Thursday, September 13, 2007

Antitrust as a Way to Pick Up Smart and Good Looking Women

Posted by D. Daniel Sokol

Today is the first day of Rosh Hashana, the Jewish new year.  It is a time of spiritual rebirth, self-examination and repentance.  I want to focus on the first of these issues.  In a time in which there is increasing assimilation and intermarriage among Jews in the United States, how might a nice Jewish boy pick up a nice Jewish girl and start dating?  The answer is to talk about antitrust, at least if the nice Jewish boy is former Federal Reserve Chairman Alan Greenspan and the nice Jewish girl is NBC reporter Andrea Mitchell.  According to yesterday's Washington Post, Alan brought Andrea back to his apartment after their first date in 1984 by promising to show her an essay he had written on the Sherman Act.  The details will appear this Sunday on CBS' 60 minutes interview, where Greenspan will discuss his new book.  For someone accustomed to discussion in the somewhat difficult to understand "Fedspeak", Greenspan was both pithy and clear about the sex appeal of antitrust.  According to the Washington Post, Greenspan remarked on his antitrust strategy "It worked."

Hat tip to my former college classmate and current DOJ antitrust attorney Ihan Kim.   

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

Wednesday, September 12, 2007

Theory Meets Practice: Barriers to Entry in Merger Analysis

Posted by D. Daniel Sokol

Analysis of agency actions is a critical part of ensuring that antitrust agencies understand how their policies work in practice.  They also give agencies an opportunity to reflect upon their own work and whether the theoretical assumptions on which they base this work need to be updated.  In an important contribution to the literature, Malcolm Coate of the US Department of Justice Antitrust Division examines the impact of merger analysis regarding barriers to entry in Theory Meets Practice: Barriers to Entry in Merger Analysis.

ABSTRACT: Barriers to entry are a necessary, but not sufficient condition for a merger to adversely affect competition. As a barrier definition must be linked to the specific theory of competitive concern under review to be meaningful, a theoretical barrier definition is unlikely to be useful. Instead, an
operational definition of barriers to entry is required. This paper explores the operationalization of the Merger Guidelines barrier to entry concept. A review of the files observes that most matters involve multiple entry scenarios, so it is often impossible to draw strict conclusions for the individual characteristics of timeliness, likelihood or sufficiency. However, by following each entry scenario through the three-stage analysis, it is possible to identify barriers to entry in 109 of the 138 matters reviewed. Within this analysis, the timeliness consideration is generally supported by the best evidence, while the likelihood characteristic leaves the most room for improvement. A total of 55 matters exhibit evidence of recent entry and 46 files report expectations of future entry. A few files detail innovative net present value analyses to determine the profitability of entry into the market. This type of financial analysis offers the promise of a quantitative approach to likelihood analysis.

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

Forensic Economics: An Introduction With Special Emphasis on Price Fixing

Posted by D. Daniel Sokol

Jconnor Keeping with the theme of forensic economics, there is another working paper worth reading on the topic, this one by cartel maven John Connor of Purdue's Agricultural Economics Department titled Forensic Economics: An Introduction With Special Emphasis on Price Fixing.

ABSTRACT: In this paper I aim to explain accepted methods of forensic analysis and how forensic economics is used in the context of competition-law enforcement. I illustrate forensic analysis with examples from antitrust cases involving price fixing.

I define forensic economics as economic analysis delivered to government authorities in public places. (The adjective ?forensic? is derived from the Roman Latin word forum). Here, ?government? is construed broadly as administrative agencies, regulatory commissions, and judicial bodies. Because regulatory and judicial proceedings are necessarily fact-laden, it follows from this definition that forensic economics is inherently, if not exclusively empirical.

Forensic analyses ? whether delivered orally or in writing ? are prepared at the behest of a client and generally support the client's interest. Forensic analyses are public in the sense that they are prepared with in anticipation that they will be subject to scrutiny and rebuttal by the client's opponent, and it is often the case that that debate will be carried on in a public setting or be made publicly available later. For that reason, forensic expert opinions are highly strategic documents prepared with an eye to anticipating the opponent's arguments. They are rhetorical in the best Aristotelian sense of that term, and they are in a curious sense peer-reviewed.

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

Tuesday, September 11, 2007

Forensic Economics in Competition Law Enforcement

Posted by D. Daniel Sokol

Mpschinkelphoto Reading through a number of new working papers this weekend, I found a very interesting one that dealt with how we conceptualize the role of economic experts in antitrust cases.  Given the importance of economic analysis to antitrust, this is (and should be) a key issue to be thinking about, one that Maarten Pieter Schinkel of the University of Amsterdam, Amsterdam Center for Law and Economics does with Forensic Economics in Competition Law Enforcement.

ABSTRACT:  This paper delineates the specialty field of forensic IO as the application of theoretical and empirical industrial organization economics in the legal process of competition law enforcement. Four stages of that process which can benefit from forensic IO techniques are distinguished: detection and investigation; case development; decision making and litigation; and remedies, sanctions and damages. We survey the use of economics in such aspects as identifying potential forms of anticompetitive behaviour, screening markets for competition law violations, determining causality, advising on appropriate remedies and assessing antitrust damages. The paper discusses the role of expert economic witnesses in competition cases. It calls for an organization of forensic IO within the context of existing forensic institutes.

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

Monday, September 10, 2007

News from AAI

Posted by D. Daniel Sokol

AAI has announced two important developmentsMichal Gal of the University of Haifa Law School (visiting this year at Georgetown law School) has been named a Senior Fellow while David Balto, a well known antitrust lawyer from his private and government work, has joined the Advisory Board.

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

Sunday, September 9, 2007

Commercial Agency Agreements, Vertical Restraints and the Limits of Article 81(1) EC: Between Hierarchies and Networks

Posted by D. Daniel Sokol

Ioannis Lianos of University College London has an excellent article in the newest issue of the Journal of Competition Law and Economics on Commercial Agency Agreements, Vertical Restraints and the Limits of Article 81(1) EC: Between Hierarchies and Networks.

ABSTRACT: Commercial agency agreements benefit from a specific competition law regime with regards to the application of Article 81 of the Treaty of the European Communities (hereinafter Article 81). Although they may contain clauses that can produce anticompetitive effects, such as minimum price fixing, these are generally found outside the scope of Article 81 paragraph 1 [hereinafter Article 81(1)]. In comparison, if a franchise or selective distribution agreement contains resale price maintenance clauses, Article 81(1) may apply. The existence of a distinct competition law regime for commercial agency agreements constitutes a paradox, as from an allocative efficiency perspective it makes no sense to distinguish between the two situations. By adopting a new-institutional economics perspective, this study will provide a justification for this specific competition law regime. The agency agreements exception will be considered as a specific form of the single entity defense that operates in situations of hierarchy. Other vertical restraints are mainly organizational mechanisms used in situations of network forms of organization. The distinction established between these agreements could thus be theoretically defended. More generally, the comparative institutional analysis of vertical restraints will provide a useful insight to delimit the boundaries of Article 81(1).

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

Saturday, September 8, 2007

DOJ Weighs in on Net Neutrality

Posted by D. Daniel Sokol

The Department of Justice has weighed in on the net neutrality debate in an ex parte filing in the FCC docket on the subject.  DOJ reminds us that what matters in the internet is the promotion of competition, stating "The FCC should be highly skeptical of calls to substitute special economic regulation of the Internet for free and open competition enforced by the antitrust laws. Marketplace restrictions proposed by some proponents of "net neutrality" could in fact prevent, rather than promote, optimal investment and innovation in the Internet, with significant negative effects for the economy and consumers."

September 8, 2007 | Permalink | Comments (1) | TrackBack (0)

Friday, September 7, 2007

ABA Antitrust Litigation Course in Philadelphia

Posted by D. Daniel Sokol

The ABA Antitrust Section is sponsoring a course on how to succeed in the harsh and confrontational world of antitrust litigation.  Ironically the conference will be held in the "City of Brotherly Love," Philadelphia, at the Ritz Carlton on October 4-5.  Details are available here.

September 7, 2007 | Permalink | Comments (0) | TrackBack (0)

Antitrust, Two-Sided Markets, and Platform Competition: The Case of the Xm-Sirius Merger

Posted by D. Daniel Sokol

Scott Wallsten of the Progress & Freedom Foundation and Stanford University suggests that regulators may fall into a potential intellectual trap if they view the proposed Xm-Sirius merger as that of a single sided market rather than a double sided market in his paper Antitrust, Two-Sided Markets, and Platform Competition: The Case of the Xm-Sirius Merger, which he filed before the FCC in the case.

ABSTRACT: On July 9, 2007 The Progress & Freedom Foundation's Scott Wallsten filed comments regarding the proposed XM-Sirius merger at the Federal Communications Commission (FCC), explaining that this merger poses unique new challenges for antitrust officials.

Specifically, companies like Sirius and XM are platforms in two-sided markets that must attract subscribers and content providers, both of whom can choose among a variety of platforms. In addition, the platforms themselves are dynamic in that they can potentially carry any digital information, not just the services they currently offer.

A merger analysis of competing platforms that considers only a single component in this complex market is likely to reach an incorrect conclusion. In the case of the XM-Sirius merger, officials should consider not only subscribers, but also content providers, competing platforms, platforms that are potential competitors, and services the platforms in question may provide in the future that they do not today.

September 7, 2007 | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 5, 2007

Harvard, Not Chicago: Which Antitrust School Drives Recent Supreme Court Decisions?

Posted by D. Daniel Sokol

Einer Elhauge of Harvard Law School provacatively asks (and answers) Harvard, Not Chicago: Which Antitrust School Drives Recent Supreme Court Decisions?

ABSTRACT: The U.S. Supreme Court has now decided 14 antitrust cases in a row in favor of the defendant. But this does not indicate an embrace of the conservative Chicago School over the moderate Harvard School. To the contrary, on every issue the Court has addressed where those two schools are in conflict, the Supreme Court has sided with the Harvard School. It has also sided with sound antitrust economics rather than with formalisms favoring plaintiffs or defendants.

September 5, 2007 | Permalink | Comments (0) | TrackBack (1)

Tuesday, September 4, 2007

Competition Policy Law Professor Needed

Posted by D. Daniel Sokol

The Faculty of Business Economics, University of Addis Ababa urgently needs a well qualified expert to teach its competition policy law module. The module has to be delivered and completed by mid-November, class size of about 25.  The class will inclide primarily government officials (among others).  The estimated time would be 20 hours per week for four weeks (including office hours to meet/guide students), plus time to mark exams.  Payment is up to $1,300 per day depending on the qualifications of the expert, plus return business class airfare, hotel accommodation and per diems to cover meals and incidentals. Interested individuals should contact, as soon as possible:

Ato Milikias T. Giorgis - Project Coordinator for the PSD CB credit, (E-mail: milktg@ethionet.et; cell phone 251-911-124605), and Ato Tsegabirhan  Wolde Giorgis, Head of Dept of Economics of AAU (E-mail: ch_econ@econ.aau.edu.et; cell phone 251-911-249071)

September 6 Update: I mistakenly posted that the position was for an economics professor.  It is for a competition law professor.  I have corrected it in the text of the post.

September 4, 2007 | Permalink | Comments (0) | TrackBack (0)

The Next Step in Chinese Competition Law - A Lesson from the EU?

Posted by D. Daniel Sokol

With the Chinese Anti-Monopoly Law slated for intrduction in 2008, today's BNA Antitrust and Trade Regulation Daily (subscription required) reports that Neelie Kroes is off to China for meetings to discuss competition policy between September 3-5.  As BNA reports, the meetings "...will include discussions of the Chinese and European economies as well as 'the role of competition policy in enhancing their competitiveness.'"  It further states that meetings will take place with both state actors (the Chinese Ministry of Commerce and the State Administration of Industry and Commerce) and non-state actors (Chinese academics and members of the business community).

September 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers

Posted by D. Daniel Sokol

I have found yet another interesting antitrust payment systems article.  This one is by Mats Bergman of Södertörn University College in Sweden and the Swedish Competition Authority and is titled Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers.

ABSTRACT: Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter's case of non-strategic and heterogenous merchants. A partial ranking of market structures according to their welfare effects is provided. Some support is found for the policy adopted by the EU Commission in the competition law case concerning Visa's interchange fees.

September 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, September 3, 2007

Network Effects and Two-Sided Markets

Posted by D. Daniel Sokol

Pic_cento As I think about how I am going to teach payment systems in the spring, I am particularly interested in how to think about the antitrust implications of two sided markets.  Adding to the literature is Cento Veljanovski of Case Associates.  Veljanovski prepared his paper Network Effects and Two-Sided Markets as part of his teaching in the Kings College, University of London Postgraduate Diploma/Masters in Economics in Competition Law.

ABSTRACT: This paper sets out the basic economics of network effects and two-sided or multi-sided markets as relevant to antitrust and regulation. Network effects, and the related concept of two- (or multi-) sided markets, are playing an increasing role in antitrust/competition law in the communications sector, computer hardware and software, Computer Ticketing Services (CRS), Automated Teller Machines (ATMs) and credit card schemes sectors to name a few; and also in the evaluation of mergers, industry standards, market structure and competitive behaviour. The discussion begins by defining network effects and the way they alter the economics of market structure, competitive behaviour and pricing. The theory is then applied to concerns over the adoption of industry and product standards, mergers in the communications sector, and the pricing of mobile services. This is followed by an introduction to the theory of two-sided markets. This covers situations where network effects affect consumers in different groups or sides of the market brought together by a third party, such as credit card schemes. The theory of two-sided markets is developed and then applied to some features of credit card schemes. This paper is a module for the Kings College, University of London Postgraduate Diploma/Masters in Economics in Competition Law, 2006/2007.

September 3, 2007 | Permalink | Comments (0) | TrackBack (0)

Sunday, September 2, 2007

Reference Points and Self-Enforcing Collusion in Oligopoly

Posted by D. Daniel Sokol

Keeping on the theme of collusion from previous posts, an interesting new working paper Reference Points and Self-Enforcing Collusion in Oligopoly is available from Felix Monuz-Garcia of the University of Pittsburgh Department of Economics.

ABSTRACT: This paper examines incentives for total and partial collusion in one-shot oligopoly games. Specifically, firm managers are considered to assign a positive importance to the difference between other firms' actual production choices and a particular reference level of output that, in any collusive agreement, would have restricted the market's total product. These considerations might be important, for instance, when the firm manager operates under weak pressures for short-run profits from the shareholders, whereas when this pressure is relatively high the above considerations are negligible. First, I show that by considering the importance that firm managers assign to this difference - reflecting the firm manager's preference for collusive partners - higher levels of collusion can be supported than in standard oligopoly games. In addition, if firm mangers' preference for collusive partners is high enough, the collusive agreement (e.g. cartel) becomes self-enforced in the Nash equilibrium of the static game. Furthermore, for moderate firms' preferences, this paper shows that the fully cooperative agreement can be sustained as the Nash equilibrium of the infinitely repeated game for less restrictive discount factors than in standard game-theoretic models of oligopoly.


September 2, 2007 | Permalink | Comments (0) | TrackBack (0)

Saturday, September 1, 2007

If a Tree Falls and People Hear It, Does This Mean That There is an Antitrust Conspiracy?

Posted by D. Daniel Sokol

A new working paper by Jean-Daniel M. Saphores, Jeffrey R. Vincent, Valy Marochko, Ioan Vasile Abrudan, Laura Bouriaud, and Clifford Zinnes explores collusion in timber auctions.  The World Bank Policy Research Working Paper is titled Detecting Collusion in Timber Auctions: An Application to Romania.

ABSTRACT:  Romania was one of the first transition countries in Europe to introduce auctions for allocating standing timber (stumpage) in public forests. In comparison with the former system in the country - administrative allocation at set prices - timber auctions offer several potential advantages: greater revenue generation for the government, a higher probability that tracts will be allocated to the firms that value them most highly, and stronger incentives for technological change within industry and efficiency gains in the public sector. Competition is the key to realizing these advantages. Unfortunately, collusion among bidders often limits competition in timber auctions, including in well-established market economies such as the United States. The result is that tracts sell below their fair market value, which undermines the advantages of auctions. This paper examines the Romanian auction system, with a focus on the use of econometric methods to detect collusion. It begins by describing the historical development of the system and the principal steps in the auction process. It then discusses the qualitative impacts of various economic and institutional factors, including collusion, on winning bids in different regions of the country. This discussion draws on information from a combination of sources, including unstructured interviews conducted with government officials and company representatives during 2003. Next, the paper summarizes key findings from the broader research literature on auctions, with an emphasis on empirical studies that have developed econometric methods for detecting collusion. It then presents an application of such methods to timber auction data from two forest directorates in Romania, Neamt and Suceava. This application confirms that data from Romanian timber auctions can be used to determine the likelihood of collusion, and it suggests that collusion reduced winning bids in Suceava in 2002 and perhaps also in Neamt. The paper concludes with a discussion of actions that the government can take to reduce the incidence of collusion and minimize its impact on auction outcomes.

September 1, 2007 | Permalink | Comments (0) | TrackBack (0)