Friday, July 20, 2007

Retail Payments and Card Use in the Netherlands: Pricing, Scale, and Antitrust

Posted by D. Daniel Sokol

Payment systems is a very interesting antitrust topic and one that I am spending more time thinking about as I plan to teach payment systems in the spring semester.  The excellent Competition Policy International had a special issue devoted to antitrust issues in payment systems.  One of the articles, by Dutchman Wilko Bolt, focuses on antitrust issues in payment systems in the Netherlands, called Retail Payments and Card Use in the Netherlands: Pricing, Scale, and Antitrust.

ABSTRACT: Efficient payment systems are essential components of well-functioning economies and financial markets, facilitating the exchange of goods, services, and assets. The speed and ease with which payments can be processed and executed will in general affect economic activities, output, and price levels. Therefore it is important that payment systems satisfy some basic principles of economic efficiency. The payment landscape is changing rapidly, with the fast growth of credit and debit card payment systems in many developed economies as perhaps one of the most striking examples. Data from a 2004 paper by Zinman show that in the United States alone, in 2002, consumers used their debit and credit cards in 33.4 billion transactions to charge around USD 2.3 trillion in total. Furthermore, data from Krueger's 2001 paper and the Bank for International Settlements (BIS) illustrate that in ten industrial countries the use of debit and credit cards rose from over nine billion transactions in 1987 to about 51 billion transactions in 2002. In particular, in the Netherlands, the enormous upswing in the usage of debit cards has been the main driver for the rapid developments in non-cash payments. Debit card payments in the Netherlands exceeded EUR 56 billion in 2004 (more than 12 percent of GDP) with a volume of around 1.25 billion debit card transactions (50 times higher than in 1990), and they are still growing rapidly.

July 20, 2007 | Permalink | Comments (1) | TrackBack (0)

Fordham Annual Conference on International Antitrust Law & Policy

Posted by D. Daniel Sokol

The most important international antitrust conference of the year, the Fordham Annual Conference on International Antitrust Law & Policy, has posted its agenda and registration materials.  This year is the 34th annual conference.  The agenda is below:

Date(s): 09.27.07 | Thu - 09.28.07 | Fri
Time: 9:00 a.m. - 6:00 p.m.
Location: Pope Auditorium, Fordham University  

Thursday, September 27

8:00 a.m. Registration & Continental Breakfast 

SESSION 1

9:00 a.m.
Introductory Remarks
Barry E. Hawk, Director, FCLI and Skadden, Arps, Slate, Meagher & Flom LLP

Convergence, Conflict, and Comity: The Search for Coherence in International Competition Policy
Hon. Deborah Platt Majoras, Chairman, U. S. Federal Trade Commission

Discussion
A. Paul Victor, Dewey Ballantine LLP (Presider); John Fingleton, Chief Executive Officer, UK Office of Fair Trading; Joe Sims, Jones Day

10:30 a.m. Break

SESSION 2

10:50 a.m.
Conglomerate Mergers and Vertical Mergers – A U. S. Perspective
Hon. J. Thomas Rosch, Commissioner, U. S. Federal Trade Commission

Conglomerate Mergers and Vertical Mergers – A European  Perspective
Carles Esteva-Mosso, Head of Merger Policy Unit, Directorate General for Competition, European Commission

Discussion
Ilene K. Gotts, Wachtell, Lipton, Rosen & Katz (Presider); Gerald F. Masoudi, Deputy Assistant Attorney, Antitrust Division, U. S. Department of Justice; Gerwin Van Gerven, Linklaters

1:00 p.m. Lunch 

SESSION 3

2:30 p.m.
Vertical Integration: Unbundling in the Energy Sector
Neelie Kroes, Commissioner of Competition, European Commission

Discussion
Stephen Kinsella, Sidley Austin LLP (Presider); Carlos Lapuerta, Principal, The Brattle Group; Abel  M. Mateus, President, Autoridade da Concorrência Portugal; Christian Stoffaës, Vice President, International Relations Department, Electricité de France; Peter Taylor, General Counsel, New Zealand Commerce Commission; Markus Wagemann, Head of Department, German Federal Cartel Office

6:00 p.m. Reception 

Friday, September 28

SESSION 4

9:00 a.m.
Remedies and Sanctions for Unlawful Unilateral Conduct – Roundtable
Andreas Reindl, Fordham Law School (Presider); Rafael Allendesalazar, Martínez Lage & Asociados; Stephen M. Axinn, Axinn, Veltrop & Harkrider LLP;  Hon. Thomas O. Barnett, Assistant Attorney General, Antitrust Division, U. S. Department of Justice; Hon. Denise L. Cote, Southern District of New York; Ian Forrester, White & Case LLP; Bruno Lasserre, President, Conseil de la Concurrence; Philip Lowe, Director General, Directorate General for Competition, European Commission; Prof. Howard A. Shelanski, School of Law – Boalt Hall, University of California, Berkeley; David L. Walsh, Vice President & Assistant General Counsel, IBM Corporation

12:45 p.m. Lunch

SESSION 5

2:15 p.m.
Oligopolies and Competition Law
Hon. Frédéric Jenny, French Cour de Cassation (Presider); Peter Freeman, Chairman, UK Competition Commission; Stefano Grassani, Pavia e Ansaldo Studio Legale;  Prof. Thomas E. Kauper, University of Michigan Law School; Damien Neven, Chief Economist, Directorate for Competition, European Commission; David Scheffman, Director, LEGC

6:00 p.m. Close of Conference

July 20, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 19, 2007

The FTC is Looking for a Healthcare Antitrust Lawyer

Posted by D. Daniel Sokol

Details are available here.

Also on the topic on Antitrust and Helath Care, make sure to sign up for the Antitrust in Healthcare conference co-sponsored by American Bar Association's Health Law Section and Section of Antitrust Law.

July 19, 2007 | Permalink | Comments (0) | TrackBack (0)

Leniency Programs in a Multimarket Setting

Posted by D. Daniel Sokol

Cartels scholarship is a hot field.  In an addition to the growing literature in this area, Catherine  Roux and Thomas von Ungern-Sternberg, both of the University of Lausanne - Department of Economics, write about Leniency Programs in a Multimarket Setting: Amnesty Plus and Penalty Plus

ABSTRACT: We examine the effects of Amnesty Plus and Penalty Plus, influencing firms' whistle blowing incentives in one market, on their self-reporting decision in another market. Amnesty Plus and Penalty Plus are proactive US strategies which aim at triggering multiple confessions by increasing the incentives of already convicted firms to report in another market where they collude. Predictably, conditional on conviction of one cartel, Amnesty Plus and Penalty Plus strengthen firms' incentives to report the remaining cartel. However, Amnesty Plus and Penalty Plus have an ambiguous impact on firms' incentives to apply for amnesty in the first place: On the one hand, Amnesty Plus and Penalty Plus may help to sustain a cartel, otherwise reported under the EC policy. On the other hand, Amnesty Plus and Penalty Plus may induce immediate reporting of both cartels whereas only one of them would have been reported under the EC Leniency Program.

July 19, 2007 | Permalink | Comments (0) | TrackBack (0)

Merger Control: More Stringent in Europe than in the United States?

Posted by D. Daniel Sokol

Fl In a provacative paper, François Lévêque of Ecole des Mines de Paris - Centre d'Économie Industrielle (CERNA) asks Merger Control: More Stringent in Europe than in the United States?  His results are a counter-intuative and lead to some interesting questions for the next stage of research.   He finds:

The number of mergers prohibited, cleared with remedies, or abandoned by the parties each year works out at an average of 50 in the USA and 20 in Europe. When these figures are divided by the number of notifications, they produce average percentages of 2.2% and 11% respectively. Does this mean that the European Commission is more stringent than US competition authorities? No, because the notification threshold is higher in Europe than in the USA... The higher proportion of decisions with remedies in the USA is not because there are more US/US mergers than EU/EU mergers but because almost all mergers between European companies are subject to remedies by the FTC or the DoJ. What is the reason for this? This result cannot be construed as direct proof that merger control is more stringent, or more protectionist in the USA. It is possible that EU/EU mergers objectively carry more anticompetitive risks in the USA than US/US mergers in Europe. Competitive conditions may vary considerably from one geographical market to another, and transatlantic mergers are not necessarily a reflection of global markets. It is conceivable, for example, that European companies have a stronger presence in the USA than US companies in Europe. To prove or disprove that the US authorities are more interventionist would require comparing the market shares and concentration of merged companies in Europe and the USA. That is the next question to tackle.

July 19, 2007 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 18, 2007

Dennis Carlton Asks- Does Antitrust Need to be Modernized?

Posted by D. Daniel Sokol

Carlton Dennis Carlton of the University of Chicago Graduate School of Business and the current Deputy Assistant Attorney General for Economic Analysis at the Department of Justice Antitrust Division asks Does Antitrust Need to be Modernized

ABSTRACT: In 2002, Congress established the Antitrust Modernization Commission to address whether the antitrust laws needed to be changed in light of globalization and rapid technological change. This paper addresses that question. Although the basic framework of the antitrust laws is suitable to deal with current economic conditions, the paper identifies several areas where antitrust can be improved. The paper first examines whether the proper criterion for antitrust should be total or consumer surplus. Then it identifies some key issues that need to be clarified and explains how they should be clarified. Those issues include market definition, merger policy and the treatment of efficiencies, the interaction of antitrust and intellectual property, exclusionary conduct, the right of indirect purchasers to sue, and the proper allocation of responsibility between regulation and antitrust.

July 18, 2007 | Permalink | Comments (0) | TrackBack (0)

Who Are the Best Antitrust Practitioners Around the World?

Posted by D. Daniel Sokol

The Global Competition Review has the answers for the best competition lawyers from 39 countries in their annual guide of Who's Who of Competition Lawyers.

July 18, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 17, 2007

€5,000 Competition on Best Paper on Competition Policy

Posted by D. Daniel Sokol

In recent weeks the beneficial impact of promoting competition on European living standards has been called into question, as the statement above makes clear. At the last meeting of the European Council the proposed EU Reform treaty had the objective of "unfettered competition" deleted from the leading objectives of the European Union. Commentary in the Financial Times has contended that this treaty change could have significant longer-term implications for competition law and its enforcement in Europe. Moreover, and quite distinctly, the European Court of First Instance is due to hand down their verdict on the Microsoft case in September. All of these matters are likely to keep EC competition law in the news for some time and call for a balanced assessement of its effects.

To stimulate debate on the contribution of competition law and its enforcement to European living standards and economic performance the editors of the Swiss Review of International Economic Relations (Aussenwirtshaft) are holding a paper competition. A prize of 5,000 euros will be offered to the best paper submitted to the competition. Details of the competition are attached. The submission deadline for the competition is 20 September 2007.

The competition is open to all those with a strong interest in competition law, irrespective of professional background or academic discipline.

The three judges for this competition will be Prof. Damien Neven (Chief Economist of DG Competition but here acting in a personal capacity), Prof. Jacques Bourgeois (WilmerHale and College of Europe), and Simon Evenett.  Email Simon Evenett with any questions.   

July 17, 2007 | Permalink | Comments (0) | TrackBack (0)

Muris and Parker on Competition in the Oil Industry

Posted by D. Daniel Sokol

Tim Muris and Rich Parker of O'Melveny & Myers have an excellent op-ed that appears in today's Wall Street Journal on competition in the oil industry.  They argue for less politicization of oil industry debates on energy competition and a greater emphasis on policy based on economic reality.  I agree wholeheartedly.

July 17, 2007 | Permalink | Comments (0) | TrackBack (0)

TOP 10 SSRN Papers for Journal of Antitrust: Antitrust Law & Policy, May 17, 2007 to July 16, 2007

Posted by D. Daniel Sokol

TOP 10 SSRN Papers for Journal of Antitrust: Antitrust Law & Policy, May 17, 2007 to July 16, 2007

1.  Competition Law and Copyright Misuse
John T. Cross, Peter K. Yu, University of Louisville-Louis D. Brandeis Schoolof Law, Drake University Law School

2.  The Empirics of Antitrust in Two-Sided Markets
Marc Rysman, Boston University- Department of Economics

3. What Can Antitrust Contribute to the Network Neutrality Debate?
Christopher S. Yoo, University of Pennsylvania Law School

4. Are Article 82 EC and Intellectual Property Interoperable? The State of the Law Pending the Judgment in Microsoft v. Commission
Robert O'Donoghue, Maurits Dolmans, Paul-John Loewenthal, Cleary Gottlieb Steen & Hamilton LLP -
Belgium Office, Cleary Gottlieb Steen & Hamilton LLP, Cleary Gottlieb Steen & Hamilton LLP

5. Mandated Network Neutrality and the First Amendment: Lessons from Turner and a New Approach
Moran Yemini, Author - Affiliation Unknown

6. Software Development as an Antitrust Remedy: Lessons from the Enforcement of the Microsoft Communications Protocol Licensing Requirement
William H. Page, Seldon J. Childers, University of Florida - Fredric G. Levin College of Law, University of Florida - Fredric G. Levin College of Law

7. Holding Innovation to an Antitrust Standard
Richard J. Gilbert, University of California, Berkeley - Department of Economics

8. 'The Benefits and Evils of Competition': James Coolidge Carter's Supreme Court Advocacy
Lewis A. Grossman, American University – Washington College of Law

9. Difference in Differences Analysis in Antitrust: What Does it Really Measure?
John Simpson, David Schmidt, Federal Trade Commission, Federal Trade Commission - Antitrust II

10. The Oligopolistic Pricing Problem - A Suggested Price Freeze Remedy
Guy Sagi, Netanya Academic College

July 17, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, July 16, 2007

Don Baker and the Antitrust Story of the Superior Court Trial Lawyers Case

Posted by D. Daniel Sokol

Don Baker of the firm Baker and Miller contributed a fascinating chapter to the Eleanor Fox and Dan Crane edited volume of Antitrust Stories (out soon from West) on the Superior Court Trial Lawyers Case.  Baker's piece is The Superior Court Trial Lawyers Case: A Battle on the Frontier Between Politics and Antitrust.  Baker retells the story of the FTC's enforcement action against the D.C. Superior Court Trial Lawyers, who agreed not to take further criminal indigent defendant work until they received a pay raise.

July 16, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, July 15, 2007

Pleading Standards after Bell Atlantic v. Twombly

Posted by D. Daniel Sokol

Civil procedure expert Scott Dodson of the University of Arkansas - School of Law weighs in on Twombly in the most recent onlime compansion to the Virginia Law Review.  His piece is titled  Pleading Standards after Bell Atlantic v. Twombly.

ABSTRACT: In Bell Atlantic Corp. v. Twombly, the Supreme Court repudiated the familiar language from Conley v. Gibson, that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief. This essay critiques Bell Atlantic and discusses some of its implications for pleading claims in the future.

July 15, 2007 | Permalink | Comments (0) | TrackBack (0)

Friday, July 13, 2007

Canada's New Government Creates Competition Policy Review Panel

Posted by D. Daniel Sokol

Just as the United States and EU have recently done, Canada has announced a review of its competition policy.  The press release is available here.  The press release offers the following summary of the scope of the review:

The Panel's core mandate is to review two key pieces of Canadian legislation, the Competition Act and the Investment Canada Act, including the treatment of state-owned enterprises and the possibility of a national security review clause. The Panel will also examine Canada's sectoral restrictions on foreign direct investment, and the competition and investment regimes of other jurisdictions to assess reciprocity between their rules and Canada's. Separately, the Panel will also assess how Canada's policies may further encourage outward investment. The Panel will report to the Minister of Industry, on behalf of the Government of Canada, by June 30, 2008 with concrete recommendations to further enhance competition in Canada.

July 13, 2007 | Permalink | Comments (0) | TrackBack (0)

Summer Reading in Comparative Antitrust- Tony Freyer's Antitrust and Global Capitalism, 1930–2004

Posted by D. Daniel Sokol

This past week we moved to our new home in Columbia, MO where I will be teaching at the University of Missouri School of Law after two years at the University of Wisconsin Law School.  Exhausted from unpacking, I finally had the time to read through Tony Freyer's Antitrust and Global Capitalism, 1930–2004.  Freyer’s book covers the history of antitrust developments in the United States, Europe, Australia and Japan. It also discusses the history of international efforts to address antitrust concerns. Freyer is a preeminent legal historian who has covered a diverse range of issues including the life and jurisprudence of Justice Hugo Black, civil rights in the US south, and the history of US and UK antitrust. Antitrust and Global Capitalism is a continuation of Freyer’s research into the comparative historic development of antitrust and business regulation.

Effective antitrust is essential to prevent monopolies and cartels from dominating economies and undermining growth and development. Increased globalization increases the possibility for anti-competitive behavior across national borders. The past ten years has seen a golden age of cooperation and coordination across antitrust agencies in antitrust enforcement. Freyer’s work is a major contribution to the longstanding debate over the historic development of comparative antitrust systems and how they address issues of business regulation, economic development and cross-border conduct. His work uncovers new insights in particular on post-WWII Japan and German antitrust and builds upon some recent works in understanding the transformation of European and Japanese antitrust.

July 13, 2007 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 12, 2007

European Competition Policy in International Markets

Posted by D. Daniel Sokol

Marc Ivaldi of University of Toulouse and Olivier Bertrand of Université Paris I Panthéon-Sorbonne have a new working paper titled European Competition Policy in International Markets.  Determining the appropriate institutional choice for issues of global antitrust is critical and something that I have written about myself here.

ABSTRACT: Changes in the institutional, technological and economic environment raise new challenges to the European competition policy. In this context, it is timely for European authorities to appraise the external dimension of the European competition policy as well as its articulation with current internal reforms. Globalisation can increase the costs of monitoring and seriously reduce the ability of European authorities to tackle cross-border anti-competitive conducts. In addition, conflicts are exacerbated by industrial policy motivations.

As it is unlikely that the sole application of the territoriality and extraterritoriality principles to competition rules could yield an optimal international competition system, globalisation calls for higher levels and types of cooperation. Given that bilateral cooperation and especially the implementation of comity principles could be of no value when laws or interests are sources of international conflicts, three main paths could be therefore encouraged: The continuous harmonization of rules through the joint action of OECD and ICN; the higher cooperation in the confidential information exchange; the establishment of global anti-trust institutions.

Although WTO is legitimate in judging questions related market access and entry barriers, it is less equipped to assess international hard core cartels or M&A reviews. As a substitute for WTO, a multilevel system, like the EU system, could be promoted. For political and pragmatic reasons, it could be composed in a first step of a hard core of countries like the EU, Japan and the U.S. It could be associated with the creation of an international Court of Justice for competition. In addition to these external reforms, some internal reforms could be required.

Competition authorities have to develop further competition advocacy to give a higher priority to competition issues in other EU policies and national regulation. A parallel and complementary reform could consist in making the European competition agency independent from State Members' interference.

July 12, 2007 | Permalink | Comments (0) | TrackBack (0)

Mackey is Not Helping Whole Foods With His Blogging

Posted by D. Daniel Sokol

In continuing excellent coverage on the Whole Foods/Wild Oats merger, David Kesmodel of the WSJ reports that the Whole Foods CEO blogged under the name "Rahodeb" regarding Wild Oats.  If the FTC action to block the merger goes to trial, this is just another way to discredit Mackey's testimony (along with Mackey's blog on the company website about the deal).   

July 12, 2007 | Permalink | Comments (1) | TrackBack (0)

Wednesday, July 11, 2007

Antitrust vs. Sector Regulation in Mobile Telecom

Posted by D. Daniel Sokol

Johan Stennek and Thomas Tangeraas of the Research Institute of Industrial Economics in Stockholm have authored a study that address the issue of antitrust vs. sector regulation titled Competition vs. Regulation in Mobile Telecommunications.

ABSTRACT: This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability.

July 11, 2007 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 10, 2007

Measuring the Effectiveness of Competition Policy

Posted by D. Daniel Sokol

The European Commission is undertaking research on the effectiveness of competition policy in 14 OECD countries. The aim of the study is to understand how different features of the legal system that guarantees and promotes competition and the way it is enforced, affect the economic performance of a country.

The questionnaire can be accessed on-line through the following link, http://www.learlab.it/survey.htm.  It takes less than 15 minutes to complete and responses will be treated with the utmost confidentiality.  The Commission has selected Lear, an economic consultancy based in Italy (http://www.learlab.it), to undertake this study.  Hence, Lear is responsible for analyzing all the data that is collected.  If you have any queries relating to the questionnaire or this study, please email: survey@learlab.itIt will be greatly appreciated if you complete the survey no later than July 31, 2007 to allow the Commission to meet its deadline. 

The person responsible for this project at the European Commission is Mr. Roderick Meiklejohn, Head of the Competition Policy Section of the Directorate General for Financial and Economic Affairs (Email: roderick.meiklejohn@ec.europa.eu)

July 10, 2007 | Permalink | Comments (0) | TrackBack (0)

Software Development as an Antitrust Remedy

Posted by D. Daniel Sokol

In a provocative new paper, William Page of the University of Florida Levin School of Law and and his student Seldon Childers have penned Software Development as an Antitrust Remedy: Lessons from the Enforcement of the Microsoft Communications Protocol Licensing Requirement.

ABSTRACT: An important provision in each of the final judgments in the government's Microsoft antitrust case requires Microsoft “make available” to software developers the communications protocols that Windows client operating systems use to interoperate “natively” (that is, without adding software) with Microsoft server operating systems in corporate networks or over the Internet. The short-term goal of the provision is to allow licensees of the protocols to write applications for non-Microsoft server operating systems that can interoperate as well with Windows client computers as can applications written for Microsoft servers. The long-term goal is to preserve, in the network context, the “middleware threat” to the Windows monopoly - the possibility that middleware applications running on servers might become a platform that could erode the “applications barrier to entry” as Netscape and Java had threatened to do. The district court singled out this provision as the “most forward-looking” in the final judgments, and as the key to assuring that the other provisions do not become “prematurely obsolete.” The provision has, however, proven to be by far the most difficult to implement. We argue that it has not accomplished its purpose and that courts can draw some hard lessons from the experience.

In 2003, almost a year after Microsoft first disclosed the protocols, only four firms had taken licenses. At the court's urging, both the plaintiffs and Microsoft have undertaken enormous efforts to promote the protocol program to developers, to make the license terms more attractive, to provide technical support, and especially to improve the technical documentation. The efforts have included several ambitious software development projects aimed at testing the adequacy of the documentation. Despite these efforts, as of March 2007, there were only 27 licensees producing 14 products, none of which had apparent platform potential. These results suggest that the program has failed in its primary goal. We argue that the real reason for the dearth of the licensees is that firms developing software applications to run on non-Microsoft servers generally do not need Microsoft's proprietary protocols to interoperate with Windows. They can achieve interoperability by using standard protocols supported in Windows, by adding other protocols, or by developing their own Windows client application.

We draw two primary lessons for courts in future cases. First, court should only impose injunctive relief in response to a proven need. The clearest need is to stop illegal conduct that impedes normal market processes. The protocol licensing requirement, however, did not respond to a proven violation and did not address technologies that were the focus of the liability phase of the case. Nor was there an independent showing of need for a forward-looking provision - evidence taken during the remedial phase of the case did not support compulsory licensing of protocols. Second, the court should avoid regulatory decrees, especially in high-technology markets. The protocol licensing program has become highly regulatory. The plaintiffs have directly supervised the price of the licenses and other terms of dealing. More important, they have regulated the quality of the product through complex testing. If these characteristics appear in future monopolization cases, they should be treated as warning signs.

July 10, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, July 9, 2007

AAI White Paper on Whole Foods/Wild Oats

Posted by D. Daniel Sokol

The American Antitrust Institute has penned a white paper on the proposed Whole Foods/Wild Oats merger.  Highlights include:

● The legality of the proposed merger turns on product market definition. The Commission defines a relevant product market centered on the category of “premium natural and organic supermarkets.” In such a highly concentrated market in 28 geographic regions across the U.S., the merger would eliminate the second largest competitor or a potential competitor. The merging parties make statements that support this market definition. But they also make statements that the relevant market is centered on full-line supermarkets and mass merchandisers selling natural and organic products, in which case the effect of the merger is de  minimis. Given this controversy, the appropriate scope of the relevant market will undoubtedly attract significant attention.

● An analysis of the merging parties’ pricing data in relevant markets should be viewed as complementary to the parties’ statements that the purpose of their merger is to avoid competition. Whole Foods’ John Mackey has made a number of public statements regarding the motives for the merger. Some of these statements reflect legitimate objectives such as cost savings, but others reflect a clear desire to stifle competition. In light of this, “natural experiments” using price data to determine if existing or potential competition discipline pricing by the merging parties should be viewed as a complement to anticompetitive motives in developing evidence that the merger would tend substantially to lessen competition.

● The merger’s effect on eliminating a potential competitor deserves equal attention to the elimination of an existing rival in the relevant market. Whole Foods’ John Mackey clearly acknowledges that one motive for the merger is to eliminate the single competitor which has the scale and brand identity that could serve as a “toe hold” for entry or expansion by a Whole Foods’ rival. This possible effect of the merger deserves significant scrutiny.

July 9, 2007 | Permalink | Comments (0) | TrackBack (0)