Antitrust & Competition Policy Blog

There is No Antitrust Conspiracy to Blame For Your High Gas Prices

Posted by D. Daniel Sokol

Yesterday the FTC and DOJ released the their Report On Spring/Summer 2006 Nationwide Gasoline Price Increases.  In what is perhaps a shock to nobody (except those in Congress), it turns out that prices are a function of supply and demand.  In particular the report lists six factors for the price increases:

(1) seasonal effects of the summer driving season; (2) increases in the price of crude oil; (3) increases in the price of ethanol; (4) capacity reductions stemming from refiners’ transition from the fuel additive methyl tertiary-butyl ether to ethanol; (5) refinery outages resulting from hurricane damage, other unexpected problems or external events, and required maintenance; and (6) increased consumer demand for gasoline beyond the seasonal effects of the summer driving season.  

European Commission Decisions on Competition: Landmark Antitrust and Merger Cases from an Economic Point of View

Posted by D. Daniel Sokol

A new book on EC Competition Law, European Commission Decisions on Competition: Landmark Antitrust and Merger Cases from an Economic Point of View, provides a comprehensive description and analysis of Commission decisions adopted pursuant to Articles 81, 82 and 86 EC Treaty, as well as landmark European merger cases.  Its authors are Maarten Pieter Schinkel (Amsterdam Center for Law and Economics), Martin Carree (Universiteit Maastricht), Francesco Russo (Amsterdam Center for Law and Economics), and Andrea Günster (Amsterdam Center for Law and Economics).

ABSTRACT: This book provides a comprehensive economic classification and analysis of all European Commission decisions adopted pursuant to Articles 81, 82 and 86 EC Treaty, as well as landmark European merger cases. The decisions are organized according to the principal economic theory applied in the case. For each theory, the first decision in which that theory was relied upon by the Commission - provided, if appealed, it was upheld by the European Courts - is described according to a fixed template that is applied throughout the book. All related decisions, in which the same economic issue was central, are listed chronologically. The book is offered as a compendium to the leading IO textbooks and practitioner guides, to which detailed references are made. All cases are structured to be easily accessible for scholars of IO and the economics of competition policy, as well as practicing competition lawyers and officials. Of each landmark decision discussed in the book, a PDF file of the full text of the publication as it appeared in the Official Journal of the European Communities is included on a complementary CD-ROM. This book provides a unique analysis of the Commission's application and understanding of results from antitrust economics that have influenced European competition law enforcement. The introduction to the book, together with the breadth of the materials selected, present a complete historical overview of European competition policy.

August 24 Draft of Chinese Anti-Monopoly Law

Posted by D. Daniel Sokol

Over at our sister blog within the Law Blog network, China Law Prof Blog, there is a posting of the August 24 Draft of Chinese Anti-Monopoly Law.  You can download the Chinese and English law below.

Download 070824_draft_aml_third_draft.pdf

Taking Stock of the Antitrust Modernization Commission Report

Posted by D. Daniel Sokol

The Silicon Flatirons Program at the University of Colorado will be hosting a program on Taking Stock of the Antitrust Modernization Commission Report in lovely Boulder, CO on September 5.  The program looks good with a mix of AMC members, academics and practitioners.   From the conference press release:

This conference will evaluate the judgments of the Antitrust Modernization Commission report, examining its basic conclusion that there are no fundamental flaws in modern antitrust law and practice as well as its various suggestions for reform. To do so, we will bring together some of the Commissioners who evaluated the state of antitrust law, current and former antitrust enforcers, and a number of leading antitrust practitioners. In particular, we will examine the report’s conclusions within three broad headings—Rethinking Merger Review; Antitrust in the New Economy; and the Antitrust/IP Interface.  

Economics in the Whole Foods Merger Case

Posted by Luke Froeb

Last week, a federal judge refused to grant a preliminary injunction against the Whole Foods acquisition of Wild Oats (FTC website; testimony: day1 am, day1 pm, day2 am). He ruled that "premium, natural and organic supermarkets" was a not a "relevant product market." A relevant market is one in which a hypothetical, multi-product monopolist, owning all stores in the category (and eliminating competition among them), would raise price.

[Read the entire post here]

September 5 Abstract Deadline Approaching for Latin American Competition Policy Conference

Posted by D. Daniel Sokol

The deadline to submit abstracts for the Latin American Competition Policy Conference in Sao Paolo is nearing (September 5).  Make sure to submit your abstract for the conference.  The conference themes are competition advocacy and cartels.  Both issues are critically important in Latin America.

Conference details can be found here.  Expenses will be covered for conference presenters.

Northwestern University Research Symposium on "Insurance Markets and Regulation" - Call for Papers

Posted by D. Daniel Sokol

The Searle Center is issuing a call for original research papers to be presented at a Research Symposium on Insurance Markets and Regulation at Northwestern University School of Law. The Symposium will run from 11:30 AM on Monday, April 14th to Tuesday, April 15th at 1:30 PM.

The goal of this Research Symposium is to encourage rigorous, high-quality, policy-relevant research on insurance markets and regulation. The topics covered and the exact format of the symposium will be determined in part by the submissions. Potential topics include (but are limited to) Optional Federal Chartering of Insurance Companies; Antitrust and Insurance Regulation; Jurisdictional Competition; Exit Barriers; Tort Reform; Natural Disasters and State Solvency Regulation; Preemption; Federal Insurance Programs; Health Insurance; and Medical Malpractice Insurance.

SYMPOSIUM DETAILS:

The Symposium will feature a Keynote Luncheon Address by Representative Melissa Bean (D-Illinois, 8th District) on Monday, April 14. Representative Bean has introduced legislation for optional federal chartering of insurance companies. There will be a reception, dinner and program on Monday evening. The Symposium will conclude on Tuesday with a luncheon roundtable discussion of emerging public policy issues affecting insurance markets.

Authors will receive an honorarium of $6,000 (plus reasonable travel expenses). Honoraria will be paid in two installments - 50 percent at the symposium, and 50 percent upon revision in response to comments at the symposium.

The Symposium format will include Discussants of the various papers. The typical Discussant will be asked to comment on two papers as part of a panel discussion. Discussants will be paid an honorarium of $1,000 (plus reasonable transportation expenses).

Papers prepared for the Research Symposium on "Insurance Markets and Regulation" will be permanently hosted on The Searle Center website:

http://www.law.northwestern.edu/searlecenter

The Searle Center intends to market the papers as a package for a law review symposium; if not picked up by a law review, the authors would be free to publish their work in other venues (with appropriate acknowledgement of The Searle Center).

RESEARCH PROPOSALS: SUBMISSION, REVIEW PROCEDURE AND TIMELINE

Research Proposals should include an abstract (300 words maximum), c.v., and whatever supporting documents the author believes will be helpful in the review process.

Research Proposals should be submitted to:MAILTO:[email protected]

Research Proposals will be reviewed by a three-member committee. Authors will be notified of the committee's decisions by November 1.  Papers must be received by March 24, 2008. Revised Papers must be received by June 1, 2008.

Potential Discussants should send a message indicating their interest in insurance markets and regulation to:

Email: http://www.law.northwestern.edu/searlecenter

Leniency and Whistleblowers in Antitrust

Posted by D. Daniel Sokol

Giancarlo Spagnolo of the University of Tor Vergata in Italy offers a new way to think comparatively about whistleblowers in Leniency and Whistleblowers in Antitrust.

ABSTRACT: The paper reviews the recent evolution of leniency programs for cartels in the US and EU, surveys their theoretical economic analyses, and discusses the empirical and experimental evidence available, also looking briefly at related experiences of rewarding whistleblowers in other fields of law enforcement. It concludes with a list of desiderata for leniency and whistleblower reward programs, simple suggestions how to improve current ones, and an agenda for future research. The issues discussed appear relevant to the fight of other forms of multiagent organized crime - like auditor-manager collusion, financial fraud, or corruption - that share with cartels the crucial features that well designed leniency and whistleblower programs exploit.

Highlights of the Third Reading of the Chinese Draft Anti-Monopoly Law

Posted by D. Daniel Sokol

A new Chinese language newspaper report provides Highlights of the Third Reading of the Chinese Draft Anti-Monopoly Law.  This news comes from Chinese competition and IP law guru Paul Jones.  Paul has summarized for those of us who do not read Chinese:

The highlights include a ban on horizontal arrangements. Interestingly one of the prohibited behaviors is listed as “ restricting the purchase of new technology, new equipment or restrictions on the development of new technologies.” There will be a special chapter on administrative provisions restricting competition. The State Council is to set up an Anti-Monopoly Commission that will undertake various types of investigative work and make administrative determinations on penalties. Finally the article mentions that this draft specifies that the law will be applicable to operators who abuse intellectual property rights.

Standardizing the Law of Antitrust Oversight of Standard Setting

Posted by D. Daniel Sokol

Today's BNA Antitrust & Trade Regulation Daily reports on the EU's first foray into "patent ambush" cases under Article 82 based on potential anti-competitive conduct by Rambus.  This conduct should ring a bell for US practitioners.  On standard setting, Phil Weiser of the University of Colorado Law School has a new paper that attempts to tackle standard setting issues in Standardizing the Law of Antitrust Oversight of Standard Setting.

ABSTRACT: The stance of antitrust oversight of standard setting activities remains a work-in-progress. Over time, antitrust authorities have grown increasingly hospitable to cooperative standard setting efforts whereby jointly developed standards will facilitate the development of new products or services. In the information industries, such standards are ubiquitous and, moreover, are set by international standard setting organizations (SSOs) like the Internet Engineering Task Force (IETF). To be successful, SSOs must develop strategies to prevent firms from patenting technologies used in official standards and charging exorbitant royalties once a standard is adopted. In particular, SSOs face a range of options in terms of policies that govern the use of patents in official standards - even within the popular strategy of mandating reasonable and non-discriminatory (RAND) access to patents necessary to practice a standard. With multi-jurisdictional oversight of SSOs, the role of antitrust law - if inconsistent and overly aggressive - could be counterproductive.

This paper argues that international antitrust authorities should be humble about second guessing policies of standard setting bodies related to patent policies or playing an aggressive enforcement role. By so doing, antitrust authorities will signal to standard setting bodies that they must rely fundamentally on their own strategies for ensuring compliance with their own policies. Such policies, for example, could include a mandate that firms disclose the relevant licensing terms and conditions before the body decides to endorse a particular technology as part of a standard. To be sure, there is still a role for antitrust authorities to sanction egregious abuses of the standard setting process, such as the Federal Trade Commission's action in Rambus, but such actions should be exceptional and not viewed as an alternative to a standard setting body's safeguards against abuses by firms that obtain patents on technologies necessary to practice the standard.

The Analysis of Coordinated Effects in EU Merger Control: Where Do We Stand after Sony/BMG and Impala?

Posted by D. Daniel Sokol

With the implications of Whole Foods/Wild Oats still sinking in, I thought it might be interesting to think about merger analysis in the EU.  Gisela Aigner, Oliver Budzinski and Arndt Christiansen, all of the University of Marburg have authored an analysis of the state of play of EU merger law specific to coordinated effects titled The Analysis of Coordinated Effects in EU Merger Control: Where Do We Stand after Sony/BMG and Impala?

ABSTRACT: The recent Impala Judgment by the CFI on the Sony/BMG Decision by the Commission represents the most important ruling on collective dominance since Airtours. We review both the Decision and the Judgment and derive implications for the institutional and substantive development of EU Merger Control. Firstly, Impala introduces an ambitious symmetric standard of proof for prohibition and clearance decisions by the Commission. While alleviating fears of an increasing number of false positives in the aftermath of Airtours, this entails the problem how to deal with cases in which neither the existence, nor the absence of anticompetitive effects can be proven to the required standard. Secondly, Impala represents to some extent a comeback of coordinated effects analysis, further précising the conditions for establishing this kind of anticompetitive effects. Thirdly, the ongoing process of increasing the role of third parties in European Merger Control is fuelled. Additionally, and given the characteristics and the development of the music industry, we criticise a lacking in-depth economic analysis of a potential decrease innovation efficiency as well as an increase in foreclosure effects following the merger.

Why Such a High Mark-Up on Corn Flakes?

Posted by D. Daniel Sokol

In the wake of the crushing setback for the FTC in the Whole Foods/Wild Oats merger case, I thought it might be interesting to look through some of the agricultural economics literature on supermarket competition.  In the forthcoming issue of  the American Journal of Agricultural Economics, there is a great article by Benaissa Chidmi and Rigoberto Lopez of the University of Connecticut Department of Agricultural and Applied Economics that explains competition in breakfast cereals in Brand-Supermarket Demand for Breakfast Cereals and Retail Competition.

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided.

Why Tie A Product Consumers Do Not Use?

Posted by D. Daniel Sokol

Dennis W. Carlton (University of Chicago Graduate School of Business), Joshua S. Gans (Melbourne Bsuiness School), and Michael Waldman (Cornell Department of Economics)has just authored an insightful new paper Why Tie A Product Consumers Do Not Use?  On Dennis, let us congratulate him on his recent appointment to be a member of the President's Council of Economic Advisors.

ABSTRACT: This paper provides a new explanation for tying that is not based on any of the standard explanations -- efficiency, price discrimination, and exclusion.  Our analysis shows how a monopolist sometimes has an incentive to tie a complementary good to its monopolized good in order to transfer profits from a rival producer of the complementary product to the monopolist.  This occurs even when consumers -- who have the option to use the monopolist's complementary good -- do not use it.  The tie is profitable because it alters the subsequent pricing game between the monopolist and the rival in a manner favorable to the monopolist.  We show that this form of tying is socially inefficient, but interestingly can arise only when the tie is socially efficient in the absence of the rival producer.  We relate this inefficient form of tying to several actual examples and explore its antitrust implications.

Spielberg, Lucas, Scorsese and the American Antitrust Institute

Posted by D. Daniel Sokol

What do Spielberg, Lucas, Scorsese and the American Antitrust Institute have in common?  All have won the coveted CINE Golden Eagle, which recognizes "excellence in documentary and other informational film and video production."  AAI won the award for its half hour documentary "Fair Fight in the Marketplace" which will appear on WETA Channel 26 in the Washington DC area on August 26 at 4 p.m. and midnight.  See here for more details. 

The Impact of Schneider Electric SA v. Commission

Posted by D. Daniel Sokol

In one of the most iomportant decisions this year,  the Court of First Instance of the European Communities found that the European Commission improperly blocked the merger of Schneider Electric SA v. Commission. This is a significant blow to DG Comp and they will appeal the decision.  John Schmidt and Sebastian McMichael of Shepherd & Wedderburn provide an analysis of the decision for eCCP.

Competition Policy Conference in Peru

Posted by D. Daniel Sokol

For those of you who want yet another reason to travel to Peru (and there are many) on September 4-5, 2007 the Faculty of Law of the University of Lima, INDECOPI and the Revista de Derecho Advocatus are organizing the “Congreso Internacional de Derecho de la Competencia: Nuevas Perspectivas Mundiales del Derecho de la Competencia” in Lima.

Details are available below.

Download programa_final_congreso_derecho_competencia.doc Download anuncio_congreso_derecho_competencia.JPG 

Mergers in Consumer Search Markets

Posted by D. Daniel Sokol

New work from Maarten Janssen and José Luis Moraga-González of Erasmus University Rotterdam titled On Mergers in Consumer Search Markets suggests that understanding search costs is critical to understanding why firms may choose to merge as well as the welfare implications of such mergers.

ABSTRACT: We study mergers in a market where N firms sell a homogeneous good and consumers search sequentially to discover prices. The main motivation for such an analysis is that mergers generally affect market prices and thereby, in a search environment, the search behavior of consumers. Endogenous changes in consumer search may strengthen, or alternatively, offset the primary effects of a merger. Our main result is that the level of search costs are crucial in determining the incentives of firms to merge and the welfare implications of mergers. When search costs are relatively small, mergers turn out not to be profitable for the merging firms. If search costs are relatively high instead, a merger causes a fall in average price and this triggers search. As a result, non-shoppers who didn't find it worthwhile to search in the pre-merger situation, start searching post-merger. We show that this change in the search composition of demand makes mergers incentive-compatible for the firms and, in some cases, socially desirable.

GE/Honeywell: The U.S. Merger that Europe Stopped - A Story of the Politics of Convergence

Posted by D. Daniel Sokol

Eleanor Fox of NYU School of Law just posted her chapter in her forthcoming edited volume of Antitrust Stories (co-authored with Dan Crane) of the most contentious trans-Atlantic merger of all time, GE/Honeywell.  Her chapter is titled GE/Honeywell: The U.S. Merger that Europe Stopped - A Story of  the Politics of Convergence.  Fox's description and analysis of this story is a real page turner and helps to shed light on a case that we continue to discuss as much for its political implications as for its antitrust analysis.  To date, we have yet to see trans-Atlantic divergence since GE/Honeywell.  However, the European Court of First Instance will issue its ruling on the Microsoft Case (due September 17) and we may see trans-Atlantic fireworks again.  I will not speculate at the moment about the forthcoming Microsoft ruling but will note that there were some troubling elements to the initial EU Microsoft decision. 

Evaluating Market Power Using Competitive Benchmark Prices Rather than the Hirschman-Herfindahl Index

Posted by D. Daniel Sokol

Jerry A. Hausman of MIT's Department of Economics and J. Gregory Sidak of Georgetown University Law Center provide an interesting alternative to HHI to measure market power in Evaluating Market Power Using Competitive Benchmark Prices Rather than the Hirschman-Herfindahl Index.

ABSTRACT: Whenever feasible, market power determinations should rest on competitive benchmark prices rather than the typical market concentration approach. Government regulators in many countries have issued guidelines on the evaluation of market power in the merger context and other areas that define relevant markets and calculate market shares - along with a summary measure of market concentration, usually the Hirschman-Herfindahl index (HHI). However, competition authorities recognize that high concentration measures are generally not a sufficient condition to infer market power. Use of other structural factors in a market often does not lead to any clearer conclusion.

We show that prices that consumers pay for the product in question often offer a superior quantitative measurement that leads to a clearer conclusion than the HHI approach. Further, because prices form the basis for the evaluation of consumer welfare (consumers surplus), they also provide important information for competition authorities, whose goal is typically the protection of consumer welfare. To demonstrate our argument, we examine a decision by the Irish telecommunications regulator, ComReg, which used the EU competition guidelines and the HHI approach to determine that Ireland's two largest mobile providers, Vodafone and O2, had joint dominance and were exercising significant market power. We demonstrate how our benchmark prices approach is superior to the HHI approach. We thank the ABA for granting permission to post the article.

SSRN TOP 10 Papers for Antitrust Law & Policy, June 19, 2007 to August 18, 2007

Posted by D. Daniel Sokol

TOP 10 Papers for Journal of Antitrust: Antitrust Law & Policy
June 19, 2007 to August 18, 2007

1. Pleading Standards after Bell Atlantic v. Twombly
Scott Dodson
University of Arkansas - School of Law

2. Should Antitrust Consent Decrees Regulate Post-Merger Pricing?
Farrell Malone & J. Gregory Sidak
Georgetown University Law Center & Georgetown University Law Center

3. Supplemental Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc.
J. Gregory Sidak
Georgetown University Law Center 

4. Class Actions in the U.S. Experience: An Economist's Perception
Frederic M. Scherer
Harvard University - John F. Kennedy School of Government 

5. Market Definition: Use and Abuse
Dennis W. Carlton
University of Chicago - Graduate School of Business 

6. An Anti-Monopoly Law for China - Scaling the Walls of Protectionist Government Restraints
Eleanor M. Fox
New York University School of Law

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

8. Abusive Pricing in an IP Licensing Context: An EC Competition Law Analysis
Damien Geradin
Howrey LLP

9. Plausibility Pleading
A. Benjamin Spencer
Washington & Lee University School of Law

10. Reinvigorating Horizontal Merger Enforcement
Jonathan B. Baker & Carl Shapiro
American University - Washington College of Law & University of California, Berkeley