Antitrust & Competition Policy Blog

Call For Papers- Knowledge for Growth: European Strategies in the Global Economy

Posted by D. Daniel Sokol

The Toulouse School of Economics and the French Ministry of Higher Education and Research have called for papers for the Conference Knowledge for Growth: European Strategies in the Global Economy. The conference will be held in Toulouse on July 07-09, 2008. It is organized under the French Presidency of the European Union.

OFT Offers £100,000 Reward for Information on Cartels

Posted by D. Daniel Sokol

In a new move for a European antitrust agency (I believe that South Korea is the only other country with such a program), the UK's Office of Fair trading has offered a £100,000 bounty (roughly US$180,000 or the equivalent of a first year associate salary in a NY law firm for those of you who need a conversion on this side of the Atlantic) in return for information which helps it to identify and take action against illegal cartels.

Interview with Michael Baye, Director, Bureau of Economics, Federal Trade Commission

Posted by D. Daniel Sokol

In the latest issue of the Antitrust Source, there is a great interview with Michael Baye, the head of the FTC's Bureau of Economics. 

ABSTRACT: In this interview with The Antitrust Source, Dr. Michael Baye discusses his views on horizontal merger analysis, econometrics, and recent activities in consumer protection. Dr. Baye began his job as the Director of the Bureau of Economics in July 2007. He is at the FTC on leave from Indiana University’s Kelly School of Business, where he has been the Bert Elwert Professor of Business since 1997. Dr. Baye’s academic research focuses on pricing strategies and their impact on consumer welfare and firm profits and has applied tools from game theory and industrial organization to evaluate network industries, mergers, auctions, and online markets. The interview was conducted on February 5, 2008, by Editor Elizabeth M. Bailey for The Antitrust Source.

Conference on India's New Merger Control Regime

Posted by D. Daniel Sokol

The Global Competition review has details of this March 15-16 New Delhi conference.

Emerging Principles of International Competition Law

Posted by D. Daniel Sokol

A new book out this month by Oxford University Press is by Chris Noonan (University of Auckland Faculty of Law), Emerging Principles of International Competition Law.

Description: Many firms operate in complex legal environments where several States may regulate the same activity against a background of international law. International competition law has grown in importance as national economies have become more integrated, at the same time as national competition laws have proliferated and enforcement efforts have been strengthened. This system is beset with conflicts arising where States perceive that the way that another country does or does not apply its competition law adversely affects its interests. This book clarifies the nature and origin of these conflicts, and explores possible ways to reduce them.

Noonan analyses the legal and policy issues associated with the control of restrictive business practices and anticompetitive mergers in international markets. The book discusses international cartels, dumping, private market access barriers, and mergers between international firms subject to multi-agency review. Subjects covered include the harmonization and coordination of competition laws, cooperation between enforcement agencies, international judicial assistance, and the role of trade agreements and the World Trade Organization in international competition law. Noonan also examines the problems that States have in regulating conduct beyond their borders and the merits of a variety of potential responses.

He contends that there is an evolving international competition law system, albeit a somewhat chaotic one. States are only just beginning to see the system as a whole and are struggling to identify where their long-term interests lie. This book describes the elements of the system and their interactions, and explains how the system is evolving; suggesting what States, individually and collectively, could do to modify the system to their mutual advantage.

Majoras to Resign Soon

Posted by D. Daniel Sokol

Normally we don't include gossip on the blog but when gossip about antitrust gets coverage in the Wall Street Journal and NY Times (and why can't we get more general coverage on antitrust in these papers-- after all, antitrust is important to the economy, growth and consumers), it is worth mentioning.  FTC Chairman Majoras may soon leave the FTC for a private sector position in-house rather than return to her old firm.  During Majoras' tenure, we have seen some important accomplishments at the FTC along with some enforcement decisions that have not gone the agency's way.  Overall, Majoras has continued a strong line of leadership at the agency from Janet Steiger to Bob Pitofsfsky to Tim Muris to Debbie Majoras.  I would argue that the FTC has been its strongest overall during this extended tenure than at any other time in its history.

Update:  It is now official that Majoras will leave the FTC at the end of March.

The Economic Impact of Merger Control Legislation

Posted by D. Daniel Sokol

In their latest paper, Elena Carletti of the University of Frankfurt - Center for Financial Studies, Philipp Hartmann of the European Central Bank (ECB) and Centre for Economic Policy Research (CEPR) and Steven Ongena of Tilburg University analyze The Economic Impact of Merger Control Legislation.

ABSTRACT: Based on a unique dataset of legislative changes in industrial countries, we identify events that strengthen the competition control of mergers and acquisitions, analyze their impact on banks and non-financial firms and explain the different reactions observed with specific regulatory characteristics of the banking sector. Covering nineteen countries for the period 1987 to 2004, we find that more competition-oriented merger control increases the stock prices of banks and decreases the stock prices of non-financial firms. Bank targets become more profitable and larger, while those of non-financial firms remain mostly unaffected. A major determinant of the positive bank returns is the degree of opaqueness that characterizes the institutional setup for supervisory bank merger reviews. The legal design of the supervisory control of bank mergers may therefore have important implications for real activity.

49th Annual Antitrust Law Institute

Posted by D. Daniel Sokol

PLI will host its 49th Annual Antitrust Law Institute in New York on May 5. 

Morning Session:  9:00 a.m. - 12:00 p.m.

9:00  Introduction

9:15  Relationships Among Competitors

• Overview of Section 1 of the Sherman Act
• Per se versus rule of reason analysis
• Pleading and proving a conspiracy after Twombly
• Horizontal price-fixing
• Bidding coordination
• Allocation of customers and markets
• Concerted refusals to deal 
• Recent developments in technology markets
• Antitrust standards governing joint ventures:
  - Formation of joint venture
  - Ancillary restraints in joint venture agreements
  -Conduct of joint ventures
• Implications of Dagher
• Recent judicial developments and enforcement actions
• Standard-setting: Current trends, including Rambus
• Patent pools

Michael D. Blechman, William J. Kolasky

10:45  Break

11:00  Monopolization

• Overview of Section 2 of the Sherman Act
• Courts’ interpretation of the elements of a claim
• Review of recent critical cases 
• Working with evolving standards of “anticompetitive conduct”
• Practical problems in defining relevant markets
• Current issues in defining market power
• Loyalty and bundled discounts after LePage’s and PeaceHealth
• Power buyers: Who’s at risk for a Section 2 claim?

R. Hewitt Pate

12:00  Lunch

Afternoon Session: 1:15 p.m. - 5:00 p.m.

1:15  Acquisitions and Mergers

• Elements of Section 7 of the Clayton Act
• 1992 horizontal merger guidelines and H-S-R reporting
• Current enforcement activities: Federal and state
• Recent decisions involving unilateral and coordinated competitive effects
• Investigations of non-reportable transactions
• Retrospective challenges
• Gun jumping and pre-merger integration
• Consent decrees

Yvonne S. Quinn

2:15  Evolving Face of Resale Price Maintenance, Tying and Other Vertical Restraints

• Tool kit: Practical tips and advice
• Establishing the “agreement” requirement
• Resale price maintenance
• Minimum advertised price programs
• Dual distribution
• Counseling in light of Leegin
• Exclusive dealing: Mitigating the risks of a claim
• Tying in the wake of Independent Ink and Microsoft
• Special considerations in aftermarkets and vestiges of Kodak
• Current government enforcement

Arthur I. Cantor

3:30  Break

3:45  Managing Litigation Risks: HYPOTHETICALS

• Focus on real-world scenarios and how they play out
  - Bundled discounts
  - Standard setting
  - Attempted monopolization and other anticompetitive conduct

Arthur I. Cantor, R. Hewitt Pate, Gary P. Zanfagna

5:00  Adjourn

Second Day: 9:00 a.m. - 4:00 p.m.

Morning Session: 9:00 a.m. - 12:15 p.m.

9:00  Discrimination in Price and Promotions

• Basic elements of discrimination under the Robinson-Patman Act
• Availability
• Functional discounts
• Secondary line injury and risks of private suits
• Counseling after Reeder-Simco
• Meeting competition and cost justification
• Buyer liability
• Advertising and promotional discriminations
• Proving antitrust injury and damages
• Dual distribution under the R-P Act

Harvey M. Applebaum, Barbara O. Bruckmann

11:00  Break

11:15  Recent International Developments

• Cartel enforcement
• Abuse of dominance
• Significant differences between U.S. and EU
  - Vertical restraints
  - Merger enforcement

MJ Moltenbrey

12:15  Lunch

Afternoon Session: 1:15 p.m. - 4:00 p.m.

1:15  Dealing with the Antitrust Enforcement Agencies: DISCUSSION and HYPOTHETICAL

• Hear from current and former staff at the:
  - Antitrust Division of the U.S. Department of Justice
  - Federal Trade Commission
  - Offices of State Attorneys General
• Learn practical lessons from a hypothetical on negotiating an amnesty agreement

Robert L. Hubbard, William J. Kolasky, John W. McReynolds, David L. Meyer, MJ Moltenbrey, Debra J. Pearlstein, Jeffrey Schmidt

2:45  Break

3:00  Corporate Compliance and Ethics (1 hour ethics)

• Conflicts of interest
• Attorney-client privilege, including Akzo-Nobel
• Document destruction and retention
• Other “process” crimes

John W. McReynolds, Mark D. Whitener

4:00  Adjourn

Spilled Ink or Economic Progress? The Supreme Court's Decision in Illinois Tool Works v. Independent Ink

Posted by D. Daniel Sokol

Bruce H. Kobayashi of George Mason University School of Law weighs in with Spilled Ink or Economic Progress? The Supreme Court's Decision in Illinois Tool Works v. Independent Ink.

ABSTRACT: This article examines the Supreme Court's recent decision in Illinois Tool Works v. Independent Ink. In that decision, the Court extended its remarkable run of pro-defendant decisions in antitrust cases, holding that plaintiffs in patent tying cases must prove and not presume market power. The Court's rejection of the presumption of market power in the presence of a patent, as well as a special per se rule of illegality for patent ties is consistent with the broad consensus that views patents as distinct from monopolies, and recognizes the pro-competitive uses of tying. While this is a positive step, the Court's decision may be limited by the flawed and outdated modified per se rule used to evaluate tying arrangements generally. Moreover, while the Court undermined the underlying rationale for the modified per se rule against tying, it chose not to revisit this issue. In addition, while the Court's opinion implicitly adopts a robust standard for market power, it failed to address its contradictory holding in Kodak v. ITS, its most recent decision evaluating a tying arrangement.

Antitrust Policy and Industrial Policy: A View from the U.S.

Posted by D. Daniel Sokol

Larry White of NYU's Department of Economics gives us a good sense of the tension that antitrust faces in the US with industrial policy in his paper Antitrust Policy and Industrial Policy: A View from the U.S.

ABSTRACT: This paper discusses the tensions between antitrust policy and industrial policy from a U.S. perspective. In the late 1970s and the 1980s, in the wake of the slowdown of the U.S. economy and the apparent ascendancy of the Japanese economy, the pluses and minuses of a formal industrial policy were debated in the U.S.; but there was never an explicit adoption of anything that had the appearance of a formal industrial policy. Nevertheless, there is a long tradition of governmental intervention in the U.S. that is at odds with the spirit and letter of antitrust policy's pursuit of more competitive and efficient markets.

After offering definitions of antitrust and of industrial policy, this paper offers details on the types of governmental intervention that are at odds with antitrust. It then provides some reflections on the reasons for these tensions and conflicts.

Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong

Posted by D. Daniel Sokol

Chun-yu Ho of Boston University - Department of Economics examines competition issues in Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong.

ABSTRACT: This paper examines competition among commercial banks following deregulation in a small open economy. I jointly estimate a system of differentiated product demand and pricing equations, and use conduct parameters to identify market structure. The empirical results show that the banking sector is characterized by the Nash-Bertrand equilibrium in which bank size is important for product differentiation. Following deregulation, bank competition intensifies and cost efficiency improves.

An Empirical Evaluation of Long Term Advisors and Short Term Interventions in Technical Assistance and Capacity Building

Posted by D. Daniel Sokol

D. Daniel Sokol (i.e., me, the tall and lanky one on the far left) of the University of Missouri School of Law and Kyle Stiegert of the University of Wisconsin Department of Agricultural and Applied Economics (20lbs lighter since the picture was taken thanks to regular biking and snacking less) have just posted An Empirical Evaluation of Long Term Advisors and Short Term Interventions in Technical Assistance and Capacity Building.  This is an important work in trying to figure how to assistant young agencies in creating effective antitrust regimes in their respective countries.

ABSTRACT: Technical assistance to improve the capacity of regulatory agencies around the world remains a key priority for international aid efforts. Technical assistance is critical to younger antitrust agencies because more effective agencies can protect consumers against anti-competitive conduct. Beginning in the 1990s, the rapid adoption of antitrust laws and development of agencies to interpret and enforce these laws has transformed the competitive landscape in many countries. Indeed, more than half of the countries with an antitrust legal framework enacted antitrust laws in the past 15 years. Many of the newer antitrust agencies are not as effective as they need to be to improve the well being of consumers and protect against anti-competitive conduct. Consequently, donors have assigned a significant amount of time and financial resources to technical assistance to raise the capacity and effectiveness of these younger agencies. However, quantitative analysis of the impact of this technical assistance remains limited at best. In a previous paper, we undertook a general analysis of antitrust technical assistance. In this paper we focus on what appears to be a particularly important part of technical assistance and capacity building - the use of long term advisors (LTA) and short term interventions (STI).

In 2005, the International Competition Network conducted a survey of antitrust agencies that received LTA and STI services from a wide array of donor agencies. We first perform a descriptive assessment of the survey data. We find LTAs to be more effective than STIs in preparing the agency for tackling work they could not have undertaken previously and in confronting cartels. Most LTA and STI services arrived directly from developed world antitrust agencies and lawyers were superior to economists for STI work while economists tend to perform best as LTAs. In a more general empirical framework, we model the effectiveness of LTA and STI interventions using key survey questions about the initial preparation phase, the ability of the interventions to improve internal tactical qualities of the agency, and the ability of the interventions to improve the agency in its strategic mission. We estimate a three equation seemingly unrelated regression system designed to tease out the factors that led to a successful preparation of tactical and strategic technical assistance. The most important findings are related to two structural features of recipient antitrust agencies. Our most prominent finding is that recipient agencies absorb LTA and STI services best when the agency head has a rank of minister or higher and/or when agencies had prosecutorial discretion. At the heart of these agency features is the relative power position of the agency in the domestic political and economic structure. Those agencies with a strong power base seem well positioned to receive the current formatted technical assistance involving LTAs and STIs. Donors should focus on modifying the technical assistance to agencies with less power and should push for stronger agency autonomy and authority. A second prominent finding was that bilateral donor relationships did remarkably better in helping the agencies with their strategic mission. Perhaps bilateral LTA and STI perform better because of a better understanding of the political and economic realities these agencies face or because these donors provide aid through developed world competition agencies. Our suggestion is that multilateral donor agencies work hard to overcome deficiencies that their organizational structure presents to recipient agencies. Overall, our analysis of technical assistance efforts in one field of complex regulation (antitrust) may prove relevant to policies of how to make assistance more effective across regulatory fields.

Kroes Wall Street Journal Interview and Story

Posted by D. Daniel Sokol

What happens when the leading US based financial newspaper and the leading European antitrust regulator sit down?  A number of interesting quotes.

My favorites include:

Whether the EU should consider criminal penalties from cartel operators, as the U.S. does:

It is not in line with most of the member states' cultures.

How she dealt with inheriting the giant Microsoft antitrust cast at the outset of her tenure:

We had a big and intense discussion to continue, yes or no … I was really involved and aware that [we had to make a decision whether to] go on. And I think that in this case it is worthwhile to be quite clear…. Talking about consumers, talking about research, innovation, talking about competition in that field … if we are giving up that, anyhow, the next generation will regret that….

The front page article on Kroes is also worth reading.

Competition and Regulatory Policy Towards Multi-Sided Platform Businesses with Applications to the Internet Economy

Posted by D. Daniel Sokol

David Evans of University College London Faculty of Law and LECG brings us his latest working paper Competition and Regulatory Policy Towards Multi-Sided Platform Businesses with Applications to the Internet Economy.

ABSTRACT: A multi-sided platform (MSP) unleashes the hidden value from getting different customer groups together on the same platform and getting them to interact. Economists now understand that exchanges, payment systems, software platforms, video game consoles, advertising-supported media, shopping malls and many other industries are populated by MSPs. The linkage between the multiple sides has significant implications for profit-maximization and competitive strategies followed by businesses and for how competition authorities and regulators should analyze these businesses. In this paper, I discuss the economic and strategic aspects of MSPs that are likely to be relevant to regulators, competition authorities and other policymakers. I also examine the basic economic features of MSPs and the business strategies that these features lead to and the key issues concerning competition and regulatory policy. I then provide an overview of web-based MSPs, which are likely to be the subjects of investigations and inquiries, and conclude with thoughts for the future.

Towards a Differentiated Analysis of Competition of Competition Laws

Posted by D. Daniel Sokol

Wolfgang Kerber of Philipps of University Marburg - Department of Business Administration and Economics and Oliver Budzinski of University of Marburg - Faculty of Economics and Business Administration discuss Towards a Differentiated Analysis of Competition of Competition Laws.

ABSTRACT: Can competition of competition laws be a feasible concept that should play an important role in an international order for the worldwide protection of competition? The authors will introduce four different types of regulatory competition that allow for a more differentiated analysis of beneficial and deficient effects of competition of competition laws. Their analysis shows that most types of regulatory competition have a rather limited scope for application to competition laws. However, yardstick competition can be very promising and represents a powerful argument against centralisation. An important result of the authors' analysis is that the institutional framework of any competition of competition laws plays a crucial role for its workability.

Weyerhaeuser, Predatory Bidding, and Error Costs

Posted by D. Daniel Sokol

Keith Hylton of Boston University Law School suggests that Brooke Group remains the gold standard for predatory bidding in his latest article Weyerhaeuser, Predatory Bidding, and Error Costs.

ABSTRACT: In Weyerhaeuser v. Ross-Simmons the Supreme Court held that the predatory pricing standard adopted in Brooke Group also applies to predatory bidding claims, because the two types of predation are "analytically similar". I argue that predatory bidding is likely to be more harmful to consumer welfare than is predatory pricing. Successful input market predation may lead to a "dual market power" outcome in which the firm has market power in both the input and the output market. In spite of the analytical distinction, consideration of error costs leads me to conclude that Brooke Group remains the best standard to apply to predatory bidding claims.

Transparency of Regulation and Cross-Border Bank Mergers

Posted by D. Daniel Sokol

I love papers on competition in the banking and financial sector. One that caught my eye is Transparency of Regulation and Cross-Border Bank Mergers by Matthias Köhler of the Center for European Economic Research that suggested that merger control is a barrier to much needed cross border consolidation.

ABSTRACT: Although there is anecdotal evidence that merger control may constitute a barrier to the integration of European retail banking markets, systematic empirical evidence is missing until now. This paper aims to fill this gap. Based on a unique dataset on the transparency on merger control in the EU banking sector, we estimate the probability that a bank is taken over as a function of its characteristics, country characteristics and the transparency of merger control in the banking sector. The results indicate that a bank is systematically more likely to be taken over by foreign credit institutions if the regulatory process is transparent. Particularly large banks are less likely to be taken over by foreign credit institutions if merger control lacks transparency. This is in line with the hypothesis that governments may block cross-border bank merger because they want the largest institution in the country to be domestically owned. Domestic mergers are not affected. This suggests that merger control may therefore constitute an important barrier to cross-border consolidation and that further integration of EU banking markets requires a higher degree of transparency of the regulatory process.

Competition Law and Public Policy: Reconsidering an Uneasy Relationship: The Example of Art. 81

Posted by D. Daniel Sokol

Heike Schweitzer of the European University Institute - Department of Law reexamines Article 81 in her paper Competition Law and Public Policy: Reconsidering an Uneasy Relationship: The Example of Art. 81.

ABSTRACT: The EU is currently re-conceptualizing the goals of competition law and their place within the EC Treaty. Whereas the Draft Reform Treaty is emphasizing the weight of public policy goals vis-à-vis the goal of undistorted competition, the EU Commission has made an effort to remove non-competition goals from competition policy in the course of the "decentralization" of EU competition law enforcement and to refocus competition law on the efficiency criterion, namely the consumer welfare goal. This contribution shall discuss the regulation of the interface between competition policy and public policy goals in the interpretation and application of Art. 81 EC under the old and the new enforcement regime. Doctrinally, the debate is led on two levels: With regard to the interpretation of Art. 81(1) the question is raised whether conflicting policy goals can delimit its scope. Art. 81(3) with its broad and general terms, potentially provides an opening of EU competition law for the consideration of noncompetition related policy goals on the level of exemptions. The interpretation of Art. 81(3) EC has gained new relevance since it has been declared directly applicable by Art. 1 of Regulation 1/2003. Whereas, under the former regime, the Commission could regulate the competition-public policy interface case-by-case based on its monopoly for granting exemptions, the direct applicability of Art. 81(3), i.e. its enforcement by national competition authorities and courts, calls for more conceptual guidance. The difficulties to provide such guidance throw some light on the conceptual uncertainties associated with the recent reform of EU competition policy.

Wither American Assistance to Competition Agencies: An FTC-DOJ Workshop

Posted by D. Daniel Sokol

Ken Davidson of the American Antitrust Institute has posted his thoughts on the DOJ/FTC technical assistance workshop in which I participated in two weeks ago.  His piece is titled Wither American Assistance to Competition Agencies: An FTC-DOJ Workshop.

ABSTRACT: This Commentary presents the author’s perspectives on a Workshop sponsored on February 6, 2008 by the US Federal Trade Commission and the Antitrust Division of the US Department of Justice entitled, “Charting the Future Course of International Technical Assistance at the Federal Trade Commission and Department of Justice. The Workshop had 33 participants who represented the two authorities, the European Union, the World Bank and other international agencies, recipients of technical assistance, academics and other staff of nonprofit and governmental institutions, and representatives of private business. This was the first such conference since the American technical assistance program was launched in the early 1990s.

Duke Hot Topics in Intellectual Property Law Symposium (with an Antitrust Panel)

Posted by D. Daniel Sokol

The Duke Intellectual Property and Cyberlaw Society and the Duke Law and Technology Review are holding their annual Hot Topics in Intellectual Property Law Symposium on February 29.  This year the topics are patent reform and the intersection between antitrust law and intellectual property.