Antitrust & Competition Policy Blog

The Roberts Court and the Limits of Antitrust

Posted by D. Daniel Sokol

Thom Lambert (Missouri Law) describes The Roberts Court and the Limits of Antitrust.

ABSTRACT: Antitrust is back in vogue at the U.S. Supreme Court. Whereas the Rehnquist Court decided few antitrust cases in its latter years (only one from 1993 to 1995, one each year from 1996 through 1999, and none from 2000 to 2003), the Roberts Court issued seven antitrust decisions in its first two years alone. Numerous commentators have characterized the Roberts Court’s antitrust decisions as radical departures that betray a pro-business, anti-consumer bias. While some of the decisions do represent significant changes from past practice (see, e.g., Leegin, which overruled the 1911 Dr. Miles rule of per se illegality for minimum resale price maintenance, and Twombly, which abrogated the infamous “no set of facts” pleading standard set forth in the 1957 Conley v. Gibson decision), the “pro-business/anti-consumer” characterization of the Roberts Court’s antitrust decisions is inaccurate. The characterization—caricature, really—fails to appreciate the fundamental limits of antitrust, a body of law that requires judges and juries to make fine distinctions between procompetitive and anticompetitive behaviors that frequently resemble each other. While false acquittals of anticompetitive conduct may harm consumers, so may false convictions of procompetitive actions. And efforts to eliminate errors in liability judgments are themselves costly. Optimal antitrust rules will therefore aim to minimize the sum of decision costs (the costs of reaching a liability decision) and expected error costs (the social losses from false convictions and false acquittals). Each of the Roberts Court’s antitrust decisions can be defended in light of this “decision-theoretic” approach, an approach calculated to maximize the effectiveness of the antitrust enterprise, to the ultimate benefit of consumers. This Article first describes the fundamental limits of antitrust and the decision-theoretic approach such limits inspire. It then analyzes the Roberts Court’s antitrust decisions, explaining how each coheres with the decision-theoretic model. Finally, it predicts how the Court will address three issues likely to come before it in the future: tying, loyalty rebates, and bundled discounts.

Comment on the Proposed Update on the Horizontal Merger Guidelines: Accounting for Out-of-Market Efficiencies

Posted by D. Daniel Sokol

Josh Wright (George Mason Law) provides a Comment on the Proposed Update on the Horizontal Merger Guidelines: Accounting for Out-of-Market Efficiencies.

ABSTRACT:  The market definition analysis endorsed by the 2010 Proposed Horizontal Merger Guidelines (“new HMGs”) tends toward narrower relevant markets. Because the merging parties cannot point to the consumer gains outside of the narrowly defined product market, the new approach could lead to Section 7 liability for mergers that result in net increases in consumer welfare. This “out of market” efficiency problem obviously does not originate with the new HMGs, nor with the HMGs at all. However, the value of diversion approach to market definition is likely to dramatically increase its practical significance. Failure to incorporate “out of market” efficiencies into merger analysis flies in the face of the modern trend in favor of analyzing actual competitive effects rather than adopting simplifying and potentially misleading proxies. Further, the value of diversion approach adopted by the new HMGs is likely to increase the need for guidance on this score. This comment proposed that the new HMGs amend note 11 to make clear that they would not bring enforcement actions where the Agencies can prove anticompetitive effects in a narrower market, but where the evidence also supports the conclusion that out of market efficiencies are sufficient to eliminate consumer harm in the aggregate. A commitment to forbear from challenging mergers where out of market efficiencies outweigh anticompetitive effects merely updates the new HMGs in a manner consistent with the modern intellectual foundation of merger analysis.

Kefauver Day

Posted by D. Daniel Sokol

The University of Tennessee is celebrating its alumnus Senator Estes Kefauver, who brought the world of antitrust the Celler-Kefauver Anti-merger Act of 1950, with Kefauver Day.

Undistorted, (Un)fair Competition, Consumer Welfare and the Interpretation of Article 102 TFEU

Posted by D. Daniel Sokol

Anca Daniela Chirita has posted Undistorted, (Un)fair Competition, Consumer Welfare and the Interpretation of Article 102 TFEU.

ABSTRACT: This article explains the Lisbon Treaty’s provisions relating to competition policy and offers a dynamic interpretation of Article 102 Treaty on the Functioning of the European Union (TFEU), which could justify the consideration of an effects-based approach to those anti-competitive practices that are most harmful to the final consumers under the economic theory of consumer welfare. The implications of ‘consumerprotection requirements’ must shed special light on Article 12 TFEU. Therefore, this article examines the possibility of shifting the courts’ teleological interpretation of Article 102, which is based on Protocol 27’s ‘undistorted competition’, towards a legal balancing test of the Treaty’s objectives. It also highlights the interpretation of undistorted competition within the internal market and the interplay between EU ‘free’ and fair and unfair competition rules. The balance of EU competition law should, therefore, be performed between Article 119 TFEU’s free competition or economic freedom-based competition and Article 12 as ensuring a ‘high level of protection’, as embedded in the Treaty, for the final consumers. This article explains how consumer-protection requirements must be defined narrowly so that Article 12 may be applied to Article 102. Article 12 can, therefore, mandate a high level of consumer protection for the final consumers in implementing such a specific policy as the abuse of dominance.

The EC Commission's Draft Horizontal Guidelines: Presumed Guilty when Having a Chat

Posted by D. Daniel Sokol

Peter D. Camesasca, Anna K. Schmidt, and Michael J. Clancy (all Covington) provide their thoughts on The EC Commission's Draft Horizontal Guidelines: Presumed Guilty when Having a Chat.

ABSTRACT: In the draft guidelines for horizontal restrictions, the European Commission has outlined a new approach to information exchange among businesses. In that approach, certain categories of exchanges would be regarded, in substance, as restrictions by object (almost per se illegality). This would be so where future information is exchanged but could be extended where present and/or past information is concerned. For the authors, that new position adopted by the European Commission fails to consider whether information exchanges are capable of harming competition. It also indicates a tendency on the part of that institution to move from the provision of guidance to opening the widest possible scope for intervention.

Using Competition Law to Promote Access to Knowledge

Posted by D. Daniel Sokol

Sean M. Flynn, Washington College of Law, American University addresses Using Competition Law to Promote Access to Knowledge.

ABSTRACT: One of the points of convergence among the many strands of the A2K movement is resistance to the one-size-fits-all ratcheting up of intellectual property provisions around the world. The resistance is grounded in analysis showing that intellectual property rules often create social costs that far outweigh their intended benefits. Much of the A2K movement’s advocacy for limitations of intellectual property rights is located within the field of intellectual property law – promoting the inclusion and use of balancing mechanisms within the laws granting intellectual property rights. But intellectual property rights are also shaped and limited by their interaction with other fields of law, competition law being a prime example. After describing the theoretical and doctrinal underpinnings of a shift of A2K legal advocacy toward the use of competition law, this paper surveys some of the strategic advantages of using competition norms to reframe political debates and shift struggles into new, potentially more hospitable, forums.

Federal Trade Commission and Northwestern University Microeconomics Conference, November 18-19, 2010

Posted by D. Daniel Sokol

Details are available here.

Thursday, November 18
8:30 a.m.	Registration
9:00 a.m.	Welcome and Opening Remarks
9:15 a.m.	Keynote Address Roman Inderst, University of Frankfurt
9:45 a.m.	Panel Session One: Disclosures and Informed Consumer Choice Chaired by Tim Daniel, Federal Trade Commission
10:45 a.m.	Morning Break
11:05 a.m.	Paper Session One: Topics in Empirical IO   Chaired by Aviv Nevo, Northwestern University
	Matthew Gentzkow (University of Chicago), The Evolution of Brand Preferences: Evidence from Consumer Migration
	Kate Ho (Columbia University), Physician Responses to Financial Incentives: Evidence from Hospital Discharge Data
	Nathan Miller (Department of Justice), Competition Among Spatially Differentiated Firms: An Empirical Model with an Application to Cement
12:35 p.m.	Lunch
1:10 p.m.	Keynote Address David Laibson, Harvard University
1:40 p.m.	Paper Session Two: Inattentive Consumers Chaired by David Laibson, Harvard University
	Michael Grubb (Massachusetts Institute of Technology, Sloan School of Management), Penalty Pricing: Optimal Price Posting Regulation with Inattentive Consumers
	Jonathan Zinman (Dartmouth College), Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Overdraft Fees
	Nicola Lacetera (University of Toronto), Heuristic Thinking and Limited Attention in the Car Market
3:10 p.m	Afternoon Break
3:30 p.m.	Paper Session Three: Consumer Choice in New Markets Chaired by Fiona Scott Morton, Yale University School of Management
	Dirk Bergemann (Yale University), Targeting: Implications for Offline vs. Online Media Competition
	Steven Puller (Texas A&M University), Power to Choose: An Analysis of Consumer Behavior in the Texas Retail Electricity Market
	Eugenio Miravete (University of Texas at Austin), Sinking, Swimming or Learning to Swim in Medicare Park D
5:00 p.m.	Close
Friday, November 19
9:00 a.m.	Keynote Address   Fiona Scott Morton, Yale University School of Management
9:30 a.m.	Paper Session Four: Theory of Industrial Organization Chaired by Roman Inderst, University of Frankfurt
	Heski Bar-Isaac (New York University), Search, Design, and Market Structure
	Patrick DeGraba (Federal Trade Commission), Naked Exclusion by a Dominant Supplier: Exclusive Contracting and Loyalty Discounts
	Volker Nocke (University of Mannheim), Merger Policy with Merger Choice
11:00 a.m.	Morning Break
11:20 a.m.	Keynote Address Aviv Nevo, Northwestern University
11:50 p.m.	Panel Session Two: Merger Retrospectives Chaired by Aviv Nevo, Northwestern University
	Orley Ashenfelter, Princeton University
	Lanier Benkard, Yale University
	John Kwoka, Northeastern University
	Christopher Taylor, Federal Trade Commission
12:50 p.m.	Close

TELEVISION MERGERS AND DIVERSITY IN SMALL MARKETS

Posted by D. Daniel Sokol

Matthew L. Spitzer, USC Law explains TELEVISION MERGERS AND DIVERSITY IN SMALL MARKETS.

ABSTRACT: “Diversity of the airwaves”—making sure that viewers have a varied mix of ideas and information available in the relevant media market—remains one of the central goals of broadcasting policy for the ownership of television stations. In an effort to protect diversity of the airwaves, the Federal Communications Commission (FCC) prevents one entity from owning more than one television station in small television markets. This paper shows that the FCC's policy is probably counterproductive; allowing television mergers in small markets is very likely to increase diversity of the airwaves. Hence, when regulating television mergers in small markets, the FCC should have a presumption in favor of the merger.

New Neutrality and Consumer Welfare

Posted by D. Daniel Sokol

Gary S. Becker (Chicago - Econ), Dennis W. Carlton (Chicago Booth School of Business), and Hal S. Sider (Compass Lexecon) have a new paper on New Neutrality and Consumer Welfare

ABSTRACT: The Federal Communications Commission's proposed net neutrality rules would, among other things, prohibit broadband access providers from prioritizing traffic, charging differential prices based on the priority status, imposing congestion-related charges, and adopting business models that offer exclusive content or that establish exclusive relationships with particular content providers. The proposed regulations are motivated in part by the concern that the broadband access providers will adopt economically inefficient business models and network management practices due to a lack of sufficient competition in the provision of broadband access services. This paper addresses the competitive concerns motivating net neutrality rules and addresses the potential impact of the proposed rules on consumer welfare. We show that there is significant and growing competition among broadband access providers and that few significant competitive problems have been observed to date. We also evaluate claims by net neutrality proponents that regulation is justified by the existence of externalities between the demand for Internet access and content services. We show that such interrelationships are more complex than claimed by net neutrality proponents and do not provide a compelling rationale for regulation. We conclude that antitrust enforcement and/or more limited regulatory mechanisms provide a better framework for addressing competitive concerns raised by proponents of net neutrality.

GCR's Antitrust Litigation 2010 conference, 12 October, London

Posted by D. Daniel Sokol

The past year has seen an increase in private antitrust litigation across Europe, with claimants focusing particularly on London and the German courts. Most private actions for damages settle and not infrequently defendants face claims in a number of jurisdictions. The position and role of the individual in cartel proceedings and subsequent litigation are becoming increasingly important considerations. These and other issues, such as damages and access to the commission's file, will be reviewed and debated by speakers with considerable experience in antitrust litigation in both Europe and the US. “High powered: Excellent” Past delegate, Barclays Distinguished speakers from the European Commission, the CAT, law firms, the bar, economic consultancies and industry include: Chairman: John Pheasant, Partner, Hogan Lovells International LLP Mr Justice Barling President, Competition Appeal Tribunal Nicholas Green QC Brick Court Chambers Chairman, The Bar Council Mark Hoskins QC Brick Court Chambers Elizabeth Morony Partner, Clifford Chance LLP Nicholas Heaton Partner, Hogan Lovells International LLP Mark Simpson QC Fountain Court Ingo Brinker Partner, Gleiss Lutz Georg Berrisch Partner, Covington & Burling LLP Jon Lawrence Partner, Freshfields Bruckhaus Deringer LLP Alan Wiseman Partner, Howrey LLP Jeroen Kortmann Partner, Stibbe. Professor, University of Amsterdam Christopher Vajda QC Monckton Chambers Eddy de Smijter DG Competition, European Commission Duncan Sinclair Barrister, Thirty Nine Essex Street Chambers Gunnar Niels Director, Oxera Richard Pike Partner, Baker & McKenzie LLP Bruno Augustin Assistant Director, Ernst & Young Michael O'Kane Partner, Peters and Peters “The quality of the speakers is excellent and a good audience” Past delegate, DLA Piper UK LLP Topics will include: Jurisdiction and forum shopping: Germany vs. the UK Settlements: relevant issues when settling international claims Access to Commission file Quantifying damages: towards guidance to the courts - the Oxera Report Damages: a case study Dealing with the individual: criminal sanctions - implications for civil litigation The Competition Appeal Tribunal - is it a suitable forum for international damages claims? Conference Fees: Standard £650 + 17.5% VAT (= £763.75) In-house Counsel and Government Agencies £550 + 17.5% VAT (= £646.25) Forthcoming GCR Conferences: International Merger Control Major international conference to mark the 20th anniversary of the EU Merger Regulation 28 & 29 September 2010, The Radisson Blu Royal Hotel, Brussels Settlements and Patent Abuse in the Pharmaceutical Sector 20 October 2010, The Stanhope Hotel, Brussels GCR's 2010 Competition Law Review In-depth analysis and debate on recent developments in competition law and policy 16 & 17 November 2010, The Conrad Hotel, Brussels 2011 Antitrust Law Leaders Forum 3 - 5 February 2011, Fontainebleau Hotel, Miami Cancellations Cancellations must be received in writing. Cancellations received in writing two weeks before the conference will receive a refund less 10% + VAT. Cancellations received one week before will receive a refund less 50% + VAT. Cancellations received less than a week before the conference will not receive a refund. Substitute delegates are welcome at any time. Unsubscribe To unsubscribe from this briefing please email [email protected] with 'unregister' in the subject field. If you have any queries regarding this briefing please contact us at [email protected]. Data protection Any personal information provided by you will be held on a database and may be shared with other Law Business Research publications. If you do not want us to use your information for marketing purposes please contact [email protected]. Law Business Research Limited 87 Lancaster Road London W11 1QQ Registered in England and Wales number 03281866 Vat registration number GB 681 598586

Call for Papers: Academic Society for Competition Law (ASCOLA) in cooperation with King’s College London will hold its 6th Conference in London on 1 and 2 July 2011 on the topic of New Competition Jurisdictions: Shaping Policies and Building Institution

Posted by D. Daniel Sokol

CALL FOR PAPERS

The Academic Society for Competition Law (ASCOLA) in cooperation with King’s College London will hold its 6th Conference in London on 1 and 2 July 2011 on the topic of ‘New Competition Jurisdictions: Shaping Policies and Building Institutions’

This conference aims to promote legal and economic scholarship on the numerous competition systems that have recently been established or are currently in the process of establishment all around the world, including in many developing countries, emerging and transition economies. In particular, the conference will look at the reasons for this proliferation of competition law and will try to analyse the legal, socio-economic, political and institutional challenges in the process of shaping new competition systems in these countries. It will also look at the international consequences of the growing diversity of approaches to competition law, including the potential need for more harmonisation. Therefore, scholars from both established and newly established competition regimes are encouraged to respond to this call for papers. Submissions should be prescriptive rather than descriptive, and specific country experiences should only be used to create broader theoretical or comparative frameworks. As planned, about half of the speakers in the conference will be identified based on this call for papers.

Scholars who are 40 years or younger at the time of the conference, unless they have already been appointed as tenured professors, can also take part in the competition for the ASCOLA Young Researcher Award. However, the selection committee retains its right to decide that the Award will not be granted in 2011. The Award will be posted on the ASCOLA website and be mentioned in the published conference proceedings. ASCOLA would welcome if the speakers could cover their costs of participation themselves. However, ASCOLA will try to do its best to help speakers to finance their participation if they are in need of financial support. If you are a member of ASCOLA you may also choose to be a commentator to one of the papers presented at the conference. In this case you are invited to signal your interest in becoming a commentator. Commentators will have to finance their participation themselves. However, they will be named on the conference program and will be requested to hand in a publishable comment after the conference.

The themes of the conference should ideally fall within the following subtopics:
(1) Reasons for adopting competition laws The adoption of competition laws can be motivated by autonomous domestic policies or outside pressure, e.g. exercised by international organisations. Many countries have adopted competition law as part of a broader policy of economic liberalisation and reform. Some countries follow the EU model, others the U.S. model. Yet a third group attempts to develop a sui generis regime. What are the reasons for such choices? Why do countries adopt competition law at a particular point in time?

(2) Challenges and obstacles in adopting competition laws This line of research focuses on the domestic political economy. What are the vested interests that oppose competition policies? Which groups advocate such policies? Do businesses and consumers understand the role of competition? What are the chances to develop a competition culture? Are local cultural perceptions supportive of a competition culture? What about the impact of the level of democratic development and the rule of law? How does competition law interrelate with other policies such as fighting corruption?

(3) Institutional challenges and choices
What is the role of authorities and courts against the background of the constitutional setting? To what extent should competition law enforcement be entrusted to independent agencies? What is the
best institutional design for guaranteeing the most effective enforcement of competition law? How do institutional choices interrelate with substantive policy choices, i.e. competition policy vs.
industrial policy? Will least-developed countries be able to implement workable competition law system despite their limitations in financial and human resources?

(4) Most burning problems and enforcement priorities
Newly established institutions have to gain credibility quickly. Therefore, they have to make a choice on what kind of restraints they will focus their enforcement priorities. What are the most important restraints in such jurisdictions (cartels, dominance, mergers)? What are the economic sectors mostly affected by restraints? Should enforcers focus their actions on domestic or international restraints, domestic of foreign firms?

(5) Economics of competition and the local environment
How universal is economic theory, especially industrial economics? What is the role of underdevelopment, the lack of corporate structure, the existence of a large informal sector, etc. in shaping competition policies? Do such specificities require different legal rules? Is there a specific justification for giving broader scope to industrial policies in such jurisdictions?

(6) Competition and the State
Younger competition jurisdictions often have a history of a state-run industries. As a legacy, the State may still play an important role in running the economy. Therefore, a crucial question may be to which
extent state-owned enterprises (SOEs) are addressees of competition laws. Other possible topics under this heading may focus on the interface of competition policy with public procurement, the control of state aid and the granting of concessions.

(7) The global perspective
The emergence of numerous competition regimes increases the diversity of approaches to competition policy. This raises a set of issues, including the following: Will this multiplicity of regimes require international harmonisation so as to avoid, for instance, conflicting decisions on international mergers? Does the global interest in guaranteeing free trade in goods and services mandate more harmonized competition rules? What is the best institutional approach to such harmonisation? Conversely, is such
harmonisation desirable given the specific socio-economic, institutional and political circumstances not least in the newly established jurisdictions of emerging and developing economies? Does mere co-extistence of domestic competition regimes lead to a system that sufficiently reacts to the challenges of competition in a globalized economy? Are there ways to balance the global interest in more harmonisation and more evolved international disciplines with the legitime interest not least of the new jurisdictions in maintaining their tailor-made domestic competition policies?

Deadlines:
15 November 2010 Submission of a thousand word proposal, explaining what topic you propose. Send your proposal to [email protected]. Describe the methodology and why the topic is important within the context of the conference.

15 December 2010 The ASCOLA selection committee will inform you on whether you have been short-listed.

1 March 2011 Submission of your full draft paper (maximum 10,000 words) to [email protected]

11 April 2011 The ASCOLA selection committee will inform you on whether your paper has been accepted. It is expected that most papers which were short-listed will also be accepted, unless the final paper does not meet the expectations created by the author in the first stage.

24 June 2011 Submission of the final draft to [email protected]

29 July 2011 Submission of the publishable version to [email protected]

Phasing Out Sector-Specific Regulation in European Telecommunications

Posted by D. Daniel Sokol

Günter Knieps (University of Freiburg) and Patrick Zenhäusern (Plaut Economics) discuss Phasing Out Sector-Specific Regulation in European Telecommunications.

ABSTRACT: The European Commission Recommendation 2007/879/EC has become known as an important innovation towards phasing out sector-specific regulation of electronic communications. Eleven of the eighteen markets are no longer regarded as needing to be subject to sector-specific ex ante regulation. Although the important role of active and potential competition in telecommunications markets has been mentioned, the economically founded implications of the “three-criteria-test” in the Commission Recommendation 2003/311/EC have not yet been implemented. As a consequence, the relevance of regulation in the remaining seven markets remains vague. To provide a superior alternative, the analytical concept of a disaggregated regulatory approach is applied. Sector-specific regulatory interventions are to be limited to network-specific market power. As a consequence, only two of the seven remaining markets in the European Commission Recommendation 2007/879/EC are possible candidates for regulation.

Confronting Change in a New Healthcare Economy: Patents, Antitrust and the Workplace

Posted by D. Daniel Sokol

IU-Indianapolis Law School will have a CLE program on Confronting Change in a New Healthcare Economy: Patents, Antitrust and the Workplace on October 12, 2010.

See the law school's website for a complete agenda and online registration. The law school is located at Indiana University-Purdue University Indianapolis, in Inlow Hall, 530 W. New York St.

Transparency and Coordinated Effects in European Merger Control

Posted by D. Daniel Sokol

Svend Albæk (University of Copenhagen), Per Baltzer Overgaard (University of Aarhus) and Peter Møllgaard (Copenhagen Business School) describe Transparency and Coordinated Effects in European Merger Control.

ABSTRACT: In this paper, we first outline the foundations in economic theory of so-called coordinated effects with a particular view to mergers and with a special focus on transparency. Then, we review a number of seminal merger cases in EU competition policy (Airtours, Sony/BMG, ABF/GBI Business) in light of that theory. Next, we discuss in more detail a recent Danish merger prohibition that was based on the presence of coordinated effects. This case poses special challenges to the theory of coordinated effects, because a very large number of products were involved, and significant, individualized discounts were widespread in the market in question. Finally, we briefly present a few other cases in which transparency has been an issue.

Making a Market out of a Mole Hill? Geographic Market Definition in Aspen Skiing

Posted by D. Daniel Sokol

Jeffrey T. Macher and John W. Mayo (both Georgetown - McDonough School of Business) explore Making a Market out of a Mole Hill? Geographic Market Definition in Aspen Skiing.

ABSTRACT: Because firm conduct in Aspen Skiing stands at the outer boundaries of monopolization, it has received considerable scrutiny from antitrust scholars. The critical and somewhat puzzling determination of the relevant geographic market in this case—“the Aspen area”—however has received essentially no attention. In this paper, we report the results of archival and interview research to illuminate the process by which the district court initially determined this narrow market definition and how this market determination withstood the appeals process.

An Analytical Model of a Vertically Separated Railway Market

Posted by D. Daniel Sokol

Markus Lang (Institute for Strategy and Business Economics, University of Zurich), Marc Laperrouza (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)), and Matthias Finger (Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)) provide An Analytical Model of a Vertically Separated Railway Market.

ABSTRACT: This paper presents a game-theoretic model of a liberalized railway market in which train operation and ownership of infrastructure are fully vertically separated. The objective of this paper is to analyze how the regulatory agency will socially optimally set the charges that operators have to pay to the infrastructure manager for access to the tracks and how these charges change with increased competition in the railway market. Our analysis shows that an increased number of competitors in the freight and/or passenger segment reduces prices per kilometer and increases total output in train kilometers. The regulatory agency reacts to more competition with a reduction in access charges in the corresponding segment. Consumers benefit through lower prices while the effect on the operators' profits is ambiguous and depends on the degree of competition. We further show that social welfare always increases through more competit! ion in the freight and/or passenger segment. Finally, social welfare is higher under two-part tariffs than under one-part tariffs if rising public funds is costly to society.

Is Jon Leibowitz Making the Grade? A Year at the FTC

Posted by D. Daniel Sokol

Jon Leibowitz (FTC) has posted his speech from ther Georgetwon Fourth Annual Global Antitrust Enforcement Symposium on Making the Grade? A Year at the FTC.

Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark

Posted by D. Daniel Sokol

Ulrich Kaiser (University of Zurich), Susan J. Mendez (University of Zurich), and Thomas Rønde (Copenhagen Business School) address Regulation of Pharmaceutical Prices: Evidence from a Reference Price Reform in Denmark.

ABSTRACT: On April 1, 2005, Denmark changed the way references prices, a main determinant of reimbursements for pharmaceutical purchases, are calculated. The previous reference prices, which were based on average EU prices, were substituted to minimum domestic prices. Novel to the literature, we estimate the joint effects of this reform on prices and quantities. Prices decreased more than 26 percent due to the reform, which reduced patient and government expenditures by 3.0 percent and 5.6 percent, respectively, and producer revenues by 5.0 percent. The prices of expensive products decreased more than their cheaper counterparts, resulting in large differences in patient benefits from the reform.

Resale Price Maintenance by Japanese Newspapers

Posted by D. Daniel Sokol

David Flath (Osaka University) addresses Resale Price Maintenance by Japanese Newspapers.

ABSTRACT: In Japan, newspapers enjoy a special exemption from antimonopoly prohibitionsagainst resale price maintenance (suppliers’ stipulations that bar downstreamfirms from price discounting), but are each required to set uniform pricesthroughout Japan. In fact, the newspapers have rarely changed their subscriptionprices in recent years, and the three leading national dailies, together accountingfor about half the total industry circulation, and thirteen other papers accountingfor another one eighth of industry circulation, all have set exactly the same price(3,925 yen per month). The remaining local papers all set lower prices. The authorized resale price maintenance, and prohibition against prices thatvarygeographically, have allowed collusive price increases that I here estimate to bearound 500 yen per month, entailing economic waste of about 300 billion yen($3 billion) per year but adding only around 16 billion yen per year to newspaperprofit. The increased profit margin on subscriptions is much offset by reducedsale of ads.

The Economics of Number Portability: Switching Costs and Two-Part Tariffs

Posted by D. Daniel Sokol

Reiko Aoki and John Small  explain The Economics of Number Portability: Switching Costs and Two-Part Tariffs.

ABSTRACT: This paper interprets number portability as a reduction of switching costs in a model of competition between telephone companies. We identify several cases by their cost and demand characteristics and show that social benefit of number portability are not guaranteed. Analysis using two-part tariff highlights the effect of how the technological cost of switching cost reduction effects the final market allocation.