Antitrust & Competition Policy Blog

A Decision-Theoretic Rule of Reason for Minimum Resale Price Maintenance

Posted by D. Daniel Sokol

Thom Lambert of the University of Missouri School of Law discusses A Decision-Theoretic Rule of Reason for Minimum Resale Price Maintenance.

ABSTRACT: In its 2007 Leegin decision, the U.S. Supreme Court reversed a 96 year-old precedent declaring vertical minimum resale price maintenance (RPM) to be per se illegal. The Court held that RPM should henceforward be evaluated under antitrust’s more lenient rule of reason, and it directed the lower courts to craft a structured liability analysis that will separate pro- from anticompetitive instances of the practice. Thus far, courts, regulators, and commentators have proposed four types of approaches for evaluative approach that would minimize the sum of decision and error costs, thereby maximizing the net social benefits of RPM regulation.

Seventeen Years Later: Thoughts on Revising the Horizontal Merger Guidelines

Posted by D. Daniel Sokol

Darren S. Tucker, Federal Trade Commission addresses Seventeen Years Later: Thoughts on Revising the Horizontal Merger Guidelines.

ABSTRACT: In September 2009, the Federal Trade Commission and the Department of Justice announced plans to explore the possibility of updating the Horizontal Merger Guidelines. The agencies plan to solicit comments on particular topics and to hold a series of public workshops, with a goal of completing the review in mid-2010.

The agencies’ announcement was a welcome development. In the seventeen years since the last major revision to the Guidelines, there have been significant advancements in agency practice, merger economics, and federal court case law. This article describes twelve ways that the Guidelines should be revised to better reflect current agency practice, to incorporate aspects of merger analysis absent from the 1992 Guidelines, and to clarify certain aspects of the 1992 Guidelines.

Competition Commission's Autumn Lecture

Posted by D. Daniel Sokol

A limited number of places are available for the Competition Commission's Autumn Lecture which takes place on Wednesday 2 December

2009 at Victoria House, Southampton Row, London  WC1B 4AD.

Speaker: Professor Carl Baudenbacher, EFTA Court, President will give a lecture entitled 'Characteristics of a Good Competition Regime'

Discussant: Professor Stephen Wilks, University of Exeter, Professor of Politics

Chair: Peter Freeman, Competition Commission, Chairman

If you are interested in attending, please email [email protected].

The Section 2 Debate: Should Lenity Play a Role?

Posted by D. Daniel Sokol

Mark S. Popofsky, Georgetown University Law Center asks The Section 2 Debate: Should Lenity Play a Role?

ABSTRACT: The Supreme Court’s recent decision in Illinois Tool Works, by invoking the Rule of Lenity in enforcing the Sherman Act in a civil setting, raises a fundamental question concerning that statute: Should the theoretical possibility of criminal sanctions for monopolization offenses (Section 2 of the Sherman Act) narrow the Sherman Act in civil actions? Commentators have suggested that the answer might be yes. This Essay disagrees, and argues that Lenity properly plays no role in judicial elaboration of the Sherman Act. Although the Supreme Court’s insistence that a statute with both civil and criminal applications must mean the same thing regardless of enforcement setting appears to preclude different constructions of the Sherman Act depending on the selected enforcement tool, that merely raises the more fundamental issue of whether the Sherman Act is ambiguous in a lenity-triggering sense. The Essay demonstrates both that the Sherman Act’s underlying Rule of Reason standard does not trigger the Rule of Lenity and that applying lenity to narrow the Sherman Act would not serve any of the Rule of Lenity’s asserted purposes.

Third-Degree Price Discrimination and Consumer Surplus

Posted by D. Daniel Sokol

Simon Cowan analyzes Third-Degree Price Discrimination and Consumer Surplus.

ABSTRACT: This paper presents simple conditions for monopoly third-degree price discrimination to have negative or positive effects on aggregate consumer surplus. Consumer surplus is often reduced by discrimination, for example when total welfare (consumer surplus and profits) falls. Surplus increases with discrimination, however, in two cases: first, when the marginal revenues without discrimination are close together and inverse demand in the market where the price will fall with discrimination is more convex; second, when inverse demand functions are highly convex and the discriminatory prices are close together.

Antitrust and Rebates: A Study in Analogies

Posted by D. Daniel Sokol

Sean Gates, Morrison & Foerster LLP explains Antitrust and Rebates: A Study in Analogies.

ABSTRACT: Cases involving rebates (both loyalty and bundled) present a unique opportunity to observe the development of antitrust law. With little direct precedent to rely upon, courts have sought to analyze the antitrust implications of rebate schemes through analogies to other, better known, types of conduct. These efforts provide profound insight not only into the antitrust analysis of rebates, but also into the means by which antitrust law is developed.

The development of antitrust law has largely followed (or lagged) economic inquiry into competitive practices. For instance, in Leegin the Supreme Court abandoned the per se rule for minimum resale price maintenance after noting that “respected authorities in the economics literature suggest the per se rule is inappropriate, and there is now widespread agreement that resale price maintenance can have procompetitive effects.” Similarly, in State Oil, after chronicling the development of the antitrust treatment of vertical restraints, the Court concluded “that there is insufficient economic justification for per se invalidation of vertical maximum price fixing.”

Rebates are different. The Court has never considered this type of conduct. Nor, in fact, have many lower courts. There is no established framework of analysis for conduct involving rebates. There is no long line of cases. There is no “great weight of scholarly opinion” presenting a consensus view. While we have LePage’s and PeaceHealth, the antitrust analysis for rebate schemes therefore starts with a relatively clean slate. We are thus afforded an opportunity to witness the development of a new body of antitrust law and to examine the means by which it comes about.

Why the iPhone Won't Last Forever and What the Government Should Do to Promote its Successor

Posted by D. Daniel Sokol

Robert W. Hahn, University of Oxford, Smith School, Georgetown University and Hal J. Singer, Empiris LLC explain Why the iPhone Won't Last Forever and What the Government Should Do to Promote its Successor.

ABSTRACT:Because of the overwhelming, positive response to the

iPhone

as compared to other smart phones, exclusive agreements between handset makers and wireless carriers have come under increasing scrutiny by regulators and lawmakers. In this paper, we document the myriad revolutions that have occurred in the mobile handset market over the past twenty years. Although casual observers have often claimed that a particular innovation was here to stay, they commonly are proven wrong by unforeseen developments in this fast-changing marketplace. We argue that exclusive agreements can play an important role in helping to ensure that another must-have device will soon come along that will supplant the

iPhone

, and generate large benefits for consumers. These agreements, which encourage risk taking, increase choice, and frequently lower prices, should be applauded by the government. In contrast, government regulation that would require forced sharing of a successful break-through technology is likely to stifle innovation and hurt consumer welfare.

EU and US Tech Companies (Again)

Posted by D. Daniel Sokol

Can US tech companies under investigation by the EU catch a break?  Apparently they can if they have the right lawyers.  In a little noticed development this past week, the European Commission closed its proceeding against Qualcomm.  For the first time, a US high-tech company comes back alive. Qualcomm did not give them any commitment - nothing. Congrats to the Howrey Brussels team for their excellent legal work.  See their press release here.  Another upside - with the inverstigationh behind him, Damien Geradin can write even more articles.  For a full time partner AND a law professor, Damien publishes at a Posner level of output and leads all law profs around the world in terms of antitrust download per year.

Effect of Economic Crisis on Antitrust Policy

Posted by D. Daniel Sokol

Speaking at the AALS Annual Meeting held in New Orleans this January at the Antitrust and Trade Regulation Section on the Effect of Economic Crisis on Antitrust Policy are:   Speaker: Jonathan B. Baker, American University Speaker: Darren D. Bush, University of Houston Speaker: Keith Norman Hylton, Boston University Moderator: Marina L. Lao, Seton Hall University Speaker: Howard A. Shelanski, Georgetown University Speaker: Maurice E. Stucke, University of Tennessee

Date & Time Start Date: 01/09/2010, 1:30 pm End Date: 01/09/2010, 3:15 pm   The papers will appear in a forthcoming issue of the Antitrust Law Journal.

Barroso proposes Joaquín Almunia to head Europe's antitrust efforts

Posted by D. Daniel Sokol

The story is here in the Wall Street Journal.

Review of An Institutional Assessment of Antitrust Policy The Latin American Experience

Posted by D. Daniel Sokol

Armando Rodriguez (U. New Haven - Econ) and to my knowledge the only other Panamanian antitrust professor teaching in the US other than me* has a book review of Review of Ignacio De Leon: An Institutional Assessment of Antitrust Policy The Latin American Experience.  Querido Armando, where is the love (ie, where is my review)?  Along with Eleanor Fox, I did just publish Latin American Competition Law and Policy.  You can download the table of contents here.  In all seriousness, Armando has done a very good review and I encourage you to read it.  

* As of 1994 I am also a US citizen, the first in my family.  This means that when I married Hannah it was for love and not the green card.  I think I am in the minority but I belive that most national anthems need a modern reimagining.  One fantasy I have had is to get the government in Panama to change the Panamanian national anthem to Panama by Van Halen. 

Update: The link seems to be broken.  Below is a pdf version.Download WP0903[1]

The Changing Antitrust/Regulation Interface in the US: Railways and Beyond

Posted by D. Daniel Sokol

Tim Brenan (U Maryland - Baltimore, Econ) explains The Changing Antitrust/Regulation Interface in the US: Railways and Beyond.

ABSTRACT: The transition from regulation to competition creates both structural and governance issues in rail, as it has in telecommunications and electricity. The latter two sectors provide both models for handling structural issues through either strict separation or fostering competition among vertically integrated firms and lessons regarding when separation may be problematic regarding operations and investment. We then turn to the antitrust/regulation interface, describing present rail immunities and using proposed legislation to identify competitive problems involving bottleneck control and conditions on sales of routes to short lines. Even if immunity were lifted, antitrust may (and perhaps should) be unable to address alleged problems. Addressing substantive harms may also be precluded by a recent radical shift in US law, making antitrust defer to regulatory authority. Recent political changes may herald a reversal, with consequences going far beyond rail.

Antitrust Doctrine, Competition Policy, and International Dialogue

Posted by D. Daniel Sokol

Phil Weiser (DOJ) explains Antitrust Doctrine, Competition Policy, and International Dialogue in a recent speech.

An Introduction to Network Industries

Posted by D. Daniel Sokol

An Introduction to Network Industries

This three session course, to be offered on December 2, 9, and 16 will discuss Network Industries:

Networks have frequently been at the heart of the great regulated industries of the day. This was true of railroads and telegraphs and is just as true of today’s natural gas industry, the electricity industry and telecommunications. The modern treatment of network industries focuses on approaches to regulating natural monopolies. Many of these industries are organized around physical networks, while others turn on platform competition and virtual networks.

This course will serve as an introduction to the law and economics of these industries. It will be based on the full-quarter course that Prof. Picker teaches at the University of Chicago Law School

Each class will be approximately one hour with time available for questions and answers.Each class will begin at 12:00 PM U.S. Eastern Standard Time. The only technology required for attending is a computer with internet access and a phone.

Recommendations for reading material for this class will be forthcoming.

Lecturer:
Dr. Randal Picker, Leffman Professor of Commercial Law, University of Chicago Law School

Overcoming Foreseeable Challenges in Implementing the Competition Act

Posted by D. Daniel Sokol

Bill Blumenthal (Clifford Chance) has a great new speech that he just delivered in India on Overcoming Foreseeable Challenges in Implementing the Competition Act at the International Academy of Law conference in India.

Download 20091106_ICCL_Delhi_Paper[1]

Updating the Merger Guidelines: Issues for the Upcoming Workshops

Posted by D. Daniel Sokol

Carl Shapiro (DOJ) provides some thoughts on Updating the Merger Guidelines: Issues for the Upcoming Workshops, which he presented at the ABA Fall Forum.

Are all mergers equally delay-averse? An empirical analysis of procedural delay in European Commission merger cases (1999-2008)

Posted by D. Daniel Sokol

Peter L. Ormosi, ESRC Centre for Competition Policy, University of East Anglia has a paper that I think is worth a read titled Are all mergers equally delay-averse? An empirical analysis of procedural delay in European Commission merger cases (1999-2008).

ABSTRACT:  This article looks at the distribution of two EC merger procedural events and examines the effect of the indefinite-length suspension of merger investigations. Although the ECMR refers to the suspension of investigations as an exceptional instrument, it is used in a high proportion of cases. As the ECMR does not set a time limit for suspension, it can lead to significant delay in the assessment of mergers. To understand the causes of delay, this article relies on the fact that the suspension of the investigation is a consequence of merging parties’ failure to provide the necessary information to the Commission. Two main causes of this behaviour are identified. Firstly, merging parties may decide to intentionally withhold information in order to cause the suspension of the investigation, which allows them more time to do whatever is necessary to avoid a lengthy second phase investigation. Secondly, failure to provide the required information to the Commission may be a result of merging parties’ negligence towards the regulatory assessment of their merger. Whereas the first case may be socially beneficial, identifying the second type of behaviour may help in filtering out inefficient mergers.

Buyer Power in Health Plan Mergers

Posted by D. Daniel Sokol

Cory S. Capps (Bates White) writes on Buyer Power in Health Plan Mergers.

ABSTRACT: In light of recent increased policy attention directed toward health insurance, the next significant health plan merger is almost certain to receive close scrutiny from many quarters, including representatives of providers, such as the American Medical Association and the American Hospital Association, and the U.S. Department of Justice. In this paper, I review the key buy-side economic questions and analytic frameworks that are likely to be at the forefront in future investigations of health plan mergers. In particular, I explain how industry structure implies that shares of purchases from individual providers as well as area-wide shares of purchases are likely to inform antitrust analysis of potential monopsony harm in health plan mergers. I also discuss the appropriate treatment of government payers in calculating and assessing buy-side market shares. I conclude with a discussion of how competition and market power in downstream markets for the sale of commercial insurance interact with the potential exercise of monopsony power in upstream markets for the purchase of provider services.

Type 1 Error and Uncertainty: Holding the Antitrust Enforcement Pendulum Steady

Posted by D. Daniel Sokol

Jim Rill (Howrey) & Thomas Dillickrath (Howrey) explain Type 1 Error and Uncertainty: Holding the Antitrust Enforcement Pendulum Steady.

ABSTRACT: Recent pronouncements by the leaders of the federal antitrust agencies have brought into sharper focus the debate over how best to balance the risks of Type 1 error (or over-enforcement error) against the risks of Type 2 error (or under-enforcement error) in antitrust enforcement. In this paper, we examine the literature surrounding the debate and suggest that the harm resulting from Type 1 error more likely and more often exceeds that stemming from Type 2 error. Indeed, the Supreme Court has recognized this imbalance in its antitrust jurisprudence, repeatedly insisting on rules that give more weight to avoiding over-deterrence of procompetitive conduct.

Especially in the area of single-firm conduct analyzed under Section 2 of the Sherman Act or Section 5 of the FTC Act, the dangers of overly interventionist antitrust rules are not limited to actual government enforcement and private actions that lead to punishing and enjoining procompetitive conduct. Such rules create uncertainty and fear resulting in constructive Type 1 error; that is, businesses forego aggressive competition that benefits consumers for fear of becoming embroiled in government or private enforcement actions. These threats to consumer welfare are compounded by amorphous antitrust rules that make it impossible for businesses to know ex ante whether their conduct will be deemed violative of the antitrust laws. Such legal ambiguity can deter businesses from engaging in efficient, procompetitive conduct; even conduct that would ultimately be found to be legal.

Another term for Neelie Kroes? It may happen

Posted by D. Daniel Sokol

The Dutch government has nominated her for a second term.