Antitrust & Competition Policy Blog

China’s Antimonopoly Law—One Year Down: Part 2. China’s new merger review regime

Posted by Wentong Zheng

In my previous post on China’s Antimonopoly Law (“AML”) (see here), I provided a brief overview of the AML and the new developments that happened since the AML went into effect last year.  Today I will focus on China’s new merger review regime under the AML.

Prior to the AML, an antitrust review process was in place for foreign acquisitions of Chinese companies.  No comparable process existed for mergers and acquisitions among domestic companies.  The framework for a new merger review regime is laid out in Chapter 4 of the AML.  By not limiting its reach to foreign acquisitions, as the previous regulation governing merger reviews did, Chapter 4 of the AML brings within its purview mergers and acquisitions among domestic companies.

More importantly, Chapter 4 of the AML specifies a list of the substantive factors that will be considered in merger reviews: (1) the market share of the undertakings (meaning business operators or parties) involved in the relevant market and their ability to control the market; (2) the degree of market concentration in the relevant market; (3) the effect of the concentration on market entry and technological progress; (4) the effect of the concentration on consumers and other undertakings; (5) the effect of the concentration on national economic development; and (6) other factors affecting market competition as determined by the antimonopoly enforcement agency.  In the meantime, Chapter 4 of the AML provides that a merger that otherwise would be prohibited may be allowed if it has competitive effects that outweigh its anticompetitive effects.  In addition, a merger that otherwise would be prohibited may also be allowed if it is “in the social or public interest.”

Chapter 4 of the AML, however, only provides a sketch of the mechanics of the new merger regime.  The details of the merger review regime are expected to be fleshed out in subsequent regulations.  In March 2008, China’s State Council released a draft merger notification and review regulation for public comments, to which the ABA’s Antitrust Section and International Law Section responded with extensive comments (see here—you will need to scroll down to the middle of the document to see the comments in English).  The regulation that was eventually promulgated in August 2008, however, was a stripped-down version containing only notification threshold provisions.  Separately, in May 2009, the Antimonopoly Commission (the inter-agency body charged with antitrust policymaking under the AML) issued guidelines on market definition under the AML, after soliciting public comments (see ABA comments here).  Four other regulations pertaining to the other aspects of the merger review regime (including merger notification procedures, merger review procedures, investigation of mergers not notified as required by law, and investigation of mergers not reaching the notification thresholds) are currently going through the rulemaking process.

What emerges from this hodgepodge of regulations or proposed regulations is a merger review regime that in some respects resembles those of Western countries and in some other respects does not.  On one hand, China’s new merger review regime follows many of the common Western practices, such as the adoption of the SSNIP test for market definition and the utilization of notification thresholds based on the size of the parties to the transactions.  On the other hand, the factors considered in merger reviews in China are apparently broader and less predictable than those considered in Western countries.  The factors considered in China are broader because the merger authority can consider factors other than the effects of the merger on competition, including the effects of the merger on “other undertakings” (does it imply that China may want to protect the competitors, not the competition?) and the effects of the merger on “national economic development” (does that give industrial policies a role in merger reviews?).  The factors considered in China are less predictable because the merger authority can consider any factor that it may determine affects market competition, and factors as amorphous as “social or public interest.”

As is true perhaps with every merger review regime, what is more important than the texts of the merger review laws and regulations is how merger reviews are actually conducted.  The Antimonopoly Bureau of MOFCOM has assumed responsibility for merger reviews under the AML.  As of now, MOFCOM has blocked one transaction (Coca-Cola/Huiyuan), and approved four transactions with conditions (InBev/Anheuser Busch, Mitsubishi Rayon/Lucite, Pfizer/Wyeth and GM/Delphi).

The five merger cases that MOFCOM has blocked or approved with conditions involve different types of merger: horizontal merger (InBev/AB, Mitsubishi Rayon/Lucite, and Pfizer/Wyeth), vertical merger (GM/Delphi), and conglomerate merger (Coca-Cola/Huiyuan).  Unfortunately, the published decisions for those cases tend to be very cursory.  And the decisions generally are focused more on remedies than on the evidence that would support a conclusion of competitive harms.  For two analyses of MOFCOM’s decisions in InBev/AB, Mitsubishi Rayon/Lucite, and Coco-Cola/Huiyuan, see here and here.  One thing that is clear from those cases is that MOFCOM has demonstrated its readiness to impose both structural remedies (such as the divestitures ordered in Mitsubishi Rayon/Lucite and Pfizer/Wyeth) and behavioral remedies (such as the restrictions on the acquisition of additional equity stakes in Chinese beer companies imposed in InBev/AB).  But in terms of how MOFCOM would evaluate available evidence to draw inferences about competitive harms, I don’t believe that MOFCOM has arrived at—much less revealed—a pattern of thinking in the decisions it has published so far.

Well, some believe that there is a pattern—a pattern of using the merger review process as a protectionist tool against foreign investors.  This argument is bolstered by MOFCOM’s decision to block the Coca-Cola/Huiyuan deal.  You may also have noticed that all of the transactions blocked or conditionally approved by MOFCOM involve foreign investors.  That surely smacks of protectionism—or does it?  I will offer my takes on these issues in my next post.

 

The Slippery Slope of Addressing Collective Dominance Under Article 82 EC

Posted by D. Daniel Sokol

Lia Vitzilaiou (Lambadarios Law Offices) & Constantinos Lambadarios (Lambadarios Law Offices) explain The Slippery Slope of Addressing Collective Dominance Under Article 82 EC.

ABSTRACT: Article 82 EC Treaty is the instrument used by European and National Competition Authorities to address the issue of dominance in the market and its abuses by undertakings holding such positions. While this Article was primarily intended to address the issue of “single dominance,” the wording “abuse by one or more undertakings of a dominant position” allowed the interpretation that “collective dominance” (“CD”) may also be addressed by Article 82.

This approach may appear very effective from a theoretical point of view, but its application in the real world has proven so complex as to render it inoperative or even perilous.

AALS Entry Level Law Faculty Hiring

Posted by D. Daniel Sokol

For those on the entry level academic law job market, I have some thoughts on the Faculty Lounge Blog on how to tell which schools seem to be puffing (at best) about their interdisciplinary commitment.

Bundling and Competition for Slots: Sequential Pricing

Posted by D. Daniel Sokol

Doh-Shin Jeony (Toulouse School of Economics, Universitat Pompeu Fabra) and Domenico Menicucci (Università degli Studi di Firenze) write on Bundling and Competition for Slots: Sequential Pricing.

ABSTRACT: In this paper we study, as in Jeon-Menicucci (2009), competition between sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. This paper considers sequential pricing and complements our main paper (Jeon- Menicucci, 2009) that considers simultaneous pricing. First, Jeon-Menicucci (2009) find that under simultaneous individual pricing, equilibrium often does not exist and hence the outcome is often inefficient. By contrast, equilibrium always exists under sequential individual pricing and we characterize it in this paper. We find that each seller faces a trade-off between the number of slots he occupies and surplus extraction per product, and there is no particular reason that this leads to an efficient allocation of slots. Second, Jeon Menicucci (2009) find that when bundling is allowed, there always exists an efficient equilibrium but inefficient equilibria can also exist due to pure bundling (for physical products) or slotting contracts. Under sequential pricing, we find that all equilibria are efficient regardless of whether firms can use slotting contracts, and both for digital goods and for physical goods. Therefore, sequential pricing presents an even stronger case for laissez-faire in the matter of bundling than simultaneous pricing.

Free Entry Bertrand Competition

Posted by D. Daniel Sokol

Prabal Roy Chowdhury (Indian Statistical Institute, Delhi Center) explains Free Entry Bertrand Competition.

ABSTRACT: This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.

Preemption, Predation, and Minimum Quality Standards

Posted by D. Daniel Sokol

Mina Baliamoune (University of North Florida - Econ) and Stefan Lutz (U. Manchester - Econ) write on Preemption, Predation, and Minimum Quality Standards.

ABSTRACT: We present a model of vertical product differentiation and exit where a domestic and a foreign firm face fixed setup costs and quality-dependent costs of production and compete in quality and price in the domestic market. Quality-dependent costs are quadratic in qualities, but independent of the quantities produced. The domestic government may impose a minimum quality standard binding for both foreign and domestic firms. In the presence of an initial cost advantage of the domestic firm, a sufficiently high minimum quality standard set by the domestic government will enable the domestic firm to induce exit of the foreign firm, i.e. to engage in predation. However, the same standard would lead to predation by the foreign firm, if the foreign firm had the initial cost advantage.

Charting the Future Course of International Technical Assistance

Posted by D. Daniel Sokol

The DOJ/FTC Final Report on Charting the Future Course of International Technical Assistance, which is based on the February 6, 2008 Workshop is out.  As some of you may know, I participated as panelist.  See my comments here.

For my written work on antitrust technical assistance see here and here. 

Collective Dominance Through Tacit Coordination: The Case for Non-Coordination Between Article 82 and Merger Control "Collective Dominance" Concept

Posted by D. Daniel Sokol

Sophia Stephanou (OFT) describes Collective Dominance Through Tacit Coordination: The Case for Non-Coordination Between Article 82 and Merger Control "Collective Dominance" Concept.

ABSTRACT: Intervention in oligopolistic markets or—to be more precise—oligopolistic markets in which firms appear to be coordinating their actions, is a multifaceted topic; aspects of which have sparked some of the most intense debates in competition policy.

The oligopoly problem, as it is often termed, refers to firms acting in a parallel manner in the market in such a way that competition between these firms is dampened with the ultimate effect of the consumer being harmed. Oligopolies may be targeted by EC competition laws through the application of Article 81 (where behavior is explicitly coordinated), Article 82 (where behavior is explicitly or implicitly coordinated) or, prospectively, through the application of merger control rules to concentrations which are likely to enable or further facilitate coordination in a given market. The analytical issues surrounding competition law intervention in oligopolistic markets entail theoretical and practical difficulties; it is notable that the Commission's new guidance on Article 82 has explicitly excluded collective dominance from the ambit of its application.

This article will briefly outline the application of EC competition law to oligopolistic markets, with particular focus on tacit collusion between firms, the relationship between Article 82 and merger control in this respect, and the judicial pronouncement in Airtours of the conditions under which tacit coordination exists. The recent European Court of Justice (“ECJ’) Impala judgment will be examined; in particular, as regards the implications for the standard of proof in collective dominance cases and whether a different approach to collective dominance is required for merger control and Article 82 following the decision. In addition, the application of the Airtours criteria to collective dominance under Article 82 where exclusionary abuses are concerned will be discussed.

Most Downloaded Antitrust Law Papers - August 25, 2009 to October 24, 2009

Posted by D. Daniel Sokol

Rank	Downloads	Paper Title
1	247	Why the Google Books Settlement is Procompetitive Einer Elhauge, Harvard University - Harvard Law School,
2	224	Dynamic Competition in Antitrust Law J. Gregory Sidak, David Teece, Criterion Economics, L.L.C., Tilburg University - Faculty of Law, University of California, Berkeley - Business & Public Policy Group,
3	162	‘Judging’ Economists: Economic Expertise in Competition Law Litigation - A European View Ioannis Lianos, University College London - Faculty of Laws,
4	140	Intellectual Property and Standard Setting Bruce H. Kobayashi, Joshua D. Wright, George Mason University - School of Law, George Mason University - School of Law, Faculty,
5	116	Abuse of Dominance in the Postal Sector – The Contribution of the Guidance Paper on Article 82 Ec Damien Geradin, David Henry, Howrey LLP - Brussels, Belgium Office, Howrey LLP,
6	108	Regulating Innovation: Competition Policy and Patent Law under Uncertainty Geoffrey A. Manne, Joshua D. Wright, Lewis & Clark College - Law School, International Center for Law & Economics, George Mason University - School of Law, Faculty,
6	108	The Puzzling Persistence of the Single Entity Argument for Sports Leagues: American Needle and the Supreme Court's Opportunity to Reject a Flawed Defense Gabe Feldman, Tulane School of Law,
8	105	Antitrust, Multi-Dimensional Competition, and Innovation: Do We Have an Antitrust-Relevant Theory of Competition Now? Joshua D. Wright, George Mason University - School of Law, Faculty,
9	97	Chinese Merger Control: Patterns and Implications Xinzhu Zhang, Vanessa Yanhua Zhang, Chinese Academy of Social Sciences (CASS) - Research Center for Regulation and Competition, Law and Economics Consulting Group, LLC,
9	97	Limiting Anti-Competitive Government Interventions that Benefit Special Interests D. Daniel Sokol, University of Florida - Levin College of Law,

GCR's 2009 Competition Law Review – Recent developments in competition law and policy

Posted by D. Daniel Sokol

GCR's 2009 Competition Law Review –
Recent developments in competition law and policy

Monday 16 and Tuesday 17 November 2009,
The Conrad Hotel, Brussels

A unique opportunity to hear some of the most influential speakers debate and analyse the key developments in competition law. The programme will focus on developments in four major areas: cartel enforcement, merger control, enforcement of Article 82 and damages actions for the breach of EC antitrust rules. Download the conference brochure here Keynote speakers Commissioner J. Thomas Rosch, Federal Trade Commission, Washington DC Philip Lowe, Director General, DG Competition, European Commission, Brussels Chairmen and speakers include:
Peter Alexiadis Partner, Gibson Dunn & Crutcher LLP, Brussels Lars-Hendrik Röller President, ESMT, Berlin Philippe Chappatte Partner, Slaughter and May, London Olivier Guersent Director, DG Competition, European Commission, Brussels Bruno Lasserre President, Autorité de la Concurrence, Paris Frédéric Jenny Director for International Relations ESSEC; Judge Supreme Court of France, Paris Lars Kjølbye Partner, Howrey, Brussels Tony Reeves Partner, Clifford Chance LLP, Brussels Gerwin Van Gerven Partner, Linklaters LLP, Brussels Gary Spratling Partner, Gibson Dunn & Crutcher LLP, San Francisco Jürgen Schwarze Director, Instititute of Public Law, Department of European and Public International Law, Freiburg Wouter Wils Legal Service, European Commission, Professor, King's College, London Robbert Snelders Partner, Cleary Gottlieb Steen & Hamilton LLP, Brussels Luc Peeperkorn Senior Administrator, DG Competition, European Commission, Brussels Stephen Kinsella OBE Partner, Sidley Austin LLP, Brussels Nikos Vettas Professor, Athens University of Economics		Mélanie Thill Tayara Partner, Norton Rose, Paris Guillaume Loriot Antitrust and Merger Case Support, DG Competition, European Commission Simon Priddis Partner, Freshfields Bruckhaus Deringer LLP, London Matthias Planz Vice President, Charles Rivers Associates, London James W. Lowe Partner, Wilmer Cutler Pickering Hale and Dorr LLP Thomas Vinje Partner, Clifford Chance LLP, Brussels Nick Banasevic Deputy Head of Unit, DG Competition, European Commission, Brussels James S Venit Partner, Skadden Arps Slate Meagher & Flom LLP, Brussels Petri Kuoppamäki Vice President Corporate Legal, Nokia Corporation, Helsinki Phillip Gasparon Deputy Head of Unit, DG Competition, European Commission Stephen Kon Partner, SJ Berwin LLP, London and Brussels David H. Rosenberg Industry Affairs, Corporate IP, GlaxoSmithKline Jorge Padilla Managing Director, LECG, London and Brussels Daniele Calisti Private Enforcement Unit, DG Competition Robert O'Donoghue Barrister, Brick Court Chambers, London Gunnar Niels Director, Oxera, Oxford Tim Reher Partner, CMS Hasche Sigle, Hamburg

Competition and Cooperation between Professional Sports Franchises: The Impact on Ticket Prices

Posted by D. Daniel Sokol

Greg Pelnar (Compass Lexecon) explains Competition and Cooperation between Professional Sports Franchises: The Impact on Ticket Prices.

ABSTRACT: An important issue in many antitrust lawsuits involving professional sports leagues and their member teams is the extent to which franchises within the same, and across different, professional sports leagues compete with one another for fans and advertisers. Complicating the issue is the fact that some sports franchises also cooperate with other franchises in the same or different leagues by, for example, participating in a joint venture to build and operate the stadium in which they will play their games or a regional sports network joint venture to televise their games. An extreme form of cooperation is common ownership: some franchises in different sports leagues have common ownership. This study investigates the impact of competition and cooperation among the franchises of the four major professional sports leagues (i.e., the National Football League, National Basketball Association, National Hockey League, and Major! League Baseball) on ticket prices for the 2008 season. The regression results suggest that the existence of one or more rival sports franchises in the same metropolitan area does not have a statistically significant impact on ticket prices. On the other hand, there is at best weak evidence that cooperation between sports franchises impacts ticket prices. These findings are consistent with a number of alternative hypotheses.

Collective Dominance to Coordinated Effects in EU Competition Policy

Posted by D. Daniel Sokol

Juan Briones (e-Konomica) discusses Collective Dominance to Coordinated Effects in EU Competition Policy.

ABSTRACT: Since the Commission first tackled the oligopoly issue under the Merger Regulation, there has been considerable development of the Commission's policy in this area and, also, very significant clarifications from the Court of Justice and the Court of First Instance. To begin with, the Commission published guidelines for its assessment of coordinated effects under the merger regulation.

Quite naturally, the oligopoly issue has arisen often, not to say systematically, since nowadays most markets do present an oligopolistic structure of supply. This is even more valid if we consider the relatively narrow relevant antitrust markets, which are typically defined by reference to substitution in demand. More often than not, leading groups of less than four suppliers account for a large combined share of output in almost any antitrust market. However, is an oligopoly in a collective dominant position? The decision in the Airtours/ First Choice case vastly extended the boundaries of the situations under which the Commission found this may be the case.

GCR 2010 European Antitrust Review

Posted by D. Daniel Sokol

The Global Competition Review has published the comprehensive 2010 European Antitrust Review.

• Introduction
  1. Introduction
     Philip Lowe - Directorate General for Competition, European Commission
• EU Substantive Areas
  1. Cartels
     Julian Joshua, Elvira Aliende Rodríguez - Howrey LLP
  2. Commercial Agreements
     Jochen P Beck, Tom S Pick - Hammonds LLP
  3. Compliance
     Kiran Desai - Mayer Brown
  4. Mergers
     Kyriakos Fountoukakos, Craig Pouncey - Herbert Smith LLP
  5. Merger Efficiencies and Remedies
     Alexandros Papanikolaou, Michael Rosenthal - Hunton & Williams LLP
  6. Monopolies and Market Dominance
     Alexander Böhlke - Kemmler Rapp Böhlke
  7. Plaintiff Recovery Actions
     Michael Hausfeld, Vincent Smith - Hausfeld & Co LLP
  8. Private Antitrust Litigation
     Jesús Alfaro, Tim Reher - CMS Albiñana & Suárez de Lezo and CMS Hasche Sigle
  9. Public Affairs
     Louise Harvey, Gwendoline Motte - FD Blueprint
  10. State Aid
      Paris Anestis, Sarah Jordan - Howrey LLP
  11. Trade
      Konstantinos Adamantopoulos, Riccardo Croce, Yves Melin - Hammonds LLP
  12. Vertical Agreements
      Astrid Ablasser-Neuhuber, René Plank - bpv Hügel Rechtsanwälte
• EU Industry Sectors
  1. Air Transport
     Konstantinos Adamantopoulos, Riccardo Croce, Guillaume Taillandier - Hammonds LLP
  2. Chemicals
     Flavia Distefano - McKenna Long & Aldridge LLP
  3. Energy
     Riccardo Celli, Philippe Noguès, Christian Riis-Madsen - O'Melveny & Myers LLP
  4. Pharmaceuticals
     Bill Batchelor, Fiona Carlin - Baker & McKenzie
  5. Private Equity
     Pierre-André Dubois, Arabella Hinton - Kirkland & Ellis International LLP
  6. Sport
     Riccardo Croce, Stephen Sampson, Will Sparks - Hammonds LLP
  7. Technology
     Pierre-André Dubois, Arabella Hinton - Kirkland & Ellis International LLP
• Country Chapters
  1. Austria
     Astrid Ablasser-Neuhuber, Florian Neumayr - bpv Hügel Rechtsanwälte
  2. Czech Republic
     Dagmar Bicková, Arthur Braun - bpv Braun Haškovcová
  3. Denmark
     Jesper Fabricius, Asser Rung-Hansen - ACCURA
  4. France: Abuse of Dominance
     Louis Vogel, Joseph Vogel - Vogel & Vogel
  5. France: Cartels
     Natasha G Assadi-Tardif, Marc Lévy - SJ Berwin LLP
  6. France: Merger Control
     Antoine Choffel, Yann Utzschneider - Gide Loyrette Nouel AARPI
  7. Germany: Abuse of Dominance
     Michael Dietrich, Marco Hartmann-Rüppel - Taylor Wessing
  8. Germany: Cartels
     Alexander Rinne, Tilman Siebert - SJ Berwin LLP
  9. Germany: Merger Control
     Martina Maier, Philipp Werner - Howrey LLP
  10. Germany: Private Antitrust Litigation
      Tatjana Mühlbach, Alexander Rinne - SJ Berwin LLP
  11. Greece
      Despina D Samara - Calavros & Partners
  12. Hungary
      Geoff Bennett, László Kelemen, Gergely Prinz - Szabó Kelemen & Partners Attorneys
  13. Ireland
      Helen Kelly - Matheson Ormsby Prentice
  14. Israel
      Tamar Dolev-Green, Eytan Epstein, Michelle Morrison - Epstein, Chomsky, Osnat & Co
  15. Italy: Overview
      Silvia D'Alberti, Lucio D'Amario - Allen & Overy - Studio Legale Associato
  16. Italy: Cartels
      Davide Balboni, Laura Matilde Cerri - SJ Berwin LLP
  17. Italy: Merger Control
      Giorgio Alù, Giovanni M Pallone - Tonucci & Partners in alliance with Mayer Brown LLP
  18. Italy: Telecoms
      Eutimio Monaco, Domenico Siciliano - Bird & Bird
  19. Latvia
      Martins Gailis, Liga Hartmane - Kļaviņś & Slaidiņś LAWIN
  20. Netherlands: Cartels
      Esther Glerum-van Aalst, Marleen de Putter, Andre Reznitchenko - Kneppelhout & Korthals
  21. Netherlands: Merger Control
      Michel Chatelin, Simone Schippers - Eversheds Faasen
  22. Portugal
      Mário Marques Mendes, Pedro Vilarinho Pires - Marques Mendes & Associados
  23. Romania
      Mihaela Ion, Silviu Stoica - Popovici Nitu & Asociatii
  24. Russia
      Natalia Ivolgina, Tapani Manninen - Hannes Snellman Attorneys Ltd
  25. Spain: Overview
      Juan Jiménez Laiglesia, Jorge Masía, Arantzazu Ruiz-Villanueva, Luis Sotelo - DLA Piper Spain
  26. Spain: Cartels
      Ramón García-Gallardo - SJ Berwin LLP
  27. Spain: Merger Control
      Marcos Araujo, Konstantin J Jörgens, Crisanto Pérez-Abad - Garrigues
  28. Spain: Telecoms and Media
      Blanca Escribano, Sofía Fontanals, Mar Quirós - Bird & Bird
  29. Switzerland
      Andreas Burger, Marcel Dietrich, Franz Hoffet - Homburger
  30. Turkey
      Metin Somay - Somay Hukuk Burosu in collaboration with Hammonds LLP
  31. Ukraine
      Irina Drofenko, Irina Nazarova - Engarde Attorneys-at-law in collaboration with Hammonds LLP
  32. United Kingdom: Overview
      Julia Joseph, Becket McGrath - Berwin Leighton Paisner LLP
  33. United Kingdom: Cartels
      Amanda Butler, Philipp Girardet, Simon Holmes - SJ Berwin LLP
  34. United Kingdom: Private Enforcement
      Neil Davis, Lesley Farrell - SJ Berwin LLP

Repealing Insurers’ Antitrust Exemption Under McCarran-Ferguson: Less There Than Meets the Eye?

Posted by D. Daniel Sokol

Tim Greaney (St. Louis Law) has a posted a discussion on Repealing Insurers’ Antitrust Exemption Under McCarran-Ferguson: Less There Than Meets the Eye?

Bundling and Competition for Slots: On the Portfolio Effects of Bundling

Posted by D. Daniel Sokol

Doh-Shin Jeony (Toulouse School of Economics, Universitat Pompeu Fabra) and Domenico Menicucci (Università degli Studi di Firenze) explain Bundling and Competition for Slots: On the Portfolio Effects of Bundling.

ABSTRACT: We consider competition among sellers when each of them sells a portfolio of distinct products to a buyer having limited slots. We study how bundling affects competition for slots. Under independent pricing, equilibrium often does not exist and hence the outcome is often inefficient. When bundling is allowed, each seller has an incentive to bundle his products and an efficient equilibrium always exists. Furthermore, in the case of digital goods, all equilibria are efficient if slotting contracts are prohibited. We also identify portfolio e¤ects of bundling and analyze the consequences on horizontal mergers. Finally, we derive clear-cut policy implications.

The Doctrine of Collective Dominance: All Together Forever?

Posted by D. Daniel Sokol

Frederic Depoortere (Skadden) & Giorgio Motta (Skadden) ask The Doctrine of Collective Dominance: All Together Forever?

ABSTRACT: What are the policy objectives underlying the collective dominance (“CD”) doctrine under Article 82 of the EC Treaty and what is the legal test governing its application? Even today these questions remain partially unanswered. EC competition law still appears to lack a robust and consistent legal standard for identifying when companies should be held “collectively dominant” and when their conduct constitutes an abuse. In addition, the lack of clear policy objectives has not assisted the debate on these issues. They may even have lead to a significant decrease in the European Commission’s interest in CD situations: the recent Guidance on Enforcement Priorities (“Enforcement Guidance”), which presumably sets out the Commission’s enforcement priorities under Article 82, does not cover collective dominance at all.

Possible policy objectives for CD are outside the scope of this article, which concentrates on providing some observations on the test currently endorsed by the Community Courts (“Courts”) to identify abuses of CD. In its Compagnie Maritime Belge judgment (“CMB”), as confirmed by subsequent case law, the ECJ proposes a three-prong test: (i) the existence of a collective position/entity, (ii) such collective position being dominant, and (iii) the abuse by the collectively dominant entity. The first and third prongs are the main focus of this article.

Competition and Antitrust Policy in the Enlarged European Union - A Level Playing Field?

Posted by D. Daniel Sokol

Jens Hölscher, University of Brighton and Johannes Florian Stephan, Technical University Freiberg address Competition and Antitrust Policy in the Enlarged European Union - A Level Playing Field?

ABSTRACT: With the central and east European countries (CEECs) increasingly included into the international division of labour in the European economic space, we are prompted to ask whether this integration operates on a level playing field with respect to competition policy. In fact, our analysis reveals that effectiveness of implementation of competition law and policy and intensity of competition are lower in the CEECs. We find no reason to believe that the new eastern EU members struggle with the recent reforms of competition policy in the EU, nor do we see the necessity for policy action to spur effective implementation.

From Formalism to Effects? – The Commission’s Communication on Enforcement Priorities in Applying Article 82 EC

Posted by D. Daniel Sokol

Nicolas Petit (University of Liege - Law) addresses From Formalism to Effects? – The Commission’s Communication on Enforcement Priorities in Applying Article 82 EC.

ABSTRACT: The purpose of the present article is to offer thoughts on the “Guidance Communication on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty” and, in particular, to review the requirements which the Commission must meet in Article 82 EC cases when it purports to apply the Communication’s economics-oriented, effects-based. In addition, this article seeks to assess whether the Communication’s effects-based approach really entails a paradigmatic shift towards increased competition economics, comparable to the (r)evolution that has taken place in other areas of EC antitrust enforcement since the early 2000. It comes to the conclusion that whilst the Communication marks a welcome economic sophistication of the Commission’s Article 82 EC enforcement policy, it nonetheless often fails to go beneath the surface of modern antitrust economics, and thus provide only limited guidance to firms and their counsels.

It's the Market Power, Stupid! Stock Return Patterns in International Bank M&A

Posted by D. Daniel Sokol

Yassin Hankir, Frankfurt School of Finance & Management - FIPEMA, Christian Rauch, E-Finance Lab, and Marc P. Umber, Frankfurt School of Finance & Management, Goethe University Frankfurt - Department of Finance explain It's the Market Power, Stupid! Stock Return Patterns in International Bank M&A.

ABSTRACT: This paper analyzes capital market reactions to international bank M&A. We investigate combined stock return patterns of targets, bidders, and their peers upon takeover announcement, and closing or withdrawal. We distinguish five common M&A hypotheses and relate characteristic and mutually exclusive abnormal stock return patterns to each hypothesis. We find that investors believe in gains through the exploitation of market power by the post-merger entity. In a multinomial logistic model we show that patterns related to market power significantly concur with large relative target size, intra-industry mergers, and increasing market concentration, suggesting a substantial lessening of competition through M&A.

Competition Among the Big and the Small

Posted by D. Daniel Sokol

Ken-Ichi Shimomura, Kobe University and Jacques-François Thisse, Catholic University of Louvain - Center for Operations Research and Econometrics explain Competition Among the Big and the Small.

ABSTRACT: Armchair evidence shows that many industries are made of a few big commercial or manufacturing firms, which are able to affect the market outcome, and of a myriad of small family-run businesses with very few employees, each of which has a negligible impact on the market. Examples can be found in apparel, catering, publishers and bookstores, retailing, finance and insurances, and IT industries. We provide a new general equilibrium framework that encapsulates both market structures. Due to the higher toughness of the market, the entry of big firms leads them to sell more through a market expansion effect, which is generated by the exit of small firms. Furthermore, the level of social welfare increases with the number of oligopolistic firms because the procompetitive effect associated with the entry of a big firm dominates the resulting decrease in product variety.