompetitive behavior. Albeit existing in all kinds of firms and industry sectors, this problem is an emerging phenomenon in high tech and is especially acute there. This Essay reveals a fundamental gap in antitrust law specific to merger control. Analogizing to the basic principles of agency law and corporate law, this Essay argues that the de facto control of another firm, manifesting in anticompetitive results, should trigger merger review. The proper test for enjoining a merger should encompass the various ways in firms are subject to contractual control capture resulting in behavior and outcomes that are potentially anticompetitive.

The Economics of AI Foundation Models: Openness, Competition, and Governance

The Economics of AI Foundation Models: Openness, Competition, and Governance

Fasheng Xu

University of Connecticut - Department of Operations & Information Management

Xiaoyu Wang

Hong Kong Polytechnic University - Department of Logistics and Maritime Studies; Washington University in St. Louis - John M. Olin Business School

Wei Chen

University of Connecticut - Department of Operations & Information Management

Karen Xie

University of Connecticut - Department of Operations & Information Management

 

Abstract

AI is undergoing a paradigm shift with the rise of foundation models, pre-trained on broad data and adaptable to myriad downstream tasks. This paper presents an economic theory of foundation model value chain that consists of upstream developers, downstream deployers, and end consumers. Central to understanding the market dynamics within the foundation model value chain is the topic of model openness. We explore how model openness affects the "fine-tuning game" as downstream deployers compete in adopting and investing in fine-tuning foundation models. We first find that as openness increases, the leading deployer might strategically limit its fine-tuning efforts to maintain a monopoly. This strategy restricts market expansion and negatively impacts the following deployer’s profit, the upstream developer’s profit, consumer surplus, and overall social welfare. This dynamic gives rise to what we term the "openness trap": a range of medium openness levels where the value chain’s overall welfare is lower than it would be at zero openness. Furthermore, along the spectrum of model openness, we explore the welfare implications of prevalent market strategies employed by upstream developers, such as vertical integration and offering free trials. Our findings reveal that vertical integration proves beneficial for all stakeholders when the model openness is relatively low. However, for a certain medium range of model openness, vertical integration can unexpectedly backfire and should not be implemented. Regarding free trials, one might intuitively expect this strategy to benefit downstream deployers and consumers by effectively reducing deployers’ foundation model sourcing costs. However, we find that such cost benefit can surprisingly lead to a "triple-lose" outcome for the two deployers and consumers, due to the intricate relationships within the AI value chain. Overall, our theory offers valuable guidance for industry practitioners and policymakers in navigating the rapidly evolving landscape of foundation model development and deployment.

International conference "Building Competition Institutions for Sustainable Growth. A Retrospective on the Role of Competition Law and Policy in Central and Eastern Europe 20 years after EU Enlargement and Lessons for the Future"

International conference "Building Competition Institutions for Sustainable Growth. A Retrospective on the Role of Competition Law and Policy in Central and Eastern Europe 20 years after EU Enlargement and Lessons for the Future"

 

 

May 27th, 2025 in the Library of the University of Warsaw, ul. Dobra 56/66, Warszawa, Poland, Room 316 (3rd Floor).

Co-organisers: Maciej Bernatt (CARS, University of Warsaw) & Ioannis Lianos (UCL, ICF)
Organizing institutions: University College London, University of Warsaw, Inclusive Competition, ASCOLA Central Europe Chapter
Conference’s partner: Office of Competition and Consumer Protection, Poland (UOKiK)

 

Registration for the conference is obligatory. Please register via the form.

The recently published Draghi report on EU competition policy's future has ignited intense discussion among experts, particularly regarding its proposals to modernize EU competition law. While some view EU competition enforcement as hindering industrial policy and growth initiatives, this perspective overlooks competition policy's broader role. In today's era of entrepreneurial states and mission-driven economies, competition policy serves to both create and shape markets, fostering innovation and competitiveness.
The transformation of Central and Eastern European (CEE) Member States over the past two decades since joining the EU exemplifies how growth-oriented policies can harmoniously coexist with competition protection and market access initiatives. Despite being sometimes portrayed as Europe's economic periphery, these nations have achieved remarkable progress: their real GDP per capita has doubled or significantly increased, while both nominal and real wages have grown at rates substantially exceeding the EU average. Simultaneously, these countries implemented market liberalization policies and strengthened their competitive frameworks through the establishment of independent competition authorities.

This conference seeks to examine these developments in detail, analyzing the key components of this largely successful transformation while acknowledging persistent challenges and shortcomings. Moreover, it aims to extract valuable insights for the broader EU dialogue on competition law enforcement and policy's role within the new EU sustainable growth and innovation framework proposed by the Draghi report.

 

 

Download the conference programme

Strategic Investment in Competitors: Theory and Evidence from Technology Startups

Strategic Investment in Competitors: Theory and Evidence from Technology Startups 

Mario Leccese

Boston University - Questrom School of Business

Abstract

I examine how venture capitalists' (VCs') investments in competing startups impact their outcomes. Theoretically, I show that if VCs improve their screening practices by investing in a particular business area, they may favor the startup subsequently invested in that area, at the expense of that initially financed. Using Crunchbase data and S&P's unique technology taxonomy, I find that these subsequent startups raise more venture capital and secure follow-on funding more often than those not sharing a VC with a competitor. This, however, hurts initial startups. The result is only partially explained by improved screening by VCs, indicating how investing in competing startups significantly affects their monitoring practices.

Naive Algorithmic Collusion: When Do Bandit Learners Cooperate and When Do They Compete?

Naive Algorithmic Collusion: When Do Bandit Learners Cooperate and When Do They Compete?

By:	Connor Douglas; Foster Provost; Arun Sundararajan
Abstract:	Algorithmic agents are used in a variety of competitive decision settings, notably in making pricing decisions in contexts that range from online retail to residential home rentals. Business managers, algorithm designers, legal scholars, and regulators alike are all starting to consider the ramifications of "algorithmic collusion." We study the emergent behavior of multi-armed bandit machine learning algorithms used in situations where agents are competing, but they have no information about the strategic interaction they are engaged in. Using a general-form repeated Prisoner's Dilemma game, agents engage in online learning with no prior model of game structure and no knowledge of competitors' states or actions (e.g., no observation of competing prices). We show that these context-free bandits, with no knowledge of opponents' choices or outcomes, still will consistently learn collusive behavior - what we call "naive collusion." We primarily study this system through an analytical model and examine perturbations to the model through simulations. Our findings have several notable implications for regulators. First, calls to limit algorithms from conditioning on competitors' prices are insufficient to prevent algorithmic collusion. This is a direct result of collusion arising even in the naive setting. Second, symmetry in algorithms can increase collusion potential. This highlights a new, simple mechanism for "hub-and-spoke" algorithmic collusion. A central distributor need not imbue its algorithm with supra-competitive tendencies for apparent collusion to arise; it can simply arise by using certain (common) machine learning algorithms. Finally, we highlight that collusive outcomes depend starkly on the specific algorithm being used, and we highlight market and algorithmic conditions under which it will be unknown a priori whether collusion occurs.
URL:	https://d.repec.org/n?u=RePEc:arx:papers:2411.16574