Antitrust & Competition Policy Blog

European Commission Launches Public Consultation on Draft Merger Guidelines for Companies in a Vertical or Conglomerate Relationship

Posted by D. Daniel Sokol

Details available here. 

The public consultation will be open for three months and the Commission invites all interested parties to submit their observations by 12 May 2007. The draft Guidelines can be found on the website of the European Commission at: http://ec.europa.eu/comm/competition/consultations/open.html.

Section 2 Hearings in Chicago - Business Executives to Speak

Posted by D. Daniel Sokol

Section 2 hearings continue in Chicago.  The sessions will be held in Room 600 of the University of Chicago Graduate School of Business’ Gleacher Center, 450 Cityfront Plaza Drive, Chicago, Illinois 60611.

Further information is provided below:

February 13, 2007

Session:

Business Testimony (9:30 A.M.–12:00 P.M. CST):

David A. Balto, Attorney, on behalf of the Generic Pharmaceutical Association.

Patrick Sheller is the Chief Compliance Officer, Eastman Kodak Company.

Ron Stern is the Vice President and Senior Competition Counsel, General Electric Company.

Business Testimony (1:30 P.M.–4:00 P.M. CST):

Stan Anderson is the Senior Counsel to the President, United States Chamber of Commerce.

Bruce Sewell is the Senior Vice President and General Counsel, Intel Corporation.

Bruce Wark is the Associate General Counsel, American Airlines, Inc.

The public and press are invited to attend all of the hearings. Seating will be on a first-come, first-served basis. Interested parties may submit written comments to the FTC and the Antitrust Division.

Further information about these hearings will be posted on the FTC’s Web site, and the Antitrust Division’s Web site. Individuals seeking more information on the hearings should contact Patricia Schultheiss, FTC, at section2hearings@ftc.gov, or Gail Kursh, Deputy Chief, Legal Policy Section, Antitrust Division, at singlefirmconduct@usdoj.gov.

Workshop on Strategic Firm-Authority Interaction in Antitrust, Merger Control and Regulation

Posted by D. Daniel Sokol

The Amsterdam Center for Law and Economics at the University of Amsterdam will present a workshop:

Strategic Firm-Authority Interaction in Antitrust, Merger Control and Regulation
Friday March 16, 2007
University of Amsterdam
Amsterdam, The Netherlands

Keynote Speakers
R. Preston McAfee (California Institute of Technology)
Stephen Calkins (Wayne State University Law School)

Plenary contributions by: Pieter Kalbfleisch (Netherlands Competition Authority), Mark Powell (White & Case LLP) and Silke Obst (European Commission).

In total 40 submitted paper presentations in parallel sessions. The presentation list is available at Download ACLEPreProgram090207-1.pdf. Registration is available here.

Antitrust Pedagogy Series: Greaney on Teaching Healthcare Antitrust

Antitrust and Competition Policy Blog is pleased to have Professor Thomas (Tim) Greaney of Saint Louis University School of Law guest blog in the second of our series in antitrust pedagogy. Tim is the Chester A. Myers Professor of Law and Co-Director, Center for Health Law Studies. He is a luminary in health care law and its intersection with antitrust. His most recent publications in the area have focused on hospital mergers. Within the larger health care law field, Tim is co-author of the major casebook, treatise and hornbook in the field. His guest blog is on Teaching Healthcare Antitrust.

Posted by Guest Blogger Tim Greaney

Because we have a large health law program at Saint Louis University (God bless U.S. News & World Report), I’ve had the luxury of teaching the antitrust / health care intersection in a number of different settings: the basic antitrust class; a seminar in antitrust and health care; a course entitled “health care financing and business organizations” (taken by almost all health law certificate students here); an IP-Antitrust Seminar and occasional classes taught to medical and public health students. The goals, coverage, tactics, and jokes necessarily vary with the class.

Health law cases pop up throughout the basic antitrust course: Cal Dental, Indiana Federation of Dentists, Maricopa, Jeff Parish, and Judge Posner’s HCA opinion are staples in most case books. Scattered through the course and idiosyncratic as these cases are, it’s difficult to develop an overarching account of antitrust law’s role in promoting competition in health care. However I think it important to point out that private and government litigation have served that important purpose (and occasionally still do). The healthcare cases also serve a pedagogical purpose by illustrating that antitrust doctrine needs to take into account market imperfections in order to make an accurate economic appraisal of the conduct and structure in that industry. To give one example, in Indiana Federation, the Court thrashed about in its competitive analysis, branding the dentists’ refusal to supply x-rays to third parties as  “withhold[ing] from their customers a particular service that they desire”and a "refusal to compete with respect to the package of services offered to customers." Taking into account the critical market imperfections that are dealt with by managed care (in this case via ‘utilization review’ evaluating x-rays) would have more precisely identified the effect and purpose of the conduct and revealed it as warranting summary condemnation. [This and a few dozen other examples of the neglected role of market failure are explored in my article, “Chicago’s Procrustean Bed: Applying Antitrust Law in Health Care” in the Antitrust Law J. (2004)]. In addition, other post-Chicago items like unilateral effects in differentiated product markets can be illustrated and elaborated by considering health care markets (e.g. the merger of two sophisticated teaching hospitals in a market served by many other hospitals, U.S. v. Long Island Jewish Hospital). 

In other settings, such as health law and the health financing course, teaching antitrust is, as the saying goes, both a challenge and an opportunity. The challenge is in laying down enough of a base so those who haven’t taken an antitrust course will be on board. The opportunity is in putting the law in context and applying it given the sometimes-conflicting commands supplied by other legal doctrines (eg. Medicare anti-kickback, exempt organization, state corporate, and Stark laws). As to teaching antitrust itself, my casebook (Furrow, Greaney, Johnson, Jost & Schwartz, Health Law [5^th Ed Thomson/West devotes 100 pages to the subject. My goal in the casebook was to give  students a look at the application to the health industry of the two most important antitrust concepts: conduct and structure. The former includes classic cartels and moves along the Section One continuum to advertising restraints, and other restraints carrying interesting “professionalism” justifications (standard-setting by medical specialty organizations). The book then goes on to consider the very actively litigated conduct/structural issues raised by partially integrated physician joint ventures and concludes with merger analysis. After that, (and exposure to the other areas of law mentioned above) students are ready to tackle problems (e.g. counseling regarding hospital-physician joint ventures that have both vertical and horizontal competitive dimensions and implicate all the other areas of law just mentioned.)

Finally, the health-antitrust intersection offers an opportunity to bring into class a seemingly endless stream of policy issues (e.g. health system reform proposals;  Tom Campbell’s lamentable physicians union legislation; exclusion payments involving generic drugs and the overall effect of Hatch-Waxman law; allowing HHS to negotiate directly with big pharma for Medicare Part D purchasing). It keeps you young. 

Waldman and Carlton on Aftermarkets

Posted by D. Daniel Sokol

Dennis Carlton and Michael Waldman have a new working paper on an increasingly hot topic in antitrust- aftermarkets.  Their paper suggests that judicial interventions in aftermarkets may come with risks.

"Competition, Monopoly and Aftermarkets"
Johnson School Research Paper Series No. 10-06

ABSTRACT: Consider a durable goods producer that potentially has market power in the aftermarkets associated with its own products. An important question is to what extent, if any, should the antitrust laws restrict the firm's behavior in these aftermarkets? In this paper we explore three models that illustrate how various behaviors that hurt competition in aftermarkets can, in fact, be efficient responses to potential inefficiencies that can arise in aftermarkets. Our results should give courts pause before intervening in aftermarkets.

Are You Paying Too Much for Vegetables and Cereal? Congress to Explore Competition Issues in the Grocery Industry

Posted by D. Daniel Sokol

Democratic control of Congress has prompted new committee chairs to flex their legislative muscles.  The latest to do so is Dennis Kucinich (D-Ohio), chairman of the new House Oversight and Government Reform Domestic Policy Subcommittee.  Kucinich, a declared presidential candidate for the 2008 race, has vowed to investigate the cost of groceries and  competition in the marketplace, according to today's BNA Antitrust Report (subscription required).  Is this motivated by Albertson/Supervalu, industry consolidation generally or another forum to politicize WalMart (always a good move for someone running for president), the nation's top grocer?

Hat tip to Minnesota's Tom Cotter from bringing the story to our attention.

February 9 Update

My colleague Kyle Stiegert who heads the University of Wisconsin's Food System Research Group in the Agricultural and Applied Economics Department alerted me to an issue sheet he wrote recently on supermarket mergers and supercenters on prices.  His conclusion is that "[r]ecent changes in the industry have muted competition effects. The rise of supercenters does not seem to increase competition nor have a significant impact on prices. Supermarket mergers increase supermarket profits, but prices to consumers also rise."

$2,000 Student Prize Offered by Berkeley Technology Law Journal

Posted by D. Daniel Sokol

The Berkeley Technology Law Journal is soliciting entries for our annual student writing competition.  They will accept submissions from JD candidates (sorry LLM and SJD students!) on a wide variety of topics at the intersection of law and technology, including but not limited to: intellectual property, antitrust, First Amendment, entertainment and new media, telecommunications, biotechnology, Internet, and cybercrime.  First prize includes $2,000 and publication in the Fall 2007 issue, if the winning article meets the Journal's publication standards.  The submission deadline is February 28, 2007.

Competition for the Best Antitrust Scholarship of 2006

Posted by D. Daniel Sokol

The American Antitrust Institute is holding its annual competition for the Jerry S. Cohen Award for the Best Antitrust Scholarship of the Year.

From the AAI press release:

The Jerry S. Cohen Memorial Charitable Trust is again seeking nominations for its annual award for best antitrust scholarship. Legal, economic, and business articles, monographs, and books published during 2006 are eligible for this award of approximately $8,000-10,000. The Award will be presented during the American Antitrust Institute Annual Conference on June 21, 2007, in Washington, D.C.

Although the Cohen Award's judges search the literature for worthy scholarship, your nominations, including self-nominations, will help make sure they do not accidentally overlook any important candidates.

The award is made through a trust set up in the memory of antitrust attorney and author Jerry S. Cohen, brought about by efforts and donations of friends, colleagues and his former law firm. This year's award will be selected by a committee consisting of Professors John Flynn, Eleanor Fox, Robert Lande and Steven Salop, antitrust practitioners David Romine and Charles Goodwin, and Judge Ann Yahner.

Last year's recipient was Professor Barry Nalebuff for his article, Exclusionary Bundling, 30 Antitrust Bull. 321 (2005). Previous winners include Professor Andrew Gavil, for Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance, Professor John Connor, for his book Global Price Fixing, and Professors Joseph F. Brodley, Patrick Bolton, and Michael H. Riordan for Predatory Pricing: Strategic Theory and Legal Policy.

To be selected for the award, submissions should address substantive, procedural, or evidentiary issues important to the statutes designed to protect consumers and society as a whole from anticompetitive activity. Submissions should include such concerns as the maintenance of effective limitations upon economic power, principles of economic justice, the dispersal of economic power, and an awareness of the human and social impacts of economic institutions upon individuals, small businesses and other institutions necessary to the maintenance of a just and humane society. All these are values and concerns that Jerry S. Cohen dedicated his life and work to fostering.

Please send a copy of your nomination before April 1, 2007 to Herbert E. Milstein, at hmilstein@cmht.com, or at Cohen, Milstein, Hausfeld & Toll, P.L.L.C., 1100   New York Avenue, N.W., West Tower, Suite 500, Washington, D.C. 20005. For a detailed statement of the Award's eligibility and selection criteria, or if you have any questions about the Cohen Award, please also contact Herbert E. Milstein, at 202-408-4600 or at hmilstein@cmht.com.

FTC Issues Final Opinion and Order in Rambus Matter

Posted by D. Daniel Sokol

An FTC press release today reports that the FTC has issued a final opinion and final order on Rambus, one of the more exciting IP-Antitrust cases in the past few years.

From the FTC Press Release:

The Federal Trade Commission today issued a final opinion and order in the legal proceeding against computer technology developer Rambus, Inc. In addition to barring Rambus from making misrepresentations or omissions to standard-setting organizations, the order requires Rambus to license its SDRAM and DDR SDRAM technology and sets maximum allowable royalty rates it can collect for the licensing, bars Rambus from collecting or attempting to collect more than the maximum allowable royalty rates from companies that may already have incorporated its DRAM technology, and requires Rambus to employ a Commission-approved compliance officer to ensure that Rambus’s patents and patent applications are disclosed to industry standard-setting bodies in which it participates. The order is designed to remedy the effects of the unlawful monopoly Rambus established in the markets for four computer memory technologies that have been incorporated into industry standards for dynamic random access memory – DRAM chips. DRAMs are widely used in personal computers, servers, printers, and cameras.

The release continues:

The Commission’s majority opinion states that the Supreme Court has “emphasized the Commission’s wide discretion in its choice of remedy, and stated the expectation that the Commission would ‘exercise a special competence in formulating remedies to deal with problems in the general sphere of competitive practices.’”                   

Thus, “The Commission enjoys ‘wide latitude for judgment’ in fashioning a remedial order, subject to the constraint that the requirements of the order bear a reasonable relationship to the unlawful practices that the Commission has found.”

“Having found liability, we want a remedy strong enough to restore ongoing competition and thereby to inspire confidence in the standard-setting process. At the same time, we do not want to impose an unnecessarily restrictive remedy that could undermine the attainment of pro-competitive goals,” it says.                   

“[T]he Commission has previously declared, and we agree, that ‘where the circumstances justify such relief, the Commission has the authority to require royalty-free licensing.’ . . . We conclude, however, that Complaint Counsel have not satisfied their burden of demonstrating that a royalty-free remedy is necessary to restore the competition that would have existed in the ‘but for’ world – i.e., that absent Rambus’s deception, JEDEC would not have standardized Rambus technologies, thus leaving Rambus with no royalties. . . .We have examined the record for the proof that the courts have found necessary to impose royalty-free licensing, but do not find it. ”

“We therefore are left with the task of determining the maximum reasonable royalty rate that Rambus may charge those practicing the SDRAM and DDR-SDRAM standards. Royalty rates unquestionably are better set in the marketplace, but Rambus’s deceptive conduct has made that impossible. Although we do not relish imposing a compulsory licensing remedy, the facts presented make that relief appropriate and indeed necessary to restore competition,” the opinion states.        

“[W]e find that a maximum royalty rate of .5% for DDR SDRAM, for three years from the date the Commission’s Order is issued and then going to zero, is reasonable and appropriate. We also find that a corresponding .25% maximum rate for SDRAM is appropriate. Halving the DDR SDRAM rate reflects the fact that SDRAM utilizes only two of the relevant Rambus technologies, whereas DDR SDRAM uses four.”

The opinion explains that the order bars Rambus “from collecting royalties relating to the sale, manufacture or use of any JEDEC-compliant DRAM or non-DRAM products that are greater than those that Rambus is allowed to collect under the terms” of the order. “The purpose of this provision . . . is to preclude Rambus from continuing to collect monopoly rents” with respect to these products.

A New Understanding of State Action?

Posted by D. Daniel Sokol

A new SSRN paper by Jim Rossi of FSU on state action brings up some new points on one of my favorite topics. A number of interesting papers have come out recently discussing the appropriate role and scope of the state action immunity, an immunity in which the state may displace competition. These papers come at a time in which the FTC produced a long and detailed report on how the state action immunity has expanded in scope and in which the Antitrust Modernization Commission has made recommendations regarding the scope of state action (finding "The federal lower courts in some cases have misinterpreted or misapplied the state action doctrine to override the federal policy in favor of free-market competition in ways inconsistent with prior Supreme Court rulings."). Some of the more recent articles in the debate include those by Darren Bush (Mission Creep: Antitrust Exemptions and Immunities as Applied to Deregulated Industries), Richard Squire (Antitrust and the Supremacy Clause), and Jim Rossi (Antitrust Process and Vertical Deference: Delegation and Reasons for Agency Inaction in State Economic Regulation) (Rossi contrasts his approach with that of Squire). 

Fellowship to Research Competition Issues in New Zealand for Academics

Posted by D. Daniel Sokol

New Zealand is one of the world’s most open economies and has among the fewest regulatory barriers of any country.  Because of New Zealand's trade dynamism and the small size of its economy (with some highly concentrated industries as a result), there are a number of interesting antitrust/competition policy related issues in the New Zealand context.

The New Zealand Institute for the Study of Competition and Regulation (ISCR) invites applications from academics for the S T Lee Research Fellowship. ISCR’s research is undertaken by a specially created academic unit based at Victoria University of Wellington’s Rutherford House campus in downtown Wellington, New Zealand.  Spending three months in New Zealand should be a dream both in terms of exploring a beautiful country and opportunities for great research and collaboration with some of the country’s top competition experts.

In looking for materials to use in my comparative and international antitrust law and economics seminar, I recently had a chance to email with one of New Zealand's top competition practitioners, Peter Hinton.  Peter heads the competition practice at Simpson Grierson.  I gather from Peter that there are a number of interesting cases and industries worthy of study (not so subtle hint to my students looking for topics for their research papers).

DOJ and FTC: A Poor Partnership?

Posted by Shubha Ghosh

Professor Kovacic has some sharp words about the need for greater cooperation between the DoJ and FTC, with an equally insightful response from Professor Pitofsky at

http://money.cnn.com/news/newsfeeds/articles/djf500/200701291348DOWJONESDJONLINE000538_FORTUNE5.htm