Antitrust & Competition Policy Blog

OECD Seventh Global Forum on Competition

Posted by D. Daniel Sokol

Today the OECD kicks off its Seventh Global Forum on Competition.  Topics for discussion are as follows:

Opening Session - Opening Remarks by Angel GURRIA, OECD Secretary-General

Session I  - Peer Review of Ukraine 
                    [Open only to country representatives and intergovernmental
                     organisations]

                    Note by the Secretariat

Session II - The Challenges of Transition for Competition Law and Policy in
                    China   
                    [Open only to country representatives and intergovernmental
                     organisations]

                    Note by the Secretariat

                    Presentation by SAIC / MOFCOM, China

Session III - The Role of Consumers in Promoting Pro-Competitive Reforms

                      Note by the Secretariat

                      Note / Presentation by Mr. Samuel Ochieng, Consumers International

                      Mr. Amr Fahim, Consumer Protection Agency, Egypt

                      Note / Presentation by Mr. Pradeep S. Mehta, CUTS International

Opening remarks by Meglena Kuneva, EU Commissioner for Consumer Protection

Session IV - The Interface Between Competition and Consumer Policies

                     Call for Country Contributions

                     Background Note / Note du Secrétariat

Argentina	Australia	Canada
Chile	Chinese Taipei	Costa Rica
EC	El Salvador / Salvador	France / France
Hungary	India	Japan
Jordan	Korea	Malta
Papua New Guinea	Poland	Portugal
Russia	Singapore	Slovak Republic
Switzerland / Suisse	Tunisie	United Kingdom
United States	BIAC

Session V - The Economics of Competition and Consumer Policies

                   Mr. Colin F. Camerer, California Institute of Technology

                    Note / Presentation by Ms. Louise Sylvan, Australian Competition and
                    Consumer Commission

                    Note / Presentation by Ms. Deunden Nikomborirak, Thailand
                    Development Research Institute

                    Introductory Note

                    For Information: Mr. Ian McAuley (Note for the Committee on Consumer
                    Policy)

Session VI - High Switching Costs: A Barrier To Competition and a Detriment to
                     Consumers

                     Note / Presentation by Ms. Jill Johnstone, UK National Consumer Council

                     Mr. Mark Williams, NERA Economic Consulting

Session VII - Breakout Sessions: Sectoral Case Studies

                       Hypothetical Cases             

Final Session

Kroes Speaks Out on the Importance of Competition

Posted by D. Daniel Sokol

Today's Financial Times has a story with a great quote from Neelie Kroes, "We cannot go back to the old inefficient ways just because it suits a narrow political interest from time to time" in response to concerns that EC competition law does not protect European companies.  The purpose of competition law is to protect consumers, not competitors and yet every once in a while there is an enforcement action in the EU that strikes me as overly dogmatic in approach that in fact does not promote greater efficiency.

Competition Law Policy in the Banking Sector

Posted by D. Daniel Sokol

Hemant Batra, of Käden Boriss Consulting Pvt. Ltd addresses Competition Law Policy in the Banking Sector in India.

ABSTRACT: Competition laws are generally designed to combat anti-competitive behavior and unfair business practices. In this paper, the author advocates for a competition policy for banking sector in India. It is argued that in a totally deregulated and globalized banking scenario, there is an imperative need for a regulatory framework to ensure corporate governance and adoption of fair practices.

Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia

Posted by D. Daniel Sokol

Robert Breunig (Australian National University College of Business and Economics) and Flavio Menezes (University of Quuensland School of Economics) write about Empirical Approaches for Identifying Maverick Firms: An Application to Mortgage Providers in Australia in the forthcoming issue of the Journal of Competition law and Economics.

ABSTRACT: This paper develops an empirical strategy to identify maverick-like behavior. This strategy includes measuring two behavioral dimensions: (i) the extent to which particular suppliers underprice rivals; and (ii) the timing of the suppliers' responses to systemic cost changes. This strategy is applied to a dataset that contains interest rates charged by mortgage providers in Australia from January 2003 to October 2006. We then evaluate suppliers' behavior both in terms of the rates that they charge and the time it takes them to change their rates as a response to a systemic increase in costs that follows a change of the cash rate by the Reserve Bank of Australia (RBA). We find that systematic price discounts and the frequency and timing of price increases and decreases are both important, but distinct, components of maverick-like behavior. These empirical observations suggest that the development of a theory for maverick behavior be focused on dynamic, asymmetric models and informed by institutions and market dynamics that are relevant to the case at hand. 

The Proper Role of Courts: Why the Supreme Court Got it Wrong in Leegin

Posted by D. Daniel Sokol

Lance McMillian of John Marshall Law School discusses The Proper Role of Courts: Why the Supreme Court Got it Wrong in Leegin in an upcoming issue of the Wisconsin Law Review.

ABSTRACT: Separation of powers matters. Accordingly, each branch of the federal government should remain faithful to its institutional role. However, in the 2007 case of Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court betrayed this founding principle. In Leegin, the Court disturbed nearly 100 years of antitrust jurisprudence by overruling Dr. Miles Medical Co. v. John D. Park & Sons Co. The issue before the Court centered on this question: should minimum resale pricing agreements between manufacturer and distributor be considered per se illegal? Dr. Miles said yes; in Leegin, the Court said no. This disagreement is hardly remarkable. The Court frequently reverses its prior precedent.

The twist in Leegin, though, is that Congress expressly endorsed the Dr. Miles rule. In passing the Consumer Goods Pricing Act of 1975, Congress clearly indicated its policy preference that the practice of vertical price-fixing should remain unlawful. It is axiomatic that responsibility for framing economic policy for the nation rests with Congress and the President, not the Supreme Court. Nevertheless, in the field of antitrust, because of the Sherman Act's broad generalities, the Court has always had more leeway to fill in the blanks left open by Congress. But this freedom to fill the void when faced with legislative silence does not give legitimacy to the Court taking the next step, namely substituting its own judgment over a contrary judgment of Congress. And this next step is exactly the path the Court traveled down in Leegin. The Article explains the mistakes made by the Court in embarking on this journey. Moreover, the Article discusses the perils that follow when the Court decides it is accountable to no other branch but itself. 

Thomson's/Reuters Gets Antitrust Approval

Posted by D. Daniel Sokol

The Thomson's/Reuters  proposed merger has received antitrust approval (conditioned on some divestitures).  Thompson's is the parent company of our exclusive advertiser so please make sure to click through on their ads located to the right of our blog posts.

Non-contractual Liability of the European Community in Competition Matters: The Aftermath of the CFI Judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission

Posted by D. Daniel Sokol

Aitor Montesa Lloreda of the European Court of First Instance writes about Non-contractual Liability of the European Community in Competition Matters: The Aftermath of the CFI Judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission in his latest paper.

ABSTRACT: The recent European Court of First Instance (CFI) judgment of July 11, 2007 in Case T-351/03, Schneider v. Commission, is the first EC judgment to grant a company damages for the losses it had suffered as a result of an illegal Commission decision prohibiting a merger.

The judgment has been drafted as if it were just applying previous jurisprudence in liability matters. However, it is anything but conservative. It indeed represents a major step in European case law. Schneider III has made real a possibility which was only theoretical before: that the Commission can be held responsible for damages caused by its wrongful decisions in competition.

Schneider III will most probably boost many further claims from companies affected by illegal Commission decisions in the antitrust and merger control fields. Schneider III may therefore be perceived by the Commission—wrongly or not—as a heavy burden, particularly in the framework of its merger control activity.

This paper intends to review the conditions that must be met for a Commission decision to engage the Community liability in competition matters. These conditions have been analyzed especially in the two Holcim judgments and, then, in Schneider III.

The paper focuses on the somehow difficult relation among these three cases. The paper will try to examine systematically their commonalities and, as necessary, their contradictions.

Last, the paper will conclude that EC liability can be only engaged in pathological cases. This conclusion should represent an additional incentive for the Commission to embrace self-discipline and high professional and legal standards. However, it does not entail a serious risk to the Commission’s functionality in competition matters, which are indeed some of the Commission’s most fundamental and complex activities.

Competition and Regulatory Regimes in Small & Developing Countries

Posted by D. Daniel Sokol

CUTS' CDRF Porject has come out with a policy brief about Competition and Regulatory Regimes in Small & Developing Countries.

ABSTRACT: In small and developing economies, the formulation and implementation of competition policies should take into account the special characteristics associated with small domestic markets. The thrust of this policy brief is that while the main principles of competition law and regulation that have evolved in large economies are also relevant to small economies, the mode and application may have to be different in order to take into account the particular characteristics of small insular markets.

Trouble Ahead at the IP/Competition Intersection?

Posted by D. Daniel Sokol

David Hull of Covington asks about Trouble Ahead at the IP/Competition Intersection?  based on the EU investigation of the pharmaceutical sector.

ABSTRACT: Efforts by innovative pharmaceutical companies to protect their markets against generic drugs have generated a wide-ranging debate over how to achieve the proper balance between these companies’ legitimate interests in reaping the full rewards of their research and development efforts and the public’s interest in having access to cheaper drugs. In Europe, this debate has largely centered on issues relating to healthcare policy, national pricing, and reimbursement policies, and the overall pharmaceutical regulatory regime.

To date, competition law has not played a prominent role in this debate. With the notable exception of its decision in AstraZeneca—in which the European Commission found that AstraZeneca had abused its dominant position by pursuing certain strategies aimed at keeping generics off the market—the Commission has not published any decisions dealing with the competition law implications of efforts by pharmaceutical companies to delay the entry of generics. The AstraZeneca decision signaled that such efforts could give rise to competition concerns, but it provides limited guidance because the practices at issue were very specific to the facts of the case.

This situation changed overnight with the Commission’s announcement on January 16, 2008 of a competition investigation into the pharmaceutical sector “relating to the introduction of innovative and generic medicines for human consumption on the market.”

This sector-wide investigation moves competition law to the center of the generics debate. As discussed in this comment, it also raises thorny issues on the relationship between the competition rules and the intellectual property rules.

TOP 10 Most Downloaded SSRN New Papers on Antitrust Law & Policy December 19, 2007 to February 17, 2008

Posted by D. Daniel Sokol

1. The Elusive Antitrust Standard on Bundling in Europe and in the United States at the Aftermath of the Microsoft Cases
Nicholas Economides, Ioannis Lianos,
New York University - Stern School of Business, University College London - Faculty of Laws,

2. Evaluating Market Power with Two-Sided Demand and Preemptive Offers to Dissipate Monopoly Rent: Lessons for High-Technology Industries from the Proposed Merger of XM and Sirius Satellite Radio
J. Gregory Sidak, Hal J. Singer,
Criterion Economics, LLC, Criterion Economics, LLC,

3. The Next Frontier for Network Neutrality
Phil Weiser,
University of Colorado Law School,

4. Antitrust (Over-?) Confidence
Thomas A. Lambert, Joshua D. Wright,
University of Missouri School of Law , George Mason University - School of Law,

5. Should Competition Law Promote Efficiency? Some Reflections of an Economist on the Normative Foundations of Competition Law
Wolfgang Kerber,
Philipps University Marburg - Department of Business Administration and Economics,

6. Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance
Marina Lao,
Seton Hall School of Law,

7. Bundles of Joy: The Ubiquity and Efficiency of Bundles in New Technology Markets
Stan J. Liebowitz, Stephen E. Margolis,
University of Texas at Dallas - Department of Finance & Managerial Economics, North Carolina State

8. The Antitrust Assessment of Loyalty Discounts and Rebates
Gianluca Faella,
Cleary Gottlieb Steen & Hamilton,

9. 74 Areeda, Epithets, and Essential Facilities
Spencer Weber Waller,
Loyola University of Chicago - School of Law, and

10. The 'Cut and Paste' of Article 82 of the EC Treaty in Israel: Conditions for a Successful Transplant
Michal S. Gal,
University of Haifa - Faculty of Law

Frictions and Sticking Points: Applying the Textbook Model to the Analysis of Cost Pass-Through in Indirect Purchaser Class Actions

Posted by D. Daniel Sokol

John Johnson and Greg Leonard, Vice Presidents in NERA’s Washington, DC and San Francisco offices, respectively, take a close look at how firms set their prices and find that in the real world, changes in cost do not always lead to changes in price in their article Frictions and Sticking Points: Applying the Textbook Model to the Analysis of Cost Pass-Through in Indirect Purchaser Class Actions. They also explain why the firm and market factors that determine the amount of the cost pass-through, if there is one, is likely to depend on the nature of the product, the variety of end uses of the product, and the distribution channels that make up the supply chain. These observations are worth noting because they have important implications for the analysis that must be conducted in the class certification phase of an indirect purchaser class action. As Johnson and Leonard point out, whether common evidence can be used to demonstrate impact and to calculate damages for a proposed class is ultimately an empirical question, and not one that can be answered by a simple appeal to economic theory.

ABSTRACT: Indirect purchaser class actions are a prevalent avenue for the civil recovery of damages resulting from antitrust violations such as price fixing and monopolization. Although both direct purchaser and indirect purchaser actions are commonplace in antitrust, there are key differences between these types of cases, particularly with respect to the issue of pass-through, which is relevant when determining the appropriateness of class certification in indirect purchaser actions. In this paper, we explain how the generic textbook models that are often used and cited in indirect purchaser class actions to support the claim of pass-through to all or substantially all class members are based on highly restrictive assumptions. We also provide several examples that describe why the simple application of these restrictive models to real world situations can lead to mistaken inferences and conclusions.

Dealing with Cartel Risk: Cartels, Leniency and Settlements in an Increasingly Complex Environment

Posted by D. Daniel Sokol

The Dealing with Cartel Risk: Cartels, Leniency and Settlements in an Increasingly Complex Environment conference on February 27, 2008 will bring a number of leading expert practitioners to discuss the latest in cartel issues.

• John Ratliff, Partner, WilmerHale LLP, Brussels
• Philip Collins, Chairman, Office of Fair Trading, London
• Fiona Carlin, Partner, Baker & McKenzie LLP London and Brussels
• Anne Riley, Associate General Counsel Shell International, London
• Sven Volcker, Partner, WilmerHale LLP Brussels
• Hans-Martin Feldkamp, Senior Counsel, Lanxess Germany
• Annette Schild, Partner, Shearman & Sterling LLP, Brussels

• Jeffrey Blumenfeld, Partner, Crowell & Moring LLP Washington DC
• Jean Francois Bellis, Partner, Van Bael & Bellis Brussels
• Isabelle Kraus, Case Handler, DG Competition, European Commission Brussels
• Sonya Branch, Senior Director, Markets and Projects, Goods Office of Fair Trading London
• Sean-Paul Brankin, Counsel, Crowell & Moring LLP Brussels

Comment on the EC's Pharmaceutical Dawn Raids

Posted by D. Daniel Sokol

Susan Creighton and Scott Russell of law firm Wilson Sonsini provide a Comment on the EC's Pharmaceutical Dawn Raids.

ABSTRACT: The pharmaceutical industry remains under close examination by antitrust enforcers on both sides of the Atlantic. The U.S. Federal Trade Commission’s (FTC) enforcement activities—challenging both unilateral and concerted action undertaken by pharmaceutical firms—have been ongoing for more than a decade.

Concerns regarding anticompetitive conduct by pharmaceutical firms in Europe contributed to the European Community’s (EC) decision several weeks ago to commence a broad probe into the pharmaceutical industry. The stated purpose of this “sector inquiry” is to determine whether anticompetitive conduct is responsible for either the sharp decline in the launch of new drugs in Europe or the relative hesitancy of generic drug manufacturers to enter the market with cheaper bio-equivalent alternatives to branded drugs that are still on patent.

That the EC has a keen interest in understanding the competitive dynamics of the pharmaceutical industry is hardly exceptional. The EC’s inquiry is unique, however, because it commenced with the seizure of documents and data through targeted dawn raids, without a publicly acknowledged reason to suspect ongoing cartel activity or other exigent circumstances. Naturally, this has left many wondering why the need for the EC to undertake such extreme measures.

Review of UK Competition Commission Merger Guidelines: Call for Submissions

Posted by D. Daniel Sokol

The UK Competition Commission has launched a review of its guidelines for merger references (Merger References: Competition Commission Guidelines, CC2) with a deadline of March 31.  See here for details.

Safe Harbors for Quantity Discounts and Bundling

Posted by D. Daniel Sokol

Dennis Carlton (University of Chicago Graduate School of Business ) and Michael Waldman (Cornell University Johnson School of Business) take issue with the AMC Report as it deals with bundling in Safe Harbors for Quantity Discounts and Bundling.

ABSTRACT: The courts and analysts continue to struggle to articulate safe harbors for a wide variety of common business pricing practices in which either a single product is sold at a discount if purchased in bulk or in which multiple products are bundled together at prices different from the ones that would emerge if the products were purchased separately. The phenomenon of tying in which the sale of one product is conditioned on the purchase of another is closely related to bundling. Its analysis relies on the same economics as that used to analyze bundling (see, e.g., Carlton and Waldman (2008)), though the law seems to make a distinction between the two. The need for safe harbors for common business pricing practices arises from the recognition that these practices often are motivated by efficiency and that a broad antitrust attack on them could cause more harm than good. In this essay, we analyze and propose safe harbors for quantity discounts and bundled products. In analyzing the latter case, we discuss the deficiencies of the particular safe harbor proposed in the report of the Antitrust Modernization Commission (2007) (AMC) of which Carlton was a member.

Deadline for $10,000 Compass Lexecon Prize Approaching

Posted by D. Daniel Sokol

The deadline for submissions for the 2008 Compass Lexecon Prizes is soon approaching (February 29, 2008).  There are separate prizes for faculty ($10,000) and graduate students ($5,000) for "economists whose papers make the most significant contributions to the understanding and implementation of competition policy." 

The 2007 co-winners for faculty:
Mark Armstrong of University College London for his paper, published in the RAND Journal of Economics, entitled “Competition in Two-Sided Markets.”

Igal Hendel and Aviv Nevoof Northwestern University for their paper, published in Econometrica, entitled “Measuring the Implications of Sales and Consumer Inventory Behavior.”

The 2007 winner for PhD student:
Nathan Miller of the University of California at Berkeley for his paper, “Can Strategic Leniency Fight Organized Crime? Empirical Evidence from Cartel Enforcement.”

BIICL International Cartels Conference

Posted by D. Daniel Sokol

The British Institute of International and Comparative Law (BIICL) will hold an International Cartels Conference on February 26 in London.

Confirmed speakers include:

Simon Williams, Office of Fair Trading

Carolyn Galbreath, Irish Competition Authority

Michael O'Kane, Peters & Peters

Dr Nicholas Green QC, Brick Court Chambers

Lawrence Zweifach, Heller Ehrman LLP

Roxann Henry, Howrey LLP

Twombley, Leegin and the Reshaping of Antitrust

Posted by D. Daniel Sokol

Randy Picker of the University of Chicago Law School has come out with Twombley, Leegin and the Reshaping of Antitrust.

ABSTRACT: This paper considers the four antitrust decisions in the Supreme Court's 2006 Term.

It offers brief discussions of Weyerhaeuser and Credit Suisse. Weyerhaeuser is a small, modest decision. The Court isn't likely to see another predatory bidding case soon and the Court chose to minimize doctrinal complexity by bringing predatory bidding analysis in sync with the Court's prior treatment of predatory pricing in Brooke Group. Credit Suisse too is minimally incremental. In concluding that federal securities law implicitly precluded claims asserting antitrust violations in the sale of new securities, the Court followed its prior decision in Gordon as well as the Court's more recent preference for regulatory schemes over antitrust as seen in Trinko. Pushing antitrust authority toward specialized regulators like the Securities and Exchange Commission broadens the trade-offs that can be made between antitrust concerns and other values and almost certainly expands the circumstances under which industry actors can act collectively. That matters, so Credit Suisse covers more of the economic landscape than Weyerhaeuser, but the decision itself is a small step from prior doctrine.

Twombly and Leegin are each, in their own ways, blockbusters. Twombly will appear in case after case, as antitrust defendants try to rely on its new tougher rules for FRCP 12(b)(6) motions. Twombly represents a preference for blunt instruments over sharp edges. The central problem confronted by Twombly is discovery run amok. The Court has the tools in its hands to control that by rewriting the discovery rules and overturning lower court decisions implementing those rules. Twombly suggests that the Court believes that refinement of those rules will fail in controlling discovery and it is willing to pay the price that private plaintiffs will have no good way to get at the best-hidden antitrust conspiracies.

Finally, Leegin brings to a close - for now or forever? - the 100-year saga of contractual minimum resale price maintenance. Since its decision in 1911 in Dr. Miles, the Court has confronted this issue again and again in the slightly-refined versions that make up the art of institutional design. Over time, the Court has chipped away at Dr. Miles, first in not finding a violation of Section 1 of the Sherman Act for the unilateral minimum RPM in Colgate in 1919 and in then broadly subjecting nonprice vertical restraints to rule-of-reason treatment in Sylvania in 1977. Given that, on what basis would Dr. Miles survive?

That is a question of stare decisis and Leegin ends up in an all-out fight over stare decisis in antitrust. That is new: the Court has been overturning old decisions in antitrust for some time and has done so with little stare decisis fanfare. That suggests that the dispute over stare decisis in Leegin is just a convenient forum for the larger dispute over stare decisis that is percolating through a divided Court. I don't have a full-blown theory of stare decisis but I do suggest why the Court has been mistaken to treat stare decisis in statutory cases differently from that in constitutional cases. The Court has made too little of one of its critical tools in shaping statutes, namely, the power to set a default point for subsequent congressional action. Once we treat the Court's decisions as inputs in subsequent lawmaking, there is greater reason to think that the Court should have a uniform approach to stare decisis across the Constitution and statutes.

Unilateral Effects Analysis and Litigation Workshop

Posted by D. Daniel Sokol

The transcript and podcast of the FTC's Unilateral Effects Analysis and Litigation Workshop held yesterday are now on the FTC website .

International Antitrust and Monopolization

Posted by D. Daniel Sokol

Luke Froeb of Vanderbilt's Owen School of Management provides a podcast interview on his newest paper on the EU Microsoft decision and antitrust in India and China.  One of Luke's best insights in the interview is that Chinese antitrust authorities might take analytical shortcuts instead of working through the nuance of bundling cases because of pressures brought by competitors.  We should all be concerned with false prosecutions in antitrust and it strikes me that for new antitrust agencies, bundling should not be anywhere near the top of the list of priorities.  All to often agencies focus on enforcement where I think that competition advocacy to limit anti-competitive government regulation is crucial, particularly as many new agencies are in countries that have not fully embraced the market as a way to organize the economy.  Enforcement should focus on cartels and addressing the role of state owned enterprises and government granted monopolies.  Nevertheless, there is no one size fits all set of priorities and we need to be careful to match enforcement with the particular set of economic and political circumstances of a given country.  With this caveat, I still cannot think of any new agency around the world that ought to be focusing on bundling.