Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, March 31, 2009

The Intersection of Antitrust, Patents, and FDA Law: The TriCor Litigation

Posted by D. Daniel Sokol

Epstein

Richard Epstein of the University of Chicago Law School describes The Intersection of Antitrust, Patents, and FDA Law: The TriCor Litigation.

ABSTRACT: The purpose of this brief essay is to address the interconnections among three important areas of law: antitrust, patents, and FDA regulation. Each of these presents formidable difficulties in its own right. The integration of any two areas of law is always vexed. The interconnections among three different bodies of law of vital relevance to the pharmaceutical industry present a still more formidable challenge. The easiest approach starts with an outline of the antitrust, into which I shall first integrate the patent law, thereafter turning to the rules governing FDA approved drugs.

In order to focus the inquiry I will talk about the TriCor litigation in which Abbott Labs was sued on three fronts: by downstream retailers, generic competitors, and state attorneys general. The three cases raise much the same substantive issues, even though each group has its own distinctive damage claim. The litigation has clear importance because TriCor generates over a billion dollars in sales each year. The stakes are high. It is worth noting that the retailer piece of the litigation was recently settled for $184 million.

March 31, 2009 | Permalink | Comments (0) | TrackBack (0)

Competition Law, Cartel Enforcement & Leniency Program

Posted by D. Daniel Sokol

Danilo Sama (LUISS "Guido Carli" University of Rome) provides insights into Competition Law, Cartel Enforcement & Leniency Program.

ABSTRACT: The present assessment focuses the attention on the antitrust action in detecting and fighting oligopolistic collusion, analyzing the development of the innovative and modern leniency policy. Following the examination of the main conditions and reasons for cartel stability and sustainability, our attempt is to comprehend under which circumstances leniency program represents a functional and successful tool for preventing the formation of anti-competitive agreements. The problem statement that follows is therefore: how can Law&Economics approach help competition authorities to achieve and realize this form of enforcement?

March 31, 2009 | Permalink | Comments (0) | TrackBack (0)

UK Competition Commissions Appoints New Members

Posted by D. Daniel Sokol

The UK Competition Commission has appointed new members according to a press release.

Robin Aaronson has been appointed as a reporting panel member from 1 April 2009 to 31 March 2017. Robin is an economist specializing in competition policy. In the 1980s he was senior economic adviser to the Monopolies and Mergers Commission. Subsequently, he has worked as a consultant in the field, as a partner at Coopers and Lybrand and later at LECG.

Phillip Evans has been appointed as a reporting panel member from 1 April 2009 to 31 March 2017. He is an independent consultant on consumer, competition and trade issues and a senior consultant to Fipra International. He is a visiting fellow at Oxford University’s Said Business School Centre for Corporate Reputation.

Simon Evenett
has been appointed as a reporting panel member from 1 April 2009 to 31 March 2017. Simon is Professor of International Trade & Economic Development, University of St Gallen, Switzerland. He is also Programme Director of the International Trade and Regional Economics Programme of the Centre of Economic Policy Research. His research interests include national and international cartels, cross-border mergers and acquisitions, and the pros and cons of international norms on competition law and policy.

Roger Finbow has been appointed as a reporting panel member from 1 May 2009 to 30 April 2017. Roger has been a partner of international solicitors Ashurst LLP since 1984 and retires on 30 April 2009. The last five years have been spent as Managing Partner of the Corporate Department. He specializes in competition law and is the joint author of UK Merger Control Law and Practice.

John Longworth has been appointed as a reporting panel member from 1 April 2009 to 31 March 2017. Originally a scientist, John has been in business for 25 years holding board and senior positions in the Corporate Group, Tesco and Asda. He was economic spokesman for the CBI, and a non-executive director of the York Foundation Hospitals Trust. He was a Health & Safety Commissioner for six years and has held many other public and non-executive positions.

Robin Mason has been appointed as a reporting panel member and a specialist member on the Communications Act Panel from 1 September 2009 to 31 August 2017. Professor Mason is currently the Eric Roll Professor of Economics and Head of Economics at the University of Southampton, where he is director of the Centre for Research in the Information Economy. He joins the University of Exeter as Professor of Economics in September 2009. He is a fellow of the CEPR and associate editor of the Journal of Industrial Economics. He has acted as adviser to Ofcom; and the Prime Minister of Mauritius on competition policy. He has published widely in the economics of information and industrial organization.

Tony Morris has been appointed as a reporting panel member from 1 September 2009 to 31 August 2017. He is a solicitor with over 30 years’ experience of UK and EU competition law. He has spent the past 24 years as a partner in the city firm of Linklaters specializing in the control of cartels and mergers and the conduct of industry competition inquiries.

Stephen Oram has been appointed as a reporting panel member and a specialist member on both the Communications Act and Newspaper Panels from 1 April 2009 to 31 March 2017. Stephen worked for 28 years at director level in the regional and national newspaper industry and as a Chief Executive of daily, weekly and free regional newspapers. He was Director of the Newspaper Publishers Association for ten years. Currently he is Executive Chairman of the London Press Club, non-executive Chairman of a national newspaper advertising consumer protection scheme and National Secretary of the Western Front Association.

Edward Smith
has been appointed as a reporting panel member from 1 April 2009 to 31 March 2017. A former senior partner and Global Assurance COO and Strategy Chairman of PricewaterhouseCoopers, he now enjoys a portfolio of board roles in Education, Transport, sport, thought leadership and the environment and sustainable development. He is Chairman of WWF-UK, Deputy Chairman of the Higher Education Funding Council for England, and a Member of Council and Treasurer of Chatham House. He joined the board of the Department for Transport on 1 January 2009.

Tony Stoller CBE has been appointed as a reporting panel member and a specialist member on both the Communications Act and Newspaper Panels from 1 April 2009 to 31 March 2017. He was Chief Executive of the Radio Authority until it was subsumed into Ofcom in 2003 when he then helped set up the new regulator. He was also formerly a Managing Director of the department store Tyrell and Green, and a principal director of the John Lewis Partnership. He is currently Deputy Chair of the Joseph Rowntree Foundation, Chair of the Committee of Reference for F&C Asset Management’s Stewardship Funds, Editor of The Friends Quarterly, and a member of the Freedom of Information Tribunal.

Roger Witcomb has been appointed as a reporting panel member and a specialist member on the Utilities Panel from 1 April 2009 to 31 March 2017. He is Chair of Governors of the University of Winchester and a non-executive director of a number of companies, including Anglian Water. He was Finance Director of National Power from 1996 to 2000, having previously been at BP and Cambridge University, where he taught economics.

March 31, 2009 | Permalink | Comments (0) | TrackBack (0)

Recent Developments in the United States, EU, and Asia at the Intersection of Antitrust and Patent Law

Posted by D. Daniel Sokol

For an overview of the intersection of antitrust and IP around the world, see Recent Developments in the United States, EU, and Asia at the Intersection of Antitrust and Patent Law by a Jones Day team of Johannes Zoettl, Sebastian Evrard, Geoffrey Oliver, J. Bruce McDonald, Steve Harris, Shinya Watanabe, Hiro Miyakawa, Peter Wang and Yizhe Zhang.  Well done.

ABSTRACT: The intersection of antitrust and intellectual property has continued to generate a great deal of controversy and is perhaps the most fertile subject area for the development of new competition law and policy. Though an overall convergence is perceptible with regard to a number of issues, differences in the laws, legal systems, and policy priorities in various jurisdictions have resulted in divergence with regard to others.

This article seeks to provide an overview of the major developments in key areas in which competition issues are implicated by the structure or use of intellectual property rights.

March 31, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, March 30, 2009

The Impact of Firm Size and Market Size Asymmetries on National Mergers in a Three-Country Model

Posted by D. Daniel Sokol

Luis Santos-Pinto (University of Lausanne Faculty of Business and Economics) describes The Impact of Firm Size and Market Size Asymmetries on National Mergers in a Three-Country Model.

ABSTRACT: This paper studies the impact of firm and market size asymmetries on merger decisions. To do that I consider a model where a small and a large country compete in a third (world) market. Each of the two countries has two firms (with potentially different costs) that supply the domestic market and export to the third market. Merger decisions in the two countries are modeled as a simultaneously move game. The paper finds that firms in the large country have more incentives to merge than firms in the small country. In contrast, the government of the large country has more incentives to block a merger than the government of the small country. Thus, the model predicts that conflicts of interest between governments and firms concerning national mergers are more likely in large countries than in small ones.

March 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Generating Evidence to Guide Merger Enforcement

Posted by D. Daniel Sokol

An interesting paper by Orley Ashenfelter (Princeton - Economics), Daniel Hosken (FTC) and Matthew Weinberg (FTC) discusses Generating Evidence to Guide Merger Enforcement.

ABSTRACT: The challenge of effective merger enforcement is tremendous. U.S. antitrust agencies must, by statute, quickly forecast the competitive effects of mergers that occur in virtually every sector of the economy to determine if mergers can proceed. Surprisingly, given the complexity of the regulators task, there is remarkably little empirical evidence on the effects of mergers to guide regulators. This paper describes the necessity of retrospective analysis of past mergers in building an empirical basis for antitrust enforcement, and provides guidance on the key measurement issues researchers confront in estimating the price effects of mergers. We also describe how evidence from merger retrospectives can be used to evaluate the economic models used to predict the competitive effects of mergers.

March 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Market Sharing and Price Leadership

Posted by D. Daniel Sokol

Ante Farm (Swedish Institute for Social Research, Stockholm University) addresses Market Sharing and Price Leadership in a new working paper.

ABSTRACT: This paper proposes an alternative to the traditional model of supply and demand in markets where consumers take prices as given. Within the framework of “no side payments and partial preplay communication” firms are assumed to decide non-cooperatively on production and marketing while the market price is set by a competitive price leader, i.e. a firm preferring the lowest market price. Predictions include excess supply and a revenuemaximizing market price in markets where production precedes sales. In markets where sales precede production competitive price leadership predicts monopoly pricing but not necessarily monopoly profits if firms are “sufficiently similar”, while the presence of firms with high costs or low capacities will make it possible for the price leader, in some circumstances, to increase its market share and also its profits by reducing its price. And the threat of costly competition for market shares may reduce the market price even for identical firms.

March 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Horizontal Mergers, Involuntary Unemployment, and Welfare

Posted by D. Daniel Sokol

Oliver Budzinski, University of Southern Denmark - Department of Environmental and Business Economics Jürgen-Peter Kretschmer, Philipps University Marburg - Economics offer their thoughts on Horizontal Mergers, Involuntary Unemployment, and Welfare.

ABSTRACT: Standard welfare analysis of horizontal mergers usually refers to two effects: the anticompetitive market power effect reduces welfare by enabling firms to charge prices above marginal costs, whereas the procompetitive efficiency effect increases welfare by reducing the costs of production (synergies). However, demand-side effects of synergies are usually neglected. We introduce them into a standard oligopoly model of horizontal merger by assuming an (empirically supported) decrease in labour demand due to merger-specific synergies and derive welfare effects. We find that efficiency benefits from horizontal mergers are substantially decreased, if involuntary unemployment exists. However, in full employment economies, demand-side effects remain negligible. Eventually, policy conclusions for merger control are discussed.

March 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Sunday, March 29, 2009

Blog Symposium on Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law

Posted by D. Daniel Sokol

On March 30th and 31st, our friends at Truth on the Market will hold their first blog symposium.  The topic will be Michael Carrier’s (Rutgers) forthcoming book: Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law (from Oxford University Press).  Shubha reviewed the book last week here on the Antitrust and Competition Policy blog.

carrierphotl.jpg

TOTM has invited a number of leading scholars from the fields of antitrust and intellectual property to comment on Professor Carrier’s book.  Here is a description of the book’s contents from Professor Carrier:

Innovation for the 21st Century offers ten proposals, from pharmaceuticals to peer-to-peer software, that will help foster innovation.  Of the ten proposals, three target antitrust topics that may be of interest to your readers: (1) settlement agreements between brand and generic firms in the pharmaceutical industry, (2) an innovation-markets framework to be applied to pharmaceutical mergers in which the “products” are in preclinical or clinical trials, and (3) standard-setting.  The book also offers a primer on patent, copyright, and antitrust law, as well as the IP-antitrust intersection.

On Monday, March 30th, TOTM will focus primarily on the antitrust aspects of Carrier’s proposals.  The four discussants will be: Dan Crane (University of Chicago/ Cardozo), Geoff Manne (TOTM/LECG), Phil Weiser (Colorado), and yours truly.

On Tuesday, March 31st, TOTM will focus primarily on the intellectual property aspects of Carrier’s work.  The three discussants will be:  Dennis Crouch (Patently-O/Missouri), Brett Frischmann (Cornell/ Loyola), and F. Scott Kieff (Wash U./ Hoover/ and on his way to GW).

On Tuesday afternoon or Wednesday morning (depending on the length of the posts), Carrier will post a response.

March 29, 2009 | Permalink | Comments (0) | TrackBack (0)

Saturday, March 28, 2009

Merger Review of Firms in Financial Distress

Posted by D. Daniel Sokol

Yesterday at the ABA Antitrust Section Spring Meeting, I bumped into DOJ superstar Ken Heyer prior to my session.  Ken let me know that his new paper with Sheldon Kimmel (also of DOJ), Merger Review of Firms in Financial Distress, is now available on the web.  As another plug for Ken, I had him speak to my antitrust class two years ago where he did a spectacular job.  Take note antitrust professors that Ken is available to entertain in class and at Bar Mitzvahs.

ABSTRACT:

With the increased number of firms that are in some form of serious financial distress, once financing becomes more readily available to potential acquirers we might expect an increase in both the number and share of mergers where at least one of the parties is having difficulty staying afloat independently. This raises the importance of the policy question as to the appropriate standard to apply to such mergers. This paper shows that this standard--striking the best balance between the efficiency benefits and the potential anti-competitive effects that a merger might produce--is the same one given in the Merger Guidelines for any merger. Further, we show that requiring money-losing firms to satisfy the conditions demanded by the Guidelines "Failing Firm Defense" is appropriate even when the overall economy is going through very difficult times.

We explain also that when the conditions required by the failing firm defense are satisfied, a proposed acquisition cannot be intended to generate an anticompetitive outcome and must be expected by the acquiring firm to generate efficiencies. This inference is shown to be not only economically sound, but also to be consistent with the Supreme Court decision in which the Court introduced the failing firm defense as a variety of the efficiency defense that it accepted in that case.

March 28, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, March 27, 2009

Regulating Interoperability: Lessons from AT&T, Microsoft, and Beyond

Posted by D. Daniel Sokol

Weiser Phil Weiser at the University of Colorado Law School discusses Regulating Interoperability: Lessons from AT&T, Microsoft, and Beyond.

ABSTRACT: Antitrust law confronted the challenges of regulating interoperability between platforms and applications in both the AT&T and Microsoft cases, but it has yet to mine the series of lessons that can inform how to address this challenge going forward. With the Microsoft consent decree still in place, it may too soon to render a final judgment on the remedy adopted in that case as well as to evaluate more generally whether antitrust law is up to the task of developing the institutional strategies - be it the use of technical committees or reliance on standard setting bodies - for addressing interoperability concerns that are likely to increasingly arise in the information-based economy. Nonetheless, policymakers focused on the interoperability issue need to begin evaluating the possibilities and limits of antitrust law in this context.

This Article argues that the effort to promote interoperability through antitrust oversight must grapple with a twin set of challenges. First, it must appreciate how standard setting bodies operate and how to bolster their effectiveness through appropriate government support and antitrust law oversight. Second, it must evaluate the comparative institutional competence of the available institutions that might play a role in different remedial strategies. If courts and enforcers can exercise increased creativity and develop effective remedial strategies, antitrust law can play an important role in avoiding the type of regulation that has generally governed network industries of critical importance to the economy. To be sure, it may be the case that regulating interoperability requires a regulatory authority to oversee the terms of access (as was the case in AT&T), but there are significant costs associated with moving towards an increased reliance on such authorities. Consequently, it is critically important that antitrust law - along with other institutions, such as standard setting bodies - grapple with the question of how to ensure effective oversight regarding access to a platform in a technologically dynamic environment.

March 27, 2009 | Permalink | Comments (0) | TrackBack (0)

Why Different Jurisdictions Do Not (and Should Not) Adopt the Same Antitrust Rules

Posted by D. Daniel Sokol

Evans David Evans (University of Chicago, University College London, LECG) makes the persuasive case Why Different Jurisdictions Do Not (and Should Not) Adopt the Same Antitrust Rules.

ABSTRACT: This article summarizes the theory on the optimal design of antitrust rules and discusses the application of such theory in different jurisdictional settings. It establishes the proposition that divergence is the norm for antitrust rules. This paper argues that the quest for convergence is quixotic and the disdain when another jurisdiction has a different rule than one's own is uncalled for. Along the way it considers two beacons of divergence that appeared on either side of the Atlantic at the end of 2008 - the US Department of Justice's report on unilateral conduct and the European Commission's enforcement guidelines on abusive exclusionary conduct.

March 27, 2009 | Permalink | Comments (1) | TrackBack (0)

Thursday, March 26, 2009

Revitalizing Section 5 of the FTC Using 'Consumer Choice' Analysis

Posted by D. Daniel Sokol

Lande Robert H. Lande of the University of Baltimore Law School suggests Revitalizing Section 5 of the FTC Using 'Consumer Choice' Analysis.

ABSTRACT: This paper makes two points. First, Section 5 of the FTC Act, properly construed, is indeed significantly broader and more encompassing than the Sherman Act or Clayton Act. Section 5 violations include incipient violations of the other antitrust laws, and also violations of their policy or spirit.

Second, the best - and probably the only - way to interpret Section 5 in an expansive manner is to do so in a way that also is relatively definite, predictable, principled and clearly bounded. This best can be done if Section 5 is articulated using the consumer choice framework. Without the discipline and constraints provided by this framework, the FTC Act risks becoming unduly standardless. Unless the Commission uses the choice framework, any attempt to construe Section 5 that goes beyond the other antitrust laws risks being viewed as giving undue discretion to the Commission, and for this reason probably will not be permitted by reviewing courts.

The paper also presents three illustrations of how this could make a beneficial difference in practice: situations similar to the N Data case, invitations to collude, and incipient tying and exclusive dealing violations.

March 26, 2009 | Permalink | Comments (1) | TrackBack (0)

Professor Carrier's New Book from Oxford University Press

posted by Shubha Ghosh

Congratulations to Professor Michael Carrier of Rutgers-Camden Law School on the publication of his new book Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law, published earlier this month by Oxford University Press.

Professor Carrier shared some of the manuscript chapters with me last year, and so I was lucky enough to have a sneak preview of this important book.  The final product is impressive and worth including in your antitrust/intellectual property/innovation policy library.  The book tackles the difficult task of reconciling intellectual property law and antitrust law.  The tension between the two has typically been understood as one between a body of law that creates monopolies (intellectual property) and one that breaks them up (antitrust).  This dichotomy, we all know, is overly simplistic, but the challenge is to find a way to bring these two areas of law under one umbrella.  Some, like me, have made the case for treating the two bodies of law as governing different (but overlapping) types of competition.  Professor Carrier makes the case for innovation as the normative foundation that reconciles the two fields.  His book makes an excellent argument for this normative foundation and the for the broader proposition that intellectual property and antitrust are more allies than foes.

The book is divided into four parts.  Part One provides an primer on what Professor Carrier means by innovation as well as of the basics of intellectual property law, antitrust law, and the perceived conflict between the two.  Part Two turns to copyright law with a focus on peer to peer technologies, copyright damages, and digital copyright.  Part Three looks at the patent system, and the debates over patent opposition procedure, patent remedies, and biotechnology patents.  Part Four concludes with a consideration of three areas where antitrust and intellectual property overlap: pharmaceutical markets, standard setting organizations, and patent settlement agreements.  The chapters form a ten point proposal for innovation proposal, one that guides the application of both intellectual property and antitrust to the promotion of innovation.

The definition of innovation Professor Carrier adopts is a straightforward one: "Innovation consists of the discovery, development, and commercialization of new and improved products and services." [page 19].   This definition encompasses both the Constitutional goal of using intellectual property to promote progress in science and the useful arts as well as the goal of antitrust in promoting competition and consumer welfare.  What I found particularly appealing about Professor Carrier's approach is his recognition that innovation is a process that occurs over time and in the context of different markets.  He spends time breaking down the various processes that constitute innovation and identifying the roles of intellectual property and antitrust in regulating each of these stages.  This framework is a useful that is adaptable beyond the particular applications in this book.  It would be interesting to see how the approach could be used for merger analysis as well as applications to other types of intellectual property such as trade secrets and trademarks.

Professor Carrier's achievement is a remarkable one, and I am excited to see this topic getting attention by Oxford University Press.  I look forward to more reviews and to the various blog posts that will be dedicated to this book.  Look for more commentary here.

March 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Call for Nominations for the Jerry S. Cohen Award for the Best Antitrust Scholarship of 2009

Posted by D. Daniel Sokol

The Jerry S. Cohen Memorial Charitable Trust is again seeking nominations for its annual award for best antitrust scholarship. Legal, economic, and business articles, monographs, and books published during 2008 are eligible for this award of approximately $8,000-9,000. The Award will be presented during the American Antitrust Institute Annual Conference on June 18, 2009 at The National Press Club in Washington, D.C.

Although the Cohen Award's judges search the literature for worthy scholarship, your nominations, including self-nominations, will help make sure they do not inadvertently overlook any important candidates. The award is made through a trust set up in the memory of antitrust attorney and author Jerry S. Cohen, brought about by efforts and donations of friends, colleagues and his former law firm.

This year's award will be selected by a committee consisting of Professors John Flynn, Eleanor Fox, Warren Grimes; antitrust practitioners Daniel Small and Charles Goodwin; and Judge Ann Yahner. Last year's co-winners were Professor Maurice E. Stucke for “Behavioral Economists at the Gate:Antitrust in the Twenty-First Century” and Professor Robert H. Lande and Neil W. Averitt for “Using the ‘Consumer Choice’ Approach to Antitrust Law.”Previous winners include Professors Lawrence Sullivan and Warren Grimes for “The Law of Antitrust:An Integrated Handbook” (2nd Ed. 2006), Barry Nalebuff for "Exclusionary Bundling," Professor Andrew Gavil for "Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance," Professor John Connor, for "Global Price Fixing," and Professors Joseph F. Brodley, Patrick Bolton, and Michael H. Riordan for "Predatory Pricing: Strategic Theory and Legal Policy."

To be considered eligible and selected for the award, submissions should reflect a concern for principles of economic justice, the dispersal of economic power, the maintenance of effective limitations upon economic power or the federal statutes designed to protect society from various forms of anticompetitive activity.Submissions should reflect an awareness of the human and social impacts of economic institutions upon individuals, small businesses and other institutions necessary to the maintenance of a just and humane society--values and concerns Jerry S. Cohen dedicated his life and work to fostering.  Submissions may address substantive, procedural or evidentiary matters that reflect these values and concerns. Please send a copy of your nomination before April 17, 2009 to Daniel A. Small, at dsmall@cohenmilstein.com<, or at Cohen Milstein Sellers & Toll, PLLC, 1100 New York Avenue, N.W., West Tower, Suite 500, Washington, D.C. 20005. For a detailed statement of the Award's eligibility and selection criteria, or if you have any questions about the Cohen Award, please contact Daniel A. Small, at 202-408-4600 or the above e-mail address.

March 26, 2009 | Permalink | Comments (0) | TrackBack (0)

What Drives Channel Choice in Grocery Shopping?

Posted by D. Daniel Sokol

In light on the FTC case against Whole Foods, we have increased interest here at the blog on supermarket issues.  Pradeep K. Chintagunta (University of Chicago Booth-Business), Junhong Chu (NUS Business School) and Javier Cebollada-Calvo, Universidad Pública de Navarra ask What Drives Channel Choice in Grocery Shopping?

ABSTRACT: We provide a descriptive study of a household's decisions on where to shop, when to shop and how much to spend for grocery products in the same grocery chain's online and offline stores. We observe households that shop interchangeably in the online and offline stores and make a majority of their purchases in the chain. The data cover all product categories purchased by households at the chain (packaged goods, perishables, etc.). For each household we identify the top 30 categories that account for a majority of that household's expenditures in the chain. These categories vary across households. We relate a household's shopping decisions to the household's needs in each of its top 30 categories, price promotions in those categories, their perishability, and household and store specific characteristics. We specify a multinomial probit model for store visit and channel choice decision, a competing-risks continuous-time proportional hazard model for trip timing, and a regression model for basket expenditures. We allow all drivers of the shopping decisions to have channel-specific effects and take a hierarchical Bayes approach to estimate the parameters of the proposed models. We find channel-specific effects of inventory levels and price promotions on all three decisions. Depletion of inventories of categories that account for a larger proportion of household expenditures drives a household to the online store while depletion of inventories of lower expenditure categories drives a household to the offline stores. Price promotions influence households to visit the chain, increase the probability of households' visiting the chain, and reduce offline trip expenditure, but do not affect online expenditure much. All these indicate the more planned nature of online shopping trips, which are influenced more by households' internal needs and less by the retailer's marketing activities. There is evidence of sorting of trips whereby households make stock-up trips to the online store and fill-in trips to the offline stores.

March 26, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 25, 2009

Assessing the Consequences of a Horizontal Merger and its Remedies in a Dynamic Environment

Posted by D. Daniel Sokol

Isao Ishida (Faculty of Economics and Graduate School of Public Policy, University of Tokyo)
      Toshiaki Watanabe (Institute of Economic Research, Hitotsubashi University) offer some thoughts on Assessing the Consequences of a Horizontal Merger and its Remedies in a Dynamic Environment.

ABSTRACT: This paper estimates a dynamic oligopoly model to assess the economic consequences of a horizontal merger that took place in 1970 to create the second largest global producer of steel. The paper solves a Markov perfect Nash equilibrium for the model and simulates the welfare effects of the horizontal merger. Estimates reveal that the merger enhanced the production efficiency of the merging party by a magnitude of 4.1 %, while the exercise of market power was restrained primarily by the presence of fringe competitors. Our simulation result also indicates that structural remedies endorsed by the competition authority failed to promote competition. model.

March 25, 2009 | Permalink | Comments (0) | TrackBack (0)

The Joint Estimation of Firm-level Market Power and Efficiency

Posted by D. Daniel Sokol

Manthos Delis (University of Ioannina Department of Economics) and Efthymios Tsionas (Athens University of Economics and Business) provide The Joint Estimation of Firm-level Market Power and Efficiency.

ABSTRACT: The aim of this study is to provide a methodology for the joint estimation of efficiency and market power of individual banks. The proposed method utilizes the separate implications of the new empirical industrial organization and the stochastic frontier literatures and suggests identification using the local maximum likelihood (LML) technique. Through LML, estimation of market power of individual banks becomes feasible, while a number of restrictive theoretical and empirical assumptions are relaxed. The empirical analysis is carried out on the basis of EMU and US bank data and the results suggest small differences in the market power and efficiency levels of banks between the two samples. Market power estimates indicate fairly competitive conduct in general; however, heterogeneity in market power estimates is substantial across banks within each sample. The latter result suggests that while the banking industries examined are fairly competitive in general, the practice of some banks deviates from the average behavior, and this finding has important policy implications. Finally, efficiency and market power present a negative relationship, which is in line with the so-called “quiet life hypothesis”.

March 25, 2009 | Permalink | Comments (0) | TrackBack (0)

ABA Antitrust Spring Meeting Begins Today

Posted by D. Daniel Sokol

The most important world-wide antitrust conference of the year begins today in Washington DC at the JW Marriott Hotel and the National Press Club.  You can download the agenda here.  Academics in law and economics, practitioners from government, law firms  and economic consulting firms and the general public come in large numbers to participate and hear what are typically very interesting presentations on the cutting edge issues of antitrust in the US and around the world.

I will be speaking at 8:15am on Friday on the emerging antitrust regimes panel.  I get to know many readers of the blog merely via email or phone.  Please stop by before or after my presentation to say hello in person.


March 25, 2009 | Permalink | Comments (0) | TrackBack (0)

Second Annual Searle Center Research Symposium on Antitrust Economics and Competition Policy

Posted by D. Daniel Sokol

The Searle Center on Law, Regulation, and Economic Growth is issuing a call for original research papers to be presented at the Second Annual Research Symposium on Antitrust Economics and Competition Policy at Northwestern University School of Law. The Symposium will run from approximately 9:00 AM on Friday, September 25th to 12:30 PM on Saturday, September 26th, 2009. The Symposium is co- sponsored by the Center for the Study of Industrial Organization at Northwestern University.

OVERVIEW: The goal of this Research Symposium is to provide a forum where leading scholars from across the country can gather together with Northwestern's own distinguished faculty to present and discuss high quality research relevant to antitrust economics and competition policy. Both theoretical and empirical submissions are welcome. Papers in industrial organization or applied microeconomic theory that address issues relevant to antitrust policy are welcome even if they do not directly focus on particular antitrust policy issues or institutions. We hope to involve leading thinkers from the government, non-profit, and private sector, as well as leading academics from economics departments, business schools, law schools and public policy schools. While most of the conference will be devoted to presentation and discussion of original academic research, we also expect to schedule a small number of panels on important current topics or policy issues.

FURTHER INFORMATION: If you have questions about the appropriateness of your topic for the symposium, or suggestions for panel subjects, please contact: Professor William Rogerson Research Director Searle Center Research Project on Competition, Antitrust and Regulation Email: wrogerson@law.northwestern.edu.

The Symposium will feature a Keynote Dinner Address, Speaker TBA. There will be a reception, dinner and program on Friday evening. Paper authors will receive an honorarium of $1,000 to cover reasonable transportation expenses, if more than one author presents at the symposium, the honorarium will be divided equally between the presenters. Government employees and non-US residents may be reimbursed for reasonable travel expenses up to the honorarium amount. Authors and discussants are expected to attend and participate in the full duration of the symposium. The Searle Center will make hotel reservations and pay for rooms for Thursday and Friday. Papers prepared for the Research Symposium on "Antitrust Economics and Competition Policy" will be permanently hosted on the Searle Center website: http://www.law.northwestern.edu/searlecenter Authors will be free to publish their work in other venues (with appropriate acknowledgement of the Searle Center).

RESEARCH PROPOSALS/PAPER SUBMISSION PROCEDURE/REVIEW PROCEDURE AND TIMELINE: Research Proposals should include an abstract (300 words maximum) and c.v. Proposal Submission Deadline: To ensure that attachments get through, proposals for the conference should be submitted to both of the following email addresses: Email: searlecenter@law.northwestern.edu Email: :d-gundersen@law.northwestern.edu by April 15th, 2009.

Notification Deadline: Research Proposals will be reviewed by a three-member committee. Authors will be notified of the committee's decisions by May 15th, 2009. Discussion Draft Deadline: Papers suitable for distribution to discussants and other conference participants must be received by September 1, 2009.

Revision Deadline: November 1, 2009.

Upon revision in response to comments received at the symposium, papers will be permanently hosted on the Searle Center website. Details on last year's symposium can be found here: http://www.law.northwestern.edu/searlecenter/conference/2008/antitrust/index.html

March 25, 2009 | Permalink | Comments (0) | TrackBack (0)