Antitrust & Competition Policy Blog

Happenings in DC

Posted by D. Daniel Sokol

I spent Friday and today at the wonderful GW Competition Law Center conference on Private Enforcement of Competition Law: New Directions.  The presentations were excellent and brought together a broad group of academics and practitioners from around the world.  I received very useful feedback for my work in progress that empirically tracks the interplay of public and private rights in US antitrust.

While at the conference, I discovered that Jon Leibowitz was designated the new Chairman of the FTC.  Though he has been a Commissioner for some time, I provide a link to his speeches for those who want a sense of his thoughts on various issues.

Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence

Posted by D. Daniel Sokol

Chongwoo Choe (Monash U. - Economics) and Chander Shekhar (U. Melbourne - Economics) discuss Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence.

ABSTRACT: We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one. Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.

Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy

Posted by D. Daniel Sokol

Adrien de Hauteclocque (Univ. of Manchester School of Law) and Jean-Michel Glachant (University Paris XI - Economics) have a new paper on Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy.

ABSTRACT: Long-term supply contracts often have ambiguous effects on the competitive structure, investment and consumer welfare in the long term. In a context of market building, these effects are likely to be worsened and thus even harder to assess. Since liberalization and especially since the release of the Energy Sector Enquiry in early 2007, the portfolio of long-term supply contracts of the former incumbents have become a priority for review by the European Commission and the national competition authorities. It is widely believed that European Competition authorities take a dogmatic view on these contracts and systemically emphasize the risk of foreclosure over their positive effects on investment and operation. This paper depicts the methodology that has emerged in the recent line of cases and argues that this interpretation is largely misguided. It shows that a multiple-step approach is used to reduce regulation costs and! balance anti-competitive effects with potential efficiency gains. However, if an economic approach is now clearly implemented, competition policy is constrained by the procedural aspect of the legal process and the remedies imposed remain open for discussion.

Consumer Benefits and Harms from Resale Price Maintenance: Sorting the Beneficial Sheep from the Antitrust Goats?

Posted by D. Daniel Sokol

FTC Commissioner Pamela Jones Harbour gave a speech titled Consumer Benefits and Harms from Resale Price Maintenance: Sorting the Beneficial Sheep from the Antitrust Goats? to kick off the FTC RPM Workshop.

The Role of Competition Authorities in the Response to Economic Crisis (Food Prices and Supply; Energy Prices; Market Crises)

Posted by D. Daniel Sokol

The OECD has released a background paper on The Role of Competition Authorities in the Response to Economic Crisis (Food Prices and Supply; Energy Prices; Market Crises).

An Exact Arithmetic SSNIP Test for Asymmetric Products

Posted by D. Daniel Sokol

Øystein Daljord of the Norwegian School of Economics and Business Administration provides An Exact Arithmetic SSNIP Test for Asymmetric Products.

ABSTRACT: The standard application of critical loss analysis to delineate markets is shown to be incorrect when products are asymmetric. A simple delineating criterion is derived that accounts for asymmetries between products without imposing equilibrium conditions or any specific demand structure.

Competition Law - New Tendencies, New Tools and New Enforcement Methods

Posted by D. Daniel Sokol

COMPETITION LAW – NEW TENDENCIES, NEW TOOLS AND NEW ENFORCEMENT METHODS FROM AN EC AND POLISH PERSPECTIVE
COLLEGE OF EUROPE
WARSAW – NATOLIN, 13 MARCH 2009

CONFERENCE PROGRAMME
8.30 – 9.15: Registration

9.15 – 9.30: Welcome words
Prof. Paul Demaret
Rector, College of Europe

9.30 – 9.45: Presentation of the conference
Prof. Jacques Bourgeois
President of the GCLC, Professor at the College of Europe
Prof. Massimo Merola
Member of the Executive Committee of the GCLC, Professor at the College of Europe
CHAIR: Jacques Bourgeois

9.45 – 10.15: Effectiveness of competition law
Małgorzata Krasnodebska-Tomkiel
President of the Office for Competition and Consumers' Protection
10.15 – 10.45: Keynote speech – The general trends of antitrust enforcement by the European Commission
Anthony Whelan
Head of Cabinet of Ms. Kroes, Commissioner in charge of Competition Policy

10.45 – 11.00: Coffee break
CHAIR: Prof. Tadeusz Skoczny

11.00 – 11.30: Private antitrust actions (the White Paper on damage actions, injunctive relief, the "Eurodefence")
Paul Csiszár
Director, DG COMP, European Commission

11.30 – 12.00: Claims for damages – private enforcement of competition rules before Polish Courts
Dr Dawid Miasik
Polish Academy of Science; Bureau of Studies and Analyses of the Supreme Court, Warsaw

12.00 – 12.30: Leniency and fines – new tools in public enforcement by the Polish competition authority
Katarzyna Racka & Anna Sekinda
Competition Protection Department of the Office for Competition and Consumers Protection\

12.30 – 13.00: Leniency, settlements and fines – The view of an EU Law practitioner
Prof. José Rivas
Professor at the College of Europe, Natolin Campus and Partner,
Bird & Bird

13.00 – 13.30: Comments – Panel discussion and questions from the floor
Małgorzata Szwaj
Counsel, Linklaters, Warsaw
Dorothy Hansberry-Biegunska
Partner, Wardynski & Partners, Warsaw

13.30 – 14.20: Lunch
CHAIR: Prof. Stanislaw Sołtysinski
14.20 – 14.50: Vertical restraints in Poland: how far from economic approach?
Dr Agata Jurkowska
The Warsaw University

14.50 – 15.20: Protecting consumers or competitors? What is an “abuse”?
Dr Konrad Kohutek
Polish-German Center for Banking Law, Jagiellonian University, Cracow

15.20 – 15.30: Coffee break
15.30 – 16.00: Is the Reform of Reg. 1/2003 an opportunity to seize and why?
Prof. Richard Whish
Professor of Law, King’s College London

16.00 – 16.30: The referral mechanisms under the merger control regulation and the ongoing consultation process
Alexander Kopke
DG COMP, European Commission

16.30 – 17.00: Comments – Panel discussion and questions from the floor
Robert Gago
Counsel, Lovells, Warsaw
Bettina Volpi
Senior Associate, Bonelli Erede Pappalardo, Brussels
Krzysztof Kanton
Partner, SK&S, Warsaw

17.00 Concluding remarks
Ewa Osniecka-Tamecka
Vice Rector of the Natolin (Warsaw) campus of the College of Europe

Download programme_gclc_conference_13_march_2009_english_final_version.pdf

linkLine Supreme Court Decision is Out

Posted by D. Daniel Sokol

The decision is available here.

Market Power in Competition for the Market

Posted by D. Daniel Sokol

Sangin Park, Seoul National University, South Korea Graduate School of Public Administration presents Market Power in Competition for the Market.

ABSTRACT: In the evaluation of abuse of dominance (or Section 2 cases in the United States), the standard method of proving monopoly power is typically faced with difficulties in measuring the competitive price level and the substantiality of market power. These difficulties are more obvious in industries characterized by R&D competition for the market, where drastic innovation, standardization, or bidding for the entire demand is central figure. On the basis of a simple model of R&D competition for the market, this paper provides the competitive price level and the threshold level of substantiality of market power, showing that the absence of barriers to R&D competition ensures no abuse of dominance in these industries.

Expropriating Monopoly Rents through Stable Buyer Groups

Posted by D. Daniel Sokol

Chris Doyle, London School of Economics & Political Science (LSE) - Department of Economics and Martijn A. Han, University of Amsterdam - Amsterdam Center for Law & Economics have an interesting piece on Expropriating Monopoly Rents through Stable Buyer Groups.

ABSTRACT: In industries with unobservable wholesale contracting, retailers may jointly extract monopoly profits in their output market through the formation of a buyer group in their input market. Buyer groups allow retailers to credibly commit to input contracts with increased wholesale prices, which serve to reduce combined final output to the monopoly level, where the increased input costs are refunded from suppliers to retailers through slotting allowances. The stability of this anticompetitive mechanism depends on the retailers' incentives to cheat and unobservably source from a supplier outside of the buyer group arrangement at lower input costs. If firms are able to sign exclusive dealing provisions, such deviation is impossible and the buyer group arrangement is stable for all discount factors. In the absence of those provisions, minimum purchase clauses still limit deviant retailers' ability to source from alternative suppliers, making the buyer group induced monopoly outcome as stable as conventional output market collusion.

The Concept of State Aid in Liberalised Sectors

Posted by D. Daniel Sokol

Thomas Von Danwitz, European Court of Justice addresses The Concept of State Aid in Liberalised Sectors.

ABSTRACT: The author highlights the balancing act both on the regulatory as well as on the institutional level between state aid control and the liberalization of public services. He focuses on partially liberalized markets and tackling cross-subsidisation where Member States infringe the competitive neutrality of the privatisation process by various funding schemes. These are all subject to three criteria linked to the private investor test. Once partially liberalized, sectors traditionally shaped by public service obligations are prone to state intervention owing to the special needs they fulfil. Starting from the premise that the concept of universal services is designed to combine public policy objectives with a fully competitive market, the author allocates the role of state aid control as both a specific mandate avoiding selective distortions through the granting of state resources imputable to the State and as a regulatory mandate to maintain a level playing field for all undertakings in the Internal Market. The jurisprudence of Community Courts - e.g. UFEX, Chronopost and Laboratoires Boiron - is faced with the demarcation of the European Commission's powers and the determination of the nature and extent of judicial review. Its analysis focuses on cost calculation and allocation in search of cross-subsidisation of liberalised market segments by using state resources originally designed to compensate for public service obligations. He closes with the assumption that, because of the narrow confines of aleatory references made to the Courts, preference should be given to a best practice approach to cost allocation standards.

Anti-Monopolization Workarounds

Posted by D. Daniel Sokol

Reza Dibadj, University of San Francisco - School of Law focuses his latest work on Anti-Monopolization Workarounds.

ABSTRACT: Bringing a monopolization claim under the Cartwright Act is difficult work. This article first explains the possible arguments that one might make in favor of such a claim, then describes why each faces an uphill battle. Second, the article discusses alternatives to the Cartwright Act for bringing a monopolization claim under California law and why each of these attempts is also challenging. The article concludes by considering the reasons for and significance of the lack of a clear monopolization claims under the Cartwright Act.

Regulation of an Open Access Essential Facility

Posted by D. Daniel Sokol

Axel Gautier, University of Liege - Research Center on Public and Population Economics, Catholic University of Louvain - Center for Operations Research and Econometrics (CORE) and Manipushpak Mitra, University of Bonn - Institute of Economic Theory write on Regulation of an Open Access Essential Facility.

ABSTRACT: A vertically integrated firm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both firms use the same essential input. The regulator's objectives are (i) to ensure financing of the essential input; and (ii) to generate competition in the downstream market. The regulatory mechanism grants non-discriminatory access of the essential facility to the entrant provided it pays a two-part tariff to the incumbent. The optimal mechanism generates inefficient entry. The inefficient entry captures the trade-off between market efficiency and infrastructure financing resulting from incomplete information and non-discriminatory access.

Best Practice for Economic Submissions

Posted by D. Daniel Sokol

In a newly released document, the British Competition Commission released a statement on best practices for economic submissions.

The Competition Commission (CC) has published a short document outlining guiding principles for parties to follow when submitting technical economic analysis to the CC as part of an inquiry.

Over recent years the CC has received a growing number of submissions featuring complex economic analysis and expects this number to increase further in future. Whilst welcoming such submissions, the CC believes it would be helpful to set out some broad principles on what they should include. This will help parties make their submissions as effective as possible and save time and resources that can be wasted debating points and trying to understand methods.

Whilst detailed economic analysis can be useful in helping the CC reach informed decisions, it also needs to be able to examine and test such analysis rigorously. The document, available at www.competition-commission.org.uk, therefore stresses that the CC needs to be able to understand how results are obtained as well as seeing the results themselves.

Parties making submissions should outline and justify the methodology underlying their analysis, describe the techniques used and be prepared to supply relevant data so that the CC can replicate any analysis. Parties are also reminded that effective submissions should —as much as possible—be comprehensible to non-economists.

Measuring and Explaining Competition in the Financial Sector

Posted by D. Daniel Sokol

Addressing an important issue are Jacob A. Bikker (Utrecht - Economics) and Laura Spierdijk (Groningen - Economics) in their paper Measuring and Explaining Competition in the Financial Sector.

ABSTRACT: The first part of this paper provides a systematic discussion of the structural problems of competition on financial markets as observed from the demand and from the supply side, using a diagnostic framework. Potential impediments to competition are concentration, entry barriers, lack of transparency, product complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In response to such financial market failures, we suggest a number of possible policy reactions. The second part of the paper investigates ways to measure competition and provides empirical figures on banking competition in 101 separate countries and assesses the market structure as monopolistic (or a perfect cartel), perfectly competitive or monopolistic competitive. Also, banking competition is explained, using explanatory variables of market structure, contestability, inter-industry competition, and instiontutional and macro economic conditions. This analysis provides possible instruments for reform in order to help promote competition. Next, the impact of banking consolidation is examined. Finally, developments in competition are observed over time, generally pointing to a downward trend.

Patent Thickets, Licensing and Innovative Performance

Posted by D. Daniel Sokol

Iain M. Cockburn (BU Economics), Megan J. MacGarvie (BU Economics), and Elisabeth Müller (ZEW Centre for European Economic Research) discuss Patent Thickets, Licensing and Innovative Performance.

ABSTRACT: We examine the relationship between fragmented intellectual property (IP) rights and innovative performance, taking into consideration the role played by in-licensing of IP. Controlling for a variety of firm and market characteristics, we find that firms facing more fragmented IP landscapes are more likely to report expenditures on in-licensing and for those firms that do incur license costs we find a weak positive association between licensing expenditure and fragmented IP rights in the relevant technology. We also observe a negative relationship between IP fragmentation and innovative performance, but only for firms that engage in in-licensing and only for product innovation. The relationship between fragmentation and innovative performance also depends on the size of a firm’s patent portfolio, which suggests an important strategic role for defensive patenting in the context of fragmented property rights.

Do Islamic Banks Have Greater Market Power?

Posted by D. Daniel Sokol

Laurent Weill of the Laboratoire de Recherche en Gestion (LARGE) (Management Research Laboratory) Université de Strasbourg asks, Do Islamic Banks Have Greater Market Power?

ABSTRACT: The aim of this paper is to investigate whether Islamic banks have greater market power than conventional banks. Indeed Islamic banks may benefit from a captive clientele, owing to religious principles, which would be charged greater prices. To measure market power, we compute Lerner indices on a sample of banks from 17 countries in which Islamic and conventional banks coexist over the period 2000-2007. Comparison of Lerner indices shows no significant difference between Islamic banks and conventional banks. When including control variables, regression of Lerner indices even suggests that Islamic banks have a lower market power than conventional banks. A robustness check with the Rosse-Panzar model confirms that Islamic banks are not less competitive than conventional banks. The lower market power of Islamic banks can be explained by their different norms and their different incentives.

Abuse and Monopolization: Unilateral Conduct by Two Competition Authorities?

Posted by D. Daniel Sokol

Gunnar Niels of Oxera offers insights into Abuse and Monopolization: Unilateral Conduct by Two Competition Authorities?

ABSTRACT: Within the space of a few months, two pre-eminent competition authorities issued widely publicized reports on unilateral conduct, one of the hotly debated topics in modern competition law. Both reports followed years of extensive review and consultation processes among practitioners and experts in each jurisdiction. Great expectations had been created. So, with these reports, have the two authorities laid down a marker for how unilateral conduct cases will be assessed in years to come?

Well, let's imagine we're in the year 2019. What would a competition practitioner at that point in time make of the Department of Justice's ("DOJ") report on single-firm conduct under Section 2 of the Sherman Act—published in September 2008—and of the European Commission's guidance on enforcement priorities in applying Article 82 EC Treaty, published in December 2008? In this article I explore the answer to this question. I anticipate that, in short, the future reader will be confused by both reports because the context in which they were produced is not made clear in either, but he or she will be even more confused by the European report than by the U.S. one.

If You Are an Antitrust Lawyer, Economist or Professor in the DC area, What Are Your Plans for This Friday and Saturday?

Posted by D. Daniel Sokol

If you are in town, you should attend Private Enforcement of Competition Law: New Directions

The GW Competition Law Center hosts this conference with the goal of promoting discussion among policymakers, practitioners, and academics -- from the United States and abroad -- about new policy initiatives relating to private enforcement, emerging experience, and new research initiatives.

Friday and Saturday,
February 27 and 28, 2009

Jacob Burns Moot Court Room
The George Washington University Law School
Lerner Hall, first floor
2000 H Street NW
Washington, D.C. 20006

For more information or to RSVP, please contact:
Leslie J. Duche
Senior Secretary, GW Law
[email protected]
202.994.7170

Schedule

Friday, February 27

9:30 - 10:00 a.m.
Coffee and Registration

10:00 a.m. - 12:00 p.m.
Panel 1: New Directions on Private Enforcement in Europe

Lead Presentations:
Eddy De Smijter, European Commission
Christopher Cook, Cleary Gottlieb (BE)
Ali Nikpay, Office of Fair Trading (UK)
Barry Rodger, University of Strathclyde (UK)

Discussants:
The Hon. Douglas Ginsburg, U.S. Court of Appeals for the D.C. Circuit
Hannah Buxbaum, Indiana University

12:15-1:30 p.m.
Luncheon Keynote

Michael Hausfeld, Hausfeld LLP

1:45 - 3:30 p.m.
Panel 2: Lessons from the “Old World” – the U.S. Experience

Lead Presentations:
Edward Cavanagh, St. John’s University
Harry First, New York University
Robert Lande, University of Baltimore

Discussants:
Spencer Waller, Loyola University (Chicago)
Stephen Calkins, Wayne State University

3:30 - 4:45 p.m.
Coffee break

3:45 - 5:15 p.m.
Panel 3: Class Actions and Their Alternatives

Lead Presentations
David Rosenberg, Harvard University
Roger Van Den Bergh, Erasmus University (NL)

Discussants:
Michael Abramowicz, George Washington University Law School
Eric Cramer, Berger & Montague

Saturday, February 28

9:00 - 10:30 a.m.
Panel 4: Building Private Enforcement Capacity – Institutional Considerations

Lead Presentations:
Salil Mehra, Temple University
David Gerber, Chicago-Kent University

Discussants:
William Kovacic, Federal Trade Commission
Edward Iacobucci, Toronto University (CA)
Francisco Marcos, IE Law School/Tribunal de Defensa de la Competencia (ES)

10:30 - 10:45 a.m.
Coffee break

10:45 - 11:45 a.m.
Panel 5: Empirical Assessment of Private Enforcement

Lead Presentation:
Daniel Sokol, University of Florida

Discussants:
Philip Nelson, Economists Incorporated
Jonathan Baker, American University

12:00 - 12:30 p.m.
Wrap-up: Future Directions for Assessing Private Competition Policy

Lead facilitators:
Andrew Gavil, Howard University
Edward Swaine, George Washington University Law School

Kroes - The Road to Recovery

Posted by D. Daniel Sokol

Neelie Kroes gave a speech to the OECD's 105^th meeting of the OECD Competition Committee on The Road to Recovery.   Among her points:

A middle way would be to have regulators to require full and frank disclosure from all banks to be able to direct their interventions to systemically relevant banks most in need of it.

Proposed schemes will need to be sustainable from a budgetary perspective, and the budgetary position may affect the type of scheme chosen.

Consideration of the medium and long-term impact must be built into the design of impaired asset schemes.

They must not inflict damage on other market players and will need to be

• timely (available during a short window),
• targeted,
• and transparent.

And, where necessary, accompanied by a restructuring of the bank to the extent necessary to ensure not just viability - in the sense of survival - but real ongoing utility as a means of channelling credit to the economy.

This leads me to my most important point.

Guarantees, recapitalisation and the treatment of impaired assets are necessary, but they are not sufficient. 

Tough decisions on restructuring or possible managed liquidation need to be made, and they need to be made very fast.  We cannot afford delay.

Member States have to be resolute and determined to reduce uncertainty and increase trust in the banking system so that the real economy can again access the credit that it needs.