Antitrust & Competition Policy Blog

Technical Monitoring and Verification Services to Support Antitrust Investigations in the IT Sector (Budget: € 9.000.000)

Posted by D. Daniel Sokol

The European Commission has a call to tender for Technical Monitoring and Verification Services to Support Antitrust Investigations in the IT Sector (Budget: € 9.000.000).

From the Commission tender specifications:

In the context of its investigation and compliance enforcement work in the IT industry concerning, in particular, Microsoft, the Commission requires expert consultancy services in order to establish technical facts, for example relating to the state of technical documentation embodying interoperability information for communication protocol technology as established by the Commission's 24 March 2004 Decision in Case COMP.37792 (Microsoft).

Justice Delayed is Justice Denied: The Rule of Law, Economic Development and the Future of the European Community Courts

Posted by D. Daniel Sokol

Tim Cowen, General Councel and Commercial Director , BT Global Services, has written on Justice Delayed is Justice Denied: The Rule of Law, Economic Development and the Future of the European Community Courts.

ABSTRACT: This article looks at the recent changes in the European Union (EU) both under the Reform Treaty and in relation to the recognised need to complete the Single Market. In essence, the political intent is agreed and the goals have been set. The Reform Treaty has set a way of working among Member States. By contrast, the EU system of law and the method by which agreed political intent is implemented has not been reviewed, and this is addressed in the paper.

Mamma Mia! Italian public choice concerns and antitrust

Posted by D. Daniel Sokol

I currently have a work that I have sent out to law reviews in which I decry the use of immunities from antitrust for public choice reasons.  Adding fuel to my general ire on this issue is news from the Global Competition Review that "Italy's government has exempted state-run airline Alitalia from national merger control regulations as part of a restructuring plan to save it from bankruptcy."  This is a terrible development.

FTC Announces Workshop to Explore Scope of the Prohibition of Unfair Methods of Competition Under Section 5 of the FTC Act

Posted by D. Daniel Sokol

From the FTC Press release: Federal Trade Commission today announced it will host a workshop on October 17, 2008, in Washington, DC, to examine the scope of the prohibition of unfair methods of competition in Section 5 of the FTC Act, 15 U.S.C. Sec. 45. The workshop will consider the appropriate scope of Section 5 in light of legal precedent, economic learning, and changing business practices in a global and high-tech economy.

Optimal Corporate Leniency Programs

Posted by D. Daniel Sokol

Joseph E. Harrington, Johns Hopkins University - Department of Economics has a very interesting piece on Optimal Corporate Leniency Programs.

ABSTRACT: This study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs. Though it can be optimal to provide only partial leniency, plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward. It is also shown that restrictions should be placed on when amnesty is awarded, though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony.

Economic Foundations of Competition Laws: The Benefits of Monopoly vs. the Benefits of Competition

Posted by D. Daniel Sokol

Alfonso Miranda Londoño and Juan D. Gutierrez of Pontificia Universidad Javeriana Law of Colombia have written on Economic Foundations of Competition Laws: The Benefits of Monopoly vs. the Benefits of Competition.

ABSTRACT: Antitrust Law can be described as the set of legal rules that regulate the current or potential power of the companies on a certain market, on behalf of public interest. In practice, the Antitrust Law prohibits the execution of restrictive competition practices, the acquisition of a dominant position in the market through the accomplishment of these practices and the abuse of the dominant position.

This document is an approach to the analysis of one of the fundamental premises of this discipline, which states that the markets in competition produce greater benefits to society than the markets with monopolistic structures. In this order, we will analyze the origins, evolution and purpose of the Antitrust Law, the practical difficulties that the competition authorities must face 'particularly the Latin American authorities', and also the criticisms that have been formulated against the laws that develop Antitrust. For this is purpose the following subjects are exposed: 1) Origins and evolution of the Antitrust Law in the United States of America, the European Union, Latin America and the Caribbean. 2) Economic Aspects of the Antitrust Law 3) Competitive markets and monopolistic markets. 4) Criticisms to the Antitrust Law 5) The challenges for the Latin American competition authorities.

Market Entry Regulation and International Competition

Posted by D. Daniel Sokol

Frank Stähler, University of Kiel - Economics and Thorsten Upmann, University of Bielefeld - Institute of Mathematical Economics have a paper on Market Entry Regulation and International Competition.

ABSTRACT: We analyze a non-cooperative two-country game where each government decides whether to allow free market entry of firms or to regulate market access. We show that a Pareto-efficient allocation may result in equilibrium. In particular, if the cost difference between home and foreign production is significant, production will be located in the cost-efficient country exclusively; and if this cost difference is even substantial, the induced allocation is also Pareto efficient. Only if the cost difference is insignificant, production may take place in both countries and the allocation is inefficient.

FTC Announces Workshop and Roundtable on Emerging Health Care Competition and Consumer Protection Issues

Posted by D. Daniel Sokol

The FTC in a press release announced "that it will hold two public workshops and roundtables this fall to examine emerging health care competition and consumer protection issues. The events, which will be held in Washington, DC, will focus on two distinct areas in which competition and consumer protection policies are implicated:  The specific dates of the events, along with detailed agendas for each, will be announced in the near future."

The FTC seeks public comments.

Strategic Vertical Integration without Foreclosure

Posted by D. Daniel Sokol

Eric Avenel of Laboratoire d'Économie Appliquée de Grenoble (Grenoble Applied Economics Laboratory (GAEL)) discusses Strategic Vertical Integration without Foreclosure in a recent article.

ABSTRACT: We determine the endogenous degree of vertical integration in a model of successive oligopoly that captures both efficiency gains and strategic effects. Foreclosure effects are purposely left aside. The profitability of integration originates in the greater ability of integrated firms to adopt a specific type of technologies. We show that vertical merger waves can stop by themselves before integration is complete because of strategic substitutability in vertical integration. This is in contrast to the strategic complementarity result in McLaren [2000] that leads to either complete integration or complete separation.

FTC to Host Public Workshop on Petroleum Market Manipulation Rulemaking

Posted by D. Daniel Sokol

The FTC will host a workshop in Washington, DC, following the close of the Notice of Proposed Rulemaking (NPRM) comment period for its ongoing petroleum market manipulation rulemaking.  Parties interested in participating as panel members must submit a comment in response to the recently issued NPRM – see http://www.ftc.gov/os/2008/08/P082900nprm.pdf– as well as a request to participate. The deadline for submitting comments and requests to participate in the workshop is September 18, 2008.

Trade and Competition Policy in the Developing World: Is There a Role for the WTO?

Posted by D. Daniel Sokol

Given some of my own writing in this area, I am always on the lookout for new work on international antitrust institutions.  Daniel J. Gifford (University of Minnesota - Law School) and Robert T. Kudrle (University of Minnesota Public Policy) provide their analysis of Trade and Competition Policy in the Developing World: Is There a Role for the WTO?

ABSTRACT: This paper considers the possibilities that the member states of the WTO would adopt some kind of antitrust provision. Initially, the paper reviews the historical relation of competition policy to trade policy, from the Havana Conference to the present. It then reviews the conflicts between the developing and developed countries in the GATT. The paper explores the differences between the mind-set of legislators adopting a competition law and trade negotiators bargaining for a multilateral reduction in tariffs. It also identifies the influence of private interests in both situations. The paper considers competing roles played by competition laws and industrial policy, especially (but not exclusively) in developing countries. It identifies the differing benefits that developed and developing countries once perceived in a competition-law component to the WTO, and it discusses how the realization of both sets of goals is proving increasingly difficult. Finally, the paper shows that the dominant private interests of developed and developing countries diverge. As a result a global competition-law regime, whether under the WTO or not has become increasingly unlikely.

Racial Discrimination and Competition

Posted by D. Daniel Sokol

Something that we tend to overlook in that competition can be used to reduce racial discrimination (see for example the books by Sowell and Becker in the 1970s for further reading- the more competition there is, the harder it is to indulge a "taste" for discrimination in hiring). Antitrust law is a great tool for destroying discrimination based on race.     Along these lines, I found an interesting working paper Racial Discrimination and Competition by Ross Levine, Alexey Levkov, and Yona Rubinstein (Department of Economics - Brown University) that analyzes how competition reduced discrimination in the banking industry.

ABSTRACT: This paper assesses the impact of competition on racial discrimination. The dismantling of inter- and intrastate bank restrictions by U.S. states from the mid-1970s to the mid-1990s reduced financial market imperfections and lowered entry barriers facing nonfinancial firms. We use bank deregulation to identify an exogenous intensification of competition in the nonfinancial sector, and evaluate its impact on the racial wage gap, which is that component of the black-white wage differential unexplained by Mincerian characteristics. We find that bank deregulation reduced the racial wage gap by spurring the entry of nonfinancial firms. Consistent with theory, the impact of competition on the wage gap is particularly large in states with a comparatively high degree of racial bias, where competition-enhancing bank deregulation eliminated between 20 and 30 percent of the racial wage gap.

GUEST BLOG: NFL and Market Power

Daniel Sokol and I are pleased to have the following guest blog from Steven Semeraro.  Thanks for the contribution, Steven, and we look forward to future commentary. 

In American Needle, Inc. v. National Football League, the Seventh Circuit held that (1) the NFL is a single entity for the purposes of licensing rights to produce caps with team logos, and (2) the league's decision to issue an exclusive license to manufacturer logo caps, therefore, could not be challenged under either Section 1 or Section 2 of the Sherman Act.  The reasoning in this case strikes me as inadequate to support the holding, and for that reason it may be a candidate for en banc or Supreme Court review.

Judge Kanne's opinion for the court properly draws on Judge Easterbrook's earlier analysis of the National Basketball Association's limitation on telecasts by individual teams.  In Chicago Professional Sports v. NBA, Easterbrook, writing for the court, observed that a sports league cannot be labeled as a single entity or joint venture for all purposes.  "[A]n organization such as the NBA," he wrote, may be "best understood as one firm when selling broadcast rights to a network in competition with a thousand other producers of entertainment, but is best understood as a joint venture when curtailing competition for players who have few other market opportunities."  He drew a comparison to McDonald's franchises that can surely coordinate "the release of a new hamburger," but probably cannot "agree on wages for counter workers."  Importantly, and despite citing a litany of reasons why the NBA was likely a single entity with respect to licensing television rights, the Chicago Professional Sports panel refused to bless the NBA's conduct on that ground.  Instead, it remanded, recommending that the trial court treat it as a traditional Section 1 Rule of Reason case in which the court assessed market power and then examined the competitive effects of limiting individual team telecasts.

Citing Easterbrook's opinion, Judge Kanne correctly recognized that each facet of a sports league must be analyzed independently, and he properly claimed to limit the opinion to the NFL's licensing of intellectual property.  The analysis in the opinion, however, fails to explain why, unlike Chicago Professional Sports,  no analysis of market power or competitive effects was necessary.

First, Judge Kanne claimed that the NFL had to be a single source of economic power because a single team could not produce the product, i.e. professional football games.   "Asserting that a single football team could not produce a football game," he quipped, "is less of a legal argument than it is a Zen riddle: Who wins when a football team plays itself."  From this truism, he concluded that "[i]t thus follows that only one source of economic power controls the promotion of NFL football; it makes little sense to assert that each individual team has the authority, if not the responsibility, to promote the jointly produced NFL football."

To the extent that this makes any sense at all, it sweeps way too broadly.   One simply cannot conclude that the need for standards to produce a product efficiently renders competition unnecessary among those agreeing to adhere to the standards.  The NCAA football telecasts case made this point abundantly clear.  Universities had to agree on many rules to make NCAA football possible, but they could nonetheless compete on licensing television rights, and Section 1 of the Sherman Act required them to do so.  Judge Easterbrook carefully distinguished the NBA from the NCAA, and even then was reluctant to pronounce the NBA a single entity exempt from Section 1 liability.  Judge Kanne never explains why the NFL’s licensing of logo caps is different from the NCAA’s licensing of football telecasts.

Second, Judge Kanne relied on "uncontradicted evidence that the NFL teams share a vital economic interest in collectively promoting NFL football" and must compete against other forms of entertainment.  But that was true of NCAA football, and would also apply to any group of competitors fixing prices.  The cartel members share a vital interest in promoting their own products to better compete with those outside the cartel.  Indeed, any group of competitors will share a common interest in minimizing competition among the members of the group.  That hardly eliminates the need for Section 1 scrutiny. 

Finally, and "most importantly," Judge Kanne asserted, the NFL has licensed its intellectual property through NFL Properties, a single entity, for more than 40 years.  Presumably realizing that the length of an anticompetitive agreement can't change its effect, the court focused on NFL Properties' articles of incorporation, which say that it was created to promote the NFL.  And promoting ones product, the court concluded, is obviously a good thing.

Again, though, the reasoning sweeps too broadly.  The American Needle case wasn't about advertising to promote NFL Football.  It's about selling merchandise.  One might legitimately conclude that a unified approach to purchasing magazine and television ads promoting NFL Football could be performed most efficiently by a single entity that could effectively coordinate the impact of the various media buys in the context of a very competitive advertising market.

Selling caps, by contrast, is another story entirely.  Each NFL team very likely has market power in a cap market (or sports logo cap) market because each team could readily charge well above the marginal cost, plus normal profit, of producing a logo cap.  The exclusive license attacked in American Needle allows the NFL to exploit that market power more fully by eliminating the closest competitors for each individual team's logo caps, i.e. logo caps from other NFL teams.  Fans wishing to purchase NFL logo caps will have only a single choice of cap brand, presumably at a high price.  No team may try to capture additional cap sales by also licensing its logo to another cap manufacturer that could produce lower cost products.  Cap output is almost certain to be lower with a single exclusive license than it would be if teams licensed their own logos to different cap manufacturers.

In the NBA television licensing case, one could argue that an individuals team might not fully internalize the negative effects that over-saturation of the airwaves could have on the marketability of NBA games on television, particularly given the substantial competition from other sports and non-sports programming.  Limiting the individual teams' ability to televise games locally might thus have been a legitimate decision in the interest of the league as a whole.  Could a similar argument really be made about NFL logo caps?  Would over-saturation or poor quality really hurt the NFL in any substantial way that would not be internalized by the individual team licensing its logo?  By simply declaring the NFL a single entity, the American Needle court side-stepped what should have been the critical question.

Steven Semeraro, is a Professor of Law at the Thomas Jefferson School of Law and a former trial attorney at the United States Department of Justice, Antitrust Division.

The Commission's Non Contractual Liability in the Field of Merger Control - Don't Use a Hammer When You Need a Screwdriver

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege Faculty of Law and Miguel Rato, Howrey write on The Commission's Non Contractual Liability in the Field of Merger Control - Don't Use a Hammer When You Need a Screwdriver.

ABSTRACT: It has become conventional wisdom to view the rulings handed down by the CFI in Airtours, Schneider, Tetra Laval and Impala as unprecedented setbacks for the European Commission ("the Commission") that would usher in a new era of administrative accountability in the field of merger control. However, several commentators still consider that the Commission regretfully enjoys a de facto power of "life or death" over notified mergers, and that judgments striking down its decisions are unlikely to change much in practice. Parties to a blocked merger generally abandon their projects following the Commission's decision, irrespective of the outcome of the actions they may subsequently bring before the EC Courts (e.g. the Airtours/First Choice or Schneider/Legrand mergers). Third parties - competitors or consumers - to an illegally approved merger have little prospect of inducing the Commission to unscramble a consummated transaction (e.g. the Sony/BMG merger).

This unsatisfactory state of affairs has led practitioners to explore other legal avenues to hold the Commission accountable for its mistakes. One such possible means of redress is to resort to Article 288 EC which provides that the EC shall "make good any damage caused by its institutions". Where an EC institution such as the Commission is found liable for such damage, Article 235 EC grants the Community Courts jurisdiction to award compensation In light of the virulence of some of criticism directed at the Commission by the CFI in the Airtours and Schneider/Legrand judgments, the parties to those mergers initiated proceedings against the Commission, seeking compensation for the unlawful prohibition of their proposed mergers.

These actions drew enthusiastic reactions from certain EC competition law experts which, upon close examination, appear unjustified. The legal avenue provided for by Article 288 EC is most likely a procedural dead-end. First, from the applicants' perspective, the conditions under which the Commission's liability can give rise to a right to compensation in the field of merger control are set so high by existing case-law that most Article 288 EC claims are likely to be dismissed as unfounded. Second, from a public policy standpoint, Article 288 EC does not constitute an adequate instrument to improve the Commission's accountability for its unlawful decisions.

Changing Views of Competition, Economic Analysis and EC Antitrust Law

Posted by D. Daniel Sokol

Alberto Pera of Gianni, Origoni, Grippo & Partners writes on Changing Views of Competition, Economic Analysis and EC Antitrust Law.

ABSTRACT: The objective of this paper is to illustrate how the changes in the view of competition have influenced the role of economic analysis in the application of antitrust law, in particular with respect to the application of EC antitrust law.

Keeping Both Eyes Wide Open: The Life of a Competition Authority Among Sectoral Regulators

Posted by D. Daniel Sokol

Pedro P. Barros, Universidade Nova de Lisboa, Steffen Hoernig, New University of Lisbon - Faculdade de Economia, and Tore Nilssen, University of Oslo - Department of Economics have written on Keeping Both Eyes Wide Open: The Life of a Competition Authority Among Sectoral Regulators.

ABSTRACT: Competition authorities must pay attention to many industries simultaneously. Sectoral regulators concentrate on their own industry. Often both types of authority may intervene in specific industries and there is an overlap of jurisdictions. We show how a competition authority's resource allocation is affected by its relationships with sectoral regulators and their biases. If agencies collaborate (compete), the competition authority spends more effort on the industry with the more (less) consumer-biased sectoral regulator. The competition authority spends budget increases on the industry whose regulator reacts less to more effort. The socially optimal budget corrects for distortions due to regulatory bias, but only downwards.

The Impact of Mergers and Acquisitions on the Efficiency of the U.S. Banking Industry: Further Evidence

Posted by D. Daniel Sokol

Adel A. Al-Sharkas, Alfred University College of Business, M. Kabir Hassan, University of New Orleans - Department of Economics and Finance, and Shari Lawrence, University of New Orleans - Department of Economics and Finance provide thoughts on The Impact of Mergers and Acquisitions on the Efficiency of the U.S. Banking Industry: Further Evidence.

ABSTRACT: Using the Stochastic Frontier Approach (SFA), this study investigates the cost and profit efficiency effects of bank mergers on the US banking industry. We also use the non-parametric technique of Data Envelopment Analysis (DEA) to evaluate the production structure of merged and non-merged banks. The empirical results indicate that mergers have improved the cost and profit efficiencies of banks. Further, evidence shows that merged banks have lower costs than non-merged banks because they are using the most efficient technology available (technical efficiency) as well as a cost minimizing input mix (allocative efficiency). The results suggest that there is an economic rational for future mergers in the banking industry. Finally, mergers may allow the banking industry to take advantage of the opportunities created by improved technology.

Who Defines the Relevant Market—The Core Customer or the Marginal One?

Posted by D. Daniel Sokol

Sumanth Addanki (NERA) and Jeff Daskin (NERA) assess the reasoning by the Court of Appeals that the District Court committed an error in assuming that market definition must depend on the actions of marginal consumers. Their conclusion is that the behavior of marginal customers is and should be the focus of an analysis of market definition. This does not mean, however, that core customers are ignored. As Sumanth and Jeff explain, whether there is a set of core customers who might be adversely affected by a transaction will also depend on the number of marginal consumers and their behavior in response to an increase in price.
Download insights_summer_2008.pdf

Senior Lecturer on Competition Policy Needed

Posted by D. Daniel Sokol

The European Institute of Public Administration is looking for a Senior Lecturer on Competition Policy.

We welcome applications from persons with professional experience from the European Institutions or Member State administrations, and from persons with a more academic or research background.

Job Profile:

Duties will mainly consist of:

* developing and conducting training activities, primarily targeting policy makers and civil servants, and carrying out consultancy;
    * delivering lectures, presentations and briefings;
    * acquiring new contracts and research projects and the management thereof;
    * applied research and publications.

Requirements:

* University degree and postgraduate studies in economics or law, with a very good knowledge of EU matters in general and, in particular, competition policy (state aid and/or anti-trust), regulated sectors or Community policies in sectors such as agriculture or transport;
    * At least eight years of relevant professional experience in public administration, consultancy or an academic environment;
    * Very good knowledge of the relevant literature;
    * Well developed capacity to carry out research as evidenced by publications in reputable journals;
* Practical experience in the implementation of the relevant law and policies at Community, national and/or sub-national level;
* Clear, effective and concise communication and presentation skills, with a particular focus on lecturing, training and offering advice;
* Fluency (speaking and writing) in one of the working languages of the Institute (English, French) and understanding of the other are essential. A working knowledge of other European languages will be considered an asset;
    * Demonstrated excellent analytical and organisational skills;
    * Experience in project management will also be considered an advantage;
    * Excellent PC and internet skills, in particular the use of PowerPoint;
    * Experience in and affinity for working with people from different cultural backgrounds;
    * Willingness and ability to travel;
    * Willingness and ability to meet annual financial targets;
    * Preferably the nationality of one of the EU/EEA Member States or one of the Candidate Countries.

Conditions of Employment:

The offered grade and salary level will be in line with the requirements of the function and will also depend on the qualifications and experience of the selected candidate.

The successful candidate will initially be offered a one-year contract with the option of renewal and the possibility of a permanent contract subject to the criteria in EIPA's Conditions of Employment.

Interviews are expected to take place during the second half of 2008.

Vacancy Number: V0097
Deadline: 14/Sep/2008
Send applications written in English or French, including a comprehensive curriculum vitae, motivation letter and quoting vacancy number V0097
by email or post mail for the attention of:
An M. Cazaerck
O.L. Vrouweplein 22
P.O. Box 1229
Maastricht 6201 BE
Netherlands
[email protected]

Further information can be obtained from:
Dr Phedon Nicolaides
E-mail: [email protected]
Tel: +31 43 3296 234

US v. Microsoft: Ten Years Later

Posted by D. Daniel Sokol

US v. Microsoft:  Ten Years Later
Conference at Harvard Law School
September 12 and 13, 2008
Conference website: 

http://cyber.law.harvard.edu/node/4517

Ten years have passed since the U.S. Department of Justice and 20 states filed their landmark antitrust case against Microsoft and the trial of the lawsuit began in federal district court in Washington,
D.C.  This major conference will look back over the last decade and explore the lasting lessons and deeper meanings of the case for Microsoft, for the software and technology industries, and for
antitrust law and enforcement.

United States v. Microsoft: 10 Years Later, will be held Friday and Saturday, September 12-13, 2008, in Austin Hall at Harvard Law School.  Sponsored by the Law School?s Cyberlaw Clinic and the Berkman Center for Internet & Society, this conference is the first retrospective to examine the lawsuit and its aftermath from the perspective of many of the participants in the original case and trial, as well as leading legal and economic academics. Conference presenters include, among others:

    * David Boies, Partner, Boies, Schiller & Flexner
    * Brad Smith, Sr. VP and General Counsel, Microsoft Corp.
    * David Heiner,  VP and Deputy General Counsel, Microsoft
    * Jonathan Zittrain, Professor of Law, Harvard Law School
    * Franklin Fisher, Professor Emeritus, MIT
    * Edward Felten, Professor of Computer Science and Public Affairs,
Princeton University
    * Douglas Melamed, Wilmer Hale, Washington, DC
    * Tim Bresnahan, Chair, Dept. of Economics, Stanford University
    * Harry First, Professor, New York University School of Law
    * Andy Gavil, Professor, Howard University School of Law
    * John Lopatka, Professor, Penn State Dickinson School of Law
    * William Page, Professor, University of Florida Levin College of Law
    * Rajiv Chandrasekaran, Washington Post
    * Joe Nocera, author and columnist, New York Times
    * John Wilke, Wall Street Journal

Schedule:  The conference will be held Friday, September 12, 2008, from 2:00 p.m. to 6:00 p.m., followed by a reception for all attendees from 6:00 p.m. to 7:15 p.m., and on Saturday, September 13, 2008, from 8:00 a.m. to 6:00 p.m.

Space for the conference is limited and early registrations are encouraged.

To Register:

http://www.events.harvard.edu/profile/form/index.cfm?PKformID=0x34217a0c

Regular registration is $75, Student registration is $25.