Wednesday, August 25, 2010

English Court of Appeal’s Judgment in Cooper Tire and Ors v. Dow Deutschland and Ors

Posted by D. Daniel Sokol

Ruchit Patel, Cleary Gottlieb explains English Court of Appeal’s Judgment in Cooper Tire and Ors v. Dow Deutschland and Ors.

ABSTRACT: On July 23, 2010, the English Court of Appeal rejected an appeal brought by Dow Deutschland and others against a 2009 decision of the English High Court concerning the jurisdiction of English courts over damages actions following-on from a cartel infringement decision of the European Commission.

The appeal focused on whether a follow-on damages claim filed with the English High Court could be struck out at a preliminary stage on the basis that the only companies domiciled in the United Kingdom were subsidiaries or affiliates of the addressees of a Commission decision (i.e., where the English-domiciled companies were not themselves addressees of the Commission decision). The appeal also considered whether proceedings in England should be stayed until concurrent proceedings in Italy related to the same Commission decision had been concluded.

As explained in greater detail below, the CoA held that an English court should not strike out a follow-on claim at a preliminary stage (i.e., before disclosure-the English term for discovery) where it cannot exclude that the English-domiciled subsidiary on which jurisdiction is based had engaged in, or was aware of, the anticompetitive conduct that was the subject of the Commission decision. Accordingly, provided that the claim makes an "arguable" case that the English subsidiary engaged in, or was aware of, anticompetitive conduct, the case may not be dismissed summarily. The CoA's judgment creates a relatively low jurisdictional standard, implying that, if it is subsequently determined that the English-domiciled defendant(s) did not engage in anticompetitive conduct and was not aware that other companies within the group engaged in such conduct, the English courts would: (1) no longer be able to hold the English defendant(s) liable and (2) likely decline jurisdiction.

In addition, the CoA noted that the High Court was right not to impose a stay on proceedings in England despite the existence of concurrent proceedings in Italy, because the "careful balancing of competing interests carried out by the High Court did not stray outside the reasonable range of options open to it." The CoA was not persuaded that the fact that the Italian court was first seized could act as a form of trump card, describing it as "speculative and imponderable at best." The CoA also held that a judge was entitled to take into account the fact that a decision in the Italian case was not imminent.

Section II below summarizes the background to the follow-on damages actions in question, Section III outlines the proceedings before the CoA and its judgment, and Section IV considers the implications of that judgment.

August 25, 2010 | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 24, 2010

Posted Pricing as a Plus Factor

Posted by D. Daniel Sokol

Joe Harrington (Johns Hopkins - Econ) discusses Posted Pricing as a Plus Factor.

ABSTRACT: This paper identifies conditions under which an industry-wide practice of posted (or list) pricing is a plus factor sufficient to conclude that firms violated Section 1 of the Sherman Act. For certain classes of markets, it is shown that, under competition, all firms setting a list price with a policy of no discounting is contrary to equilibrium. Thus, if all firms choose posted pricing, it is to facilitate collusion by making it easier for them to coordinate their prices. It is then argued that the adoption of posted pricing communicates the necessary intent and reliance to conclude concerted action.

August 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Strategic Collusion in Auctions with Externalities

Posted by D. Daniel Sokol

Omer Biran (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX) addresses Strategic Collusion in Auctions with Externalities.

ABSTRACT: We study a first price auction preceded by a negotiation stage, during which bidders may form a bidding ring. We prove that in the absence of external effects the all-inclusive ring forms in equilibrium, allowing ring members to gain the auctioned object for a minimal price. However, identity dependent externalities may lead to the formation of small rings, as often observed in practice. Potential ring members may condition their participation on high transfer payments, as a compensation for their expected (negative) externalities if the ring forms. The others may therefore profitably exclude such "demanding" bidders, although risking tougher competition in the auction. We also analyze ring inefficiency in the presence of externalities, showing that a ring may prefer sending an inefficient member to the auction, if the efficient member exerts threatening externalities on bidders outside the ring, which in turn leads to a higher winning price.

August 24, 2010 | Permalink | Comments (0) | TrackBack (0)

The End of the Monopoly of Peer Review

Posted by D. Daniel Sokol

Is peer review going the way of the dodo?  The NY Times reports on some changes in the humanities.  See here.

HT: Javier Tapia

August 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Recent Developments In Antitrust Class Actions in the United Kingdom

Posted by D. Daniel Sokol

Robert O’Donoghue, Brick Court Chambers discusses Recent Developments In Antitrust Class Actions in the United Kingdom.

ABSTRACT: Somewhat fitful attempts at promoting antitrust damages litigation have taken place in the EU in the last several years. These attempts have been stymied to a certain extent by a coalition of disparate, but cumulatively powerful, factors. For one thing, the EU Commission (and also, to an extent, certain national competition authorities) has sought to strike a delicate balance between competing considerations. A paramount consideration has been the jealous guarding of the Commission's leniency/amnesty policy in cartels-a policy that has been the major source of the very large majority of Commission cartel cases in the last 15 years. Fostering a private antitrust damages litigation culture is seen by some within the Commission as potentially undermining its leniency policy; in particular, if private litigation were to lead to a risk of discovery of corporate leniency statements by plaintiffs. Allied to this is a real fear on the part of many national legal systems of importing the perceived excesses of U.S. style class action lawsuits, coupled with (a somewhat surprising) resistance in many countries to EU harmonization of national civil procedure laws (perhaps reflecting the fact that the EU law has, with very, very limited exceptions, not sought to harmonize national legal procedural laws).

On the other hand, there is also recognition that administrative fines by the Commission do not, directly anyway, benefit EU consumers, and that the political legitimacy of EU competition law could be significantly increased by consumer recovery of damages in civil litigation. At least some within the Commission also appear to accept that civil damages actions could be an important complement to public enforcement, particularly if the non-disclosure of corporate leniency statements could be guaranteed. The EU Courts, too, have recognized that there is a substantive individual right, under EU law, to compensation for damages caused by a breach of EU competition law (rather than merely a right that claims for damages under EU competition law should be effective and treated no differently, in procedural terms, to claims under national law).

For plaintiffs' lawyers, at least, key to the success of an effective private damages action system is the need to cater for collective forms of redress. Because in many cases harm caused by, say, a cartel is atomized among a large group of purchasers and sub-purchasers whose individual losses may not be huge, the incentives of any individual plaintiff to sue (usually large and well-resourced) defendants is sometimes limited. The same may be true of small- and medium-sized enterprises affected by anticompetitive behavior.

As things currently stand, however, EU Commission reforms in this area appear to envisage a very limited form of collective action redress. In the draft of the EU Directive intended to legislate for a minimum level of common procedures for private damages actions, the Commission only provided for: (1) an opt-in collective redress procedure whereby two or more named plaintiffs could, in general, be joined in the same action, and (2) a representative action procedure, whereby certain nominated or "qualified" State bodies or not-for-profit entities would be able to pursue collective actions. While, in (2), the action could be brought on behalf of a group that did not involve individual named plaintiffs (i.e., something more akin to an opt-out action), the reservation of such actions to essentially public bodies would seriously limit its practical effectiveness. Moreover, the fate of the draft Directive remains unclear following its withdrawal and the change in EU Competition Commissioner in February 2010.

Given the somewhat schizophrenic, and uncertain, approach of the EU authorities to private damages actions in the competition arena, it will likely, in the short- to medium-term anyway, be left to national legal systems in the EU to decide to what extent, if any, they wish to promote collective redress procedures in competition law cases. The United Kingdom has long been regarded as being at the vanguard of EU jurisdictions likely to be attractive, to plaintiffs at any rate, for private damages actions. Reasons for the U.K.'s attractiveness include the availability of full disclosure of documents as of right (unlike most civil law systems where specific (or, even, no) disclosure is the norm), the use of English as the lingua franca of competition law, and the generally high quality, probity, and speed of justice in the United Kingdom. Perhaps recognizing these attractions one of the leading U.S. class action law firms, Hausfeld LLP, established an office in London for the express purpose of bringing class action law suits.

This short article examines recent developments in multi-party litigation, including competition litigation, in the United Kingdom. 

August 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Dukes v Wal-Mart Stores: En Banc Ninth Circuit Lowers the Bar for Class Certification and Creates Circuit Splits in Approving Largest Class Action Ever Certified

Posted by D. Daniel Sokol

Donald Falk, Archis Parasharami, & Marcia Goodman (Mayer Brown) explore Dukes v Wal-Mart Stores: En Banc Ninth Circuit Lowers the Bar for Class Certification and Creates Circuit Splits in Approving Largest Class Action Ever Certified.

ABSTRACT: The U.S. Court of Appeals for the Ninth Circuit has issued a significant decision affirming the certification of the largest class action since the adoption of Federal Rule of Civil Procedure 23. In Dukes v. Wal-Mart Stores, Inc., a divided en banc court ruled, 6 to 5, that the district court did not abuse its discretion in certifying a class of as many as 1.5 million female employees who worked in Wal-Mart's 3,400 stores at any time after December 1998 for gender discrimination claims based on pay. The effect of the Ninth Circuit's decision will reach far beyond the employment context and is likely to ease the path to certify class actions under antitrust and California unfair competition theories as well.

The Ninth Circuit's decision creates or deepens conflicts with other circuits on at least three key class certification issues:

1. Whether the district court must resolve Daubert objections to the admissibility of experts used in support of class certification before ruling on the class certification motion;

2. Whether the use of "sample cases" is consistent with the defendant's right to present affirmative defenses against each class member's claims at trial; and

3. Under what circumstances claims for injunctive relief predominate over claims for monetary relief so as to permit class certification under Rule 23(b)(2), which excuses plaintiffs from satisfying the "predominance" and "superiority" requirements imposed by Rule 23(b)(3) on class actions for damages.

Dukes is likely to affect certification of antitrust class actions (and thus, the incentives to settle cases of questionable merit). As one court has put it, because of the enormous stakes involved in class actions, the "basic truth about class action litigation" is that "the fight over class certification is often the whole ball game." Because Dukes lowers the bar to class certification in the Ninth Circuit, businesses that may be targeted by antitrust class actions should be prepared to face more litigation there, and should be sure to preserve important issues for potential Supreme Court review.

August 24, 2010 | Permalink | Comments (0) | TrackBack (0)

Monday, August 23, 2010

Competition, product and process innovation: an empirical analysis

Posted by D. Daniel Sokol

Carlos D. Santos (Dpto. Fundamentos del Análisis Económico) explains Competition, product and process innovation: an empirical analysis.

ABSTRACT: Competition has long been regarded as productivity enhancing. Understanding the mechanism by which competition affects innovation and productivity is therefore an important topic for economic policy. The main contribution of this paper is to disentangle the relationship between competition and two sides of innovation: product and process. I write down a model and discuss the conditions under which we can identify the causal mechanism. Overall I find that competition, measured by the number of competitors or market shares, has negative effects on product innovation and no effects on process innovation. The explanation is very simple. By shifting demand, competition directly changes the optimality condition for product but not for process innovation. Thus, competition has no direct effects on process innovations or, as a consequence, productivity.

August 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Nondiscriminatory Pricing: Is Standard Setting Different?

Posted by D. Daniel Sokol

Anne Layne-Farrar (LECG) asks Nondiscriminatory Pricing: Is Standard Setting Different?

ABSTRACT: The debate surrounding a RAND licensing promise (for reasonable and nondiscriminatory licensing) made within standard setting has focused on what the "R" means; far less attention has been given to what is implied by the "ND." The goal of this paper is to offer courts and competition agencies guidance on evaluating when differing intellectual property (IP) licensing within standard setting rises to the level of anticompetitive behavior. The paper reviews the economics literature on price discrimination in traditional markets for goods and services and on licensing IP outside of standard setting to identify lessons that can be applied to licensing within standards. There are a number of important teachings relevant for competition policy. Price discrimination is not necessarily harmful, and can even increase consumer welfare. Most IP licensing is characterized by "discrimination" in that rates and terms differ across licensees, making the task of disentangling anticompetitive practices difficult. Proof of market power must remain the first step in any inquiry on allegations of anticompetitive IP licensing. Moreover, as of yet, no widely applicable benchmarks or rules for distinguishing harmful from beneficial or nonharmful licensing discrimination have emerged, meaning that a careful, quantitative effects-based analysis remains the best approach.

August 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Online Advertising: Defining Relevant Markets

Posted by D. Daniel Sokol

James D. Ratliff (Compass Lexecon) and Daniel L. Rubinfeld (Berkeley Law) discuss Online Advertising: Defining Relevant Markets.

ABSTRACT: This paper provides an overview of the development of Internet advertising. We offer a broad overview of both online and offline advertising and the economic models that allow one to evaluate competition among advertisers. We focus on the extent to which various types of online advertising compete with one another and with offline advertising. We also ask whether various types of online ads are competitive with each other.

August 23, 2010 | Permalink | Comments (1) | TrackBack (0)

Department of Justice and USDA Announce Agenda for August 27 Livestock Workshop in Colorado

Posted by D. Daniel Sokol

Department of Justice and USDA Announce Agenda for August 27 Livestock Workshop in Colorado

8:30 a.m - 8:45 a.m. MDT Opening Remarks

Eric Holder, Attorney General, U.S. Department of Justice
Tom Vilsack, Secretary of Agriculture, U.S. Department of Agriculture

8:45 a.m. - 9:45 a.m. MDT Keynote Roundtable Discussion

Eric Holder, Attorney General, U.S. Department of Justice
Tom Vilsack, Secretary of Agriculture, U.S. Department of Agriculture
Christine Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice
Betsy Markey, Congresswoman, U.S. House of Representatives
Bill Ritter Jr., Governor, state of Colorado
John Suthers, Attorney General, state of Colorado
Steve Bullock, Attorney General, state of Montana
John Stulp, Commissioner of Agriculture, state of Colorado

9:45 a.m. - 10:15 a.m. MDT Coffee Break

10:15 a.m. - 11:45 a.m. MDT Producer/Feeder Presentation of Issues

This panel will be an opportunity to hear first-hand from producers or feeders as they share their experiences and perspectives on the industry.

Moderators: Tom Vilsack, Secretary of Agriculture, U.S. Department of Agriculture
Christine Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Mike Harper, sheep producer, Eaton, Colo.
Dr. Taylor Haynes, rancher, Cheyenne, Wyo.
Robbie LeValley, rancher, Hotchkiss, Colo.
Harry Livermont, rancher, Interior, S.D.
Chris Petersen, hog farmer, Clear Lake, Iowa
Allen Sents, feedlot owner, Marquette, Kan.
Alden Zuhlke, rancher, Brunswick, Neb.

11:45 a.m. - 12:30 p.m. MDT Lunch

12:30 p.m. - 1:30 p.m. MDT Public Testimony

1:30 p.m. - 2:45 p.m. MDT Panel I - Trends in the Livestock Industry

This panel will discuss trends in the livestock industry, including issues associated with contracting, price transparency and the effects of concentration.

Moderator: Philip Weiser, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Jerry Bohn, general manager, Pratt Feeders, Pratt, Kan.
Libby Cook, co-founder, Wild Oats Markets and Sunflower Farmers Markets
Mark Greenwood, vice president, commercial lending, AgStar Financial Services
Bill Heffernan, professor emeritus of rural sociology, University of Missouri
Mark Lauritsen, international vice president, director food processing, packing and manufacturing division, United Food and Commercial Workers International Union
Gilles Stockton, rancher, Range, Mont.
Armando Valdez, rancher, La Jara, Colo.
Clem Ward, professor and extension economist, Oklahoma State University

2:45 p.m. - 4:00 p.m. MDT Panel II - Market Structure

This panel will include a variety of market participants who will discuss market structure issues in the livestock industry.

Moderator: James MacDonald, Chief, Agricultural Structure and Productivity Branch, Economic Research Service, U.S. Department of Agriculture

Bruce Cobb, general manager, Consolidated Beef Producers
David Domina, attorney, Domina Law Group
Mark Dopp, attorney, American Meat Institute
James Herring, president and chief executive officer, Friona Industries
Robert Mack, cattle producer/feeder, Watertown, S.D.
Bob Miller, rancher, Okmulgee, Okla.
William Rishel, Richel Angus, Platt, Neb.
Charlie Rogers, owner/general manager, Clovis Livestock Auction

4:00 p.m. - 4:15 p.m. MDT Break

4:15 p.m. - 6:30 p.m. MDT Public Testimony

6:30 p.m. MDT Concluding Remarks

Additional information, including submitted public comments and transcripts for past workshops can be found at the Antitrust Division's agriculture workshop website at www.justice.gov/atr/public/workshops/ag2010/index.htm. While no streaming webcast will be available, transcripts and video will be available for this workshop at a later date on the Antitrust Division's website. Individuals seeking more information on the workshops should contact agriculturalworkshops@usdoj.gov.

August 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Pitfalls in vertical arrangements

Posted by D. Daniel Sokol

Gianpaolo Rossini and Cecilia Verga (both Bologna - Economics) describe Pitfalls in vertical arrangements.

ABSTRACT: A popular way of obtaining essential inputs requires the establishment of an input production joint venture (IPJV) in the upstream (U) section of the vertical chain of production by firms competing and selling final goods in the downstream (D) section of the vertical chain. In spite of the apparently simple arrangement there are many possible governances for the management of the IPJV according to the ownership structure and to the degree of delegation granted to the IPJV by parent firms. We explore the best sustainable governance arrangement for the IPJV. We address this question in a duopoly framwork and we find a large area of impossible vertical arrangements associated with technological asymmtery. The most likely governance of the vertical arrangment associated to the IPJV is total independence.

August 23, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, August 22, 2010

The Duchesses Come Out Swinging in Dukes: Restoring the Balance in Class Certification

Posted by D. Daniel Sokol

Jay L. Himes & William V. Reiss, Labaton & Sucharow discuss The Duchesses Come Out Swinging in Dukes: Restoring the Balance in Class Certification.

ABSTRACT: With its much-anticipated en banc decision in Dukes v. Wal-Mart Stores, Inc., the Ninth Circuit became the most recent federal court of appeals to address the district court's role in deciding whether a plaintiff has met Federal Rule 23's class certification requirements. Like several other federal circuits in recent years, the Ninth Circuit considered whether the district court may analyze the underlying merits of the dispute in determining the class certification issue. The en banc Dukes majority upheld the district court's merits inquiry where essential to ruling on class certification. At the same time, however, the majority declined to require the district court to resolve disputed expert testimony offered in class certification proceedings, holding instead that such resolution may appropriately await a later stage of the litigation. As we discuss below, while this approach differs from that of other circuits, it is more faithful to the language of Rule 23 and to the function of class certification as a procedural device for managing complex litigation and for framing the substantive issues that these cases present.

Dukes itself arises in the employment discrimination context. However, the majority's ruling could well have a significant impact on class actions generally, including antitrust cases, both in the Ninth Circuit and in those other circuits where the court of appeals has not yet addressed similar issues.

August 22, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, August 20, 2010

Success in Pharmaceutical Research: The Changing Role of Scale and Scope Economies, Spillovers and Competition

Posted by D. Daniel Sokol

Tatiana Plotnikova (DFG Research Training Program "The Economics of Innovative Change", Friedrich-Schiller-University Jena, Germany) explores Success in Pharmaceutical Research: The Changing Role of Scale and Scope Economies, Spillovers and Competition.

ABSTRACT: This paper investigates the determinants of success in the development of new drugs. In specific, it explores the factors of success in drug development programs at different stages of innovation process. We use economies of scale, scope, R&D competition and technological spillovers as explanatory variables and test whether the effect of these variables on the success of a project differs in relation to the discovery and development stages of innovation, respectively. Our main finding is that spillovers, including spillovers from collaboration, are important in explaining the success of projects during the discovery stage of innovation, while in the later development stage, the effects of competition outweigh any benefits from spillovers.

August 20, 2010 | Permalink | Comments (1) | TrackBack (0)

Antitrust Screening: Making Compliance Programs Robust

Posted by D. Daniel Sokol

Rosa M. Abrantes-Metz, LECG, LLC, Leonard N. Stern School of Business - Department of Economics, Patrick Bajari, University of Michigan at Ann Arbor - Economics, National Bureau of Economic Research (NBER), and
Joseph E. Murphy have a new short paper on Antitrust Screening: Making Compliance Programs Robust.

ABSTRACT: One of the prime issues in the antitrust and competition law1 compliance field is how to deal with the risk of collusive or cartel behavior which involves willful violations of the law. In the past much of antitrust compliance work has focused on training, perhaps accompanied by an antitrust compliance manual. But regardless of the amount of employee training they conduct and the existence of written materials, it is likely that most practitioners feel they do not have a handle on this area of risk. In this paper we discuss the role that empirical screens for conspiracies and manipulations can play in assisting compliance programs, by looking at certain quantifiable red flags and applying statistical analysis to determine priority areas which merit further focus.

August 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Timing Vertical Relationships

Posted by D. Daniel Sokol

Richard Ruble (EMLYON & CNRS, GATE),Bruno Versaevel (EMLYON & CNRS, GATE), and Étienne de Villemeur (Toulouse School of Economics (IDEI & GREMAQ)) explore Timing Vertical Relationships.

ABSTRACT: We show that the standard analysis of vertical relationships transposes directly to investment timing. Thus, when a rm undertaking a project requires an outside supplier (e.g. an equipment manufacturer) to provide it with a discrete input, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in rm decisions is characterized by a Lerner index, which is related to the parameters of a stochastic downstream demand. When feasible, vertical restraints restore eciency. For instance, the upstream rm can induce entry at the correct investment threshold by selling a call option on the input. Otherwise, competition may substitute for vertical restraints. In particular, if two rms are engaged in a preemption race downstream, the upstream rm sells the input to the rst investor at a discount that is chosen in such a way that the race to preempt exactly osets the vertical external! ity, and this leader invests at the optimal market threshold.

August 20, 2010 | Permalink | Comments (0) | TrackBack (0)

Thursday, August 19, 2010

Revised DOJ/FTC Horizontal Merger Guiddelines Released

Posted by D. Daniel Sokol

See here.

August 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model

Posted by D. Daniel Sokol

Pierre Dubois and Sandra Jódar-Rosell (both Toulouse Economics) discuss Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model.

ABSTRACT: We develop a model of competition between retailer chains with a structural estimation of the demand and supply in the supermarket industry in France. In the model, supermarkets compete in price and brand offer over all food products to attract consumers, in particular through the share of private labels versus national brands across all their products. Private labels can serve as a differentiation tool for the retailers in order to soften price competition. They may affect the marginal costs of all products for the retailer because of eventual quality differences and also by helping retailers to obtain better conditions from their manufacturers. Differentiation is taken into account by estimating a discrete-continuous choice model of demand where outlet choice and total expenditures are determined endogenously. On the supply side, we consider a simultaneous competition game in brand offer and price between retailers to identify marginal costs. After estimation by simulated maximum likelihood, the structural estimates allow to simulate the effect on the equilibrium behavior of retailer chains of a demand shock through an increase in transportation costs for consumers and a merger between two retailer chains.

August 19, 2010 | Permalink | Comments (0) | TrackBack (0)

The Follower Phenomenon: Implications for the Design of Monopolization Rules in a Global Economy

Posted by D. Daniel Sokol

Jorge Padilla (LECG) and Michal Gal (University of Haifa - Law) explain The Follower Phenomenon: Implications for the Design of Monopolization Rules in a Global Economy.

Abstract: Laws are oftentimes modeled, at least in part, on those of jurisdictions with established antitrust regimes, a trend we call “the follower phenomenon.” Follower behavior might involve a transplant of a legal rule, its interpretation, or both.

This article analyzes the main causes of the follower phenomenon in antitrust and its welfare effects, both on the following jurisdiction and on the followed one. It argues that the proliferation of one's antitrust prohibitions can sometimes act as a boomerang, negatively affecting the welfare of the followed jurisdiction as well as third jurisdictions. This boomerang effect can result from three main causes: (a) the limited ability of the followed jurisdiction's domestic firms to monopolize or cartelize foreign markets due to stricter antitrust policies of the following jurisdiction based on a correct following of the followed jurisdiction’s antitrust prohibitions; (b) the abandonment of neutral or procompetitive conduct by firms based in the followed jurisdiction (or trading in it) due, for example, to increased costs resulting from parallel and often similar regulation in several following jurisdictions; and (c) negative externalities resulting from increased error costs due, for example, to the misapplication of the followed jurisdiction's complex rules in following jurisdictions with limited institutional capabilities.

Based on the above findings, we then propose ways for the followed jurisdiction, as well as for other jurisdictions, to increase the positive externalities and limit the negative externalities resulting from the follower phenomenon. We suggest that under certain circumstances the followed jurisdiction could anticipate the follower phenomenon and modify its choice of optimal rule to account for the boomerang effect. Less extreme methods are also explored, such as aiding and directing less experienced jurisdictions in the correct application of their antitrust laws.

August 19, 2010 | Permalink | Comments (0) | TrackBack (0)

The EU/US Cooperation in the Field of Antitrust Law Enforcement – Some Challenges to Future Cooperation

Posted by D. Daniel Sokol

Charlotte Leskinen, Instituto de Empresa analyzes The EU/US Cooperation in the Field of Antitrust Law Enforcement – Some Challenges to Future Cooperation.

ABSTRACT:  Today, undertakings frequently operate in an international environment where cross-border arrangements are common. As a result, it is easier for them to circumvent national competition laws by taking advantage of differences between countries. Consequently, this has increased the risk of cross-border anti-competitive conduct. In order to cooperate better and lessen differences in the application of their competition laws, the European Union and the United States have concluded different agreements and understandings between them.

This paper aims to examine how these agreements and understandings have worked in practice and to define the main problems in the application of the EU and US antitrust rules in situations, which might also have an impact on the territory of the other contracting party. In addition, it intends to outline the main challenges for a functioning cooperation, particularly in light of the intention of the European Commission to foster private enforcement of the antitrust rules.

August 19, 2010 | Permalink | Comments (0) | TrackBack (0)

Competition and Mergers Among Nonprofits

Posted by D. Daniel Sokol

Jens Prufer, TILEC and CentER, Department of Economics, Tilburg University has a paper on the very interesting topic of Competition and Mergers Among Nonprofits.

ABSTRACT: Should mergers among nonprofit organizations be assessed differently than mergers among for-profit firms? A recent debate in law and economics, boosted by apparently one-sided court decisions, has produced the result that promoting competition is socially valuable regardless of the particular objectives of producers. In this paper, I challenge the general validity of this result by showing that it may indeed depend on the particular objectives of producers whether a merger between two nonprofits is welfare decreasing or increasing. This implies that it is impossible to assess the net effects of a merger between two nonprofits without examining the objectives of the owners involved.


 

August 19, 2010 | Permalink | Comments (0) | TrackBack (0)