Antitrust & Competition Policy Blog

Essays on the Economics of Two-Sided Markets: Economics, Antitrust and Strategy

Posted by D. Daniel Sokol

David S. Evans, University of Chicago Law School, University College London provides a collected set of works in Essays on the Economics of Two-Sided Markets: Economics, Antitrust and Strategy.

ABSTRACT: This volume collects a series of essays that I have written over the last decade on businesses that create value by providing products that enable two or more different types of customers to get together, find each other, and exchange value. Part I presents background pieces on the economics of multi-sided platforms and industries in which these platforms are common. Part II examines the antitrust economics of two-sided markets including defining the difficult problem of defining the boundaries of competition. Part III comprises several papers that apply two-sided market analysis to web-based businesses. Part IV does the same for payment cards which is the industry that attracted much of the early two-sided analysis - in part because this framework was helpful for understanding the hotly debated issue of interchange fees. Part V collects several article and book chapters on software platforms. These platforms have become especially important in the last several years because they are now the basis for revolutionary developments with mobile devices (e.g. the iPhone and Android), social networking (Facebook in particular), and payments (PayPalX). The essays are published as originally written (usually, in fact, whatever version could be made freely available). The book itself consists of a series of urls (website addresses) that enable the reader to download these papers.

Antitrust in two-sided markets: Is competition always desirable?

Posted by D. Daniel Sokol

Ingo Fielder (University of Hamburg - Law) asks Antitrust in two-sided markets: Is competition always desirable?

ABSTRACT: The main objective of antitrust interventions is to assure competition in markets to benefit consumers. This paper challenges this common approach by examining the case of a satellite broadcasting network with monopoly power. First, satellite TV is identified as a two-sided market. It is then analyzed in the framework of the canonical model for two-sided markets developed by Rochet & Tirole (2004). The main finding is that the satellite network maximizes his profits by choosing a price formation which maximizes the overall welfare of all market participants. Even if the satellite network uses his monopoly power to introduce a fee to receive satellite TV, it would do so only until the semi-elasticity of the amount of consumers in regard to the per-interaction-price equals the one of the TV stations – exactly the point where welfare is maximized. It is therefore concluded that antitrust cases have to take a more! in-depth look at two-sided markets before deciding that competition is best for consumers.

An Antitrust Analysis of the Case for Wireless Network Neutrality

Posted by D. Daniel Sokol

Mike Topper (Conerstone Research) and Gregory L. Rosston, Stanford Institute for Economic Policy Research provide An Antitrust Analysis of the Case for Wireless Network Neutrality.

ABSTRACT: The ongoing debate about possible implementation of regulatory rules requiring ‘‘network neutrality’’ for wireless telecommunications services is inherently about whether to impose prohibitions on the ability of network operators to control their vertical relationships. Antitrust analysis is well suited to analyze whether a wireless network neutrality rule is socially beneficial. Implementing network neutrality rules would be akin to using a per se antitrust rule regarding vertical relationships instead of the rule of reason analysis typically applied to vertical relationships in antitrust. Per se rules are used to prevent actions that rarely, if ever, have any procompetitive benefits, such as price-fixing agreements. Rule of reason analysis is used when there are potential efficiency gains from the actions under investigation.

Some vertical practices of the wireless carriers, such as bandwidth restrictions, may appear to be anticompetitive, but may also have plausible efficiency justifications so should be judged under rule of reason analysis. Economic examination of the wireless industry shows significant competition between networks, which reduces the concern about vertical relationships, but also shows some areas that should be monitored by antitrust and regulatory authorities. We propose several regulatory changes that would likely increase wireless competition and lessen the perceived need for prophylactic network neutrality rules while at the same time allowing efficiency-enhancing vertical relationships.

Competition and Development: What Competition Law Regime?

Posted by D. Daniel Sokol

Abel Mateus (University of New Lisbon - Economics) has an interesting paper on Competition and Development: What Competition Law Regime?

ABSTRACT: Using a law and economics model of competition law enforcement we try to answer the following questions: What characterizes the effectiveness of a competition law regime? How has competition law enforcement spread around the world? What factors limit the enforcement of competition law? And finally, what regimes for competition law and what are the pre-requisites for each one? Our econometric analysis confirms that democracy, the level of education and control of vested interests are the most important pre-requisites for a competition law regime, and its improvement is crucial for having a more effective regime. Quality of public administration and the regulatory system as well as of the judicial system and reduction of corruption are sub-factors that are central to enforcement.

Using Rival Effects to Identify Synergies and Improve Merger Typologies

Posted by D. Daniel Sokol

Joseph A. Clougherty and Tomaso Duso (WZB) discuss Using Rival Effects to Identify Synergies and Improve Merger Typologies.

ABSTRACT: The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by effi-ciency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity.

Merger Enforcement in Two-Sided Markets

Posted by D. Daniel Sokol

Przemyslaw Jeziorski, Johns Hopkins University - Department of Economics explores Merger Enforcement in Two-Sided Markets.

ABSTRACT: This paper studies mergers in two-sided markets by estimating a structural supply and demand model and performing counter-factual experiments. The analysis is performed on data for a merger wave in U.S. radio that occurred between 1996 and 2006. The paper makes two main contributions. First, I identify the conflicting incentives of merged firms to exercise market power on both sides of the market (listeners and advertisers in the case of radio). Second, I dis-aggregate the effects of mergers on consumers into changes in product variety and changes in supplied ad quantity. I find that firms have moderate market power over listeners in all markets, extensive market power over advertisers in small markets and no market power over advertisers in large markets. Counter-factuals reveal that extra product variety created by post-merger repositioning increased listeners’ welfare by 1.3% and decreased advertisers’ welfare by about $160m per-year. However, subsequent changes in supplied ad quantity decreased listener welfare by 0.4% (for a total impact of 0.9%) and advertiser welfare by an additional $140m (for a total impact of -$300m).

Intel, Apple, Google, Microsoft, and Facebook: Observations on Antitrust and the High-Tech Sector

Posted by D. Daniel Sokol

Tom Rosch (FTC) has posted his speech on Intel, Apple, Google, Microsoft, and Facebook: Observations on Antitrust and the High-Tech Sector.

ABSTRACT: First, I will discuss the arguments against the Commission challenging mergers and conduct in the high-tech sphere. Second, I will discuss some considerations that I believe should inform the Commission’s analysis when it does decide to litigate a case in the high-tech sphere.

Taking the Temperature: A Survey of the EU Law on Competition and State Aid in the Healthcare Sector

Posted by D. Daniel Sokol

Wolf Sauter, Tilburg Law and Economics Center (TILEC), Dutch Healthcare Authority and Johan van de Gronden, Radboud University Nijmegen explain Taking the Temperature: A Survey of the EU Law on Competition and State Aid in the Healthcare Sector.

ABSTRACT: As the healthcare sector grows in significance due to social and technical developments the EU competition rules are likely to be more frequently applied to healthcare both as a result of the broad interpretation of the concept of undertaking and because the applicable antitrust rules are since modernisation also applied at Member State level. At the same time there is so far little guidance regarding the manner in which the substantive rules must be applied. This problem is less serious concerning state aid where the beginnings of a framework exist, in particular in the form of the Altmark test and the services of general economic interest (SGEI) concept, and where enforcement remains largely centralised in the hands of the Commission. We plead for a broader application of SGEI and of the legitimate objective test that is found in Wouters and Meca-Medina. In particular we advocate providing guidance by means of a soft law approach within the European competition network (ECN).

The Intel and Microsoft Settlements

Posted by D. Daniel Sokol

Bob Lande (Baltimore - Law) discusses The Intel and Microsoft Settlements.

ABSTRACT: This article briefly compares and contrasts the recent U.S. Federal Trade Commission's antitrust settlement with Intel, and the antitrust cases brought against Microsoft. The article praises the FTC's settlement with Intel, and predicts that history will judge it very favorably compared to the settlement by the U.S. Department of Justice of its antitrust case against Microsoft.

Between Economic Freedom and Effective Competition Enforcement: The Impact of the Antitrust Remedies Provided by the Modernisation Regulation on Investigated Parties’ Freedom to Contract and to Enjoy Property

Posted by D. Daniel Sokol

Arianna Andreangeli, University of Liverpool - Law has posted Between Economic Freedom and Effective Competition Enforcement: The Impact of the Antitrust Remedies Provided by the Modernisation Regulation on Investigated Parties’ Freedom to Contract and to Enjoy Property.

ABSTRACT: This paper seeks to analyse the issues emerging from the imposition of certain antitrust remedies, such as the obligation to grant intellectual property licenses regarding key inventions covered by patent or copyright and to stipulate contracts with other firms, including competitors, as a means to remedy the consequences of antitrust infringements. It will consider the extent to which Article 7 remedies can be reconciled with other important tenets of the market economy, such as the freedom to contract and the right to peacefully enjoy one’s possessions. After briefly examining the rationale for the application of certain human rights’ guarantees to competition investigations and decisions, the first part of the paper will consider the questions of whether and to what extent the European Convention on Human Rights protects economic freedom and compare the current position with that adopted by the US Supreme Court. The second part will illustrate the notion of competition remedies and consider whether the principles governing them are compatible with current human rights standards as well as with the concept of the rule of law as a tool to protect ‘everyone’ from the arbitrary or disproportionate use of public power. The final part of the paper will argue that although antitrust remedies pursue a legitimate objective, i.e. the preservation of economic well-being through competitive markets, they must also comply with basic human rights safeguards, such as the protection of property and of freedom to contract, by striking a “fair balance” between the common good and the legitimate interests of the affected undertakings. It will be concluded that the practice in this area should conform to standards consistent with the principles enshrined in the ECHR and to the substantive concept of ‘rule of law’, i.e. accuracy, administrability, consistency, objectivity, applicability and transparency.

ICN December 2010 Unilateral Conduct Workshop

Posted by D. Daniel Sokol

This website is designed to provide information and materials to workshop participants for the ICN’s Unilateral Conduct Workshop on December 2 and 3 in Brussels, Belgium.  The following links will provide more information on the workshop program, logistics, and travel information.  On behalf of our host, the European Commission, and the Unilateral Conduct Working Group, we look forward to your attendance and participation in the workshop. 

 November 22 Webinar - Presentation of the Hypothetical Case Studies

Click here for the Loyatly Discount slide deck

Click here for the Margin Squeeze slide deck

Workshop Information and Materials

• Workshop Venue. The workshop will be held at MCE, Management Centre Europe. 
• Registration
• Agenda  
• Conference Materials - loyalty discount and margin squeeze hypothetical case studies for use in the workshop breakout sessions.
• Live Webcast – A live webcast of the workshop’s plenary sessions will be available.  Click here at the start of the workshop. 

 

Brussels Information

• Hotel Information - Each participant is responsible for his or her own hotel accommodations.  For a brief description and list of hotels in close proximity to the conference center, click here.   More information can be obtained from the official Brussels tourism office.
• Visa Information  - It is the responsibility of workshop delegates to determine if a visa to enter Belgium is required by contacting the Belgium Embassy/Consulate in their jurisdiction. 
• Belgium’s Foreign Affairs, Foreign Trade and Development Cooperation provides visa information, including applications and handling fees.  The following URL should be used for reference purposes only:  http://diplomatie.belgium.be/en/services/travel_to_belgium/

 Travel Information

•  All major airlines and numerous regional airlines serve the Brussels airport.  For a list of airlines, click here. 
• Regular train and bus services access the airport.  Depending on your hotel, there may be a hotel airport shuttle.  Taxi services are also available.  To access train and bus schedules and routes, click here. 

Please contact the workshop host ([email protected]) with questions on logistics. (Please include a reference to “HT.2451” in the subject line of your e-mail.)

Limited funding may be available for those requiring assistance with travel expenses.  To request funding you must complete a written funding request.  Please contact the ICN Secretariat ([email protected]) for more details.

Transaction et concurrence Quels enseignements des premières décisions communautaires ? Points de vue européen et français

Posted by D. Daniel Sokol

La revue Concurrences,

en partenariat avec les

 Petits-déjeuners Sorbonne Affaires,

vous invitent à assister à un petit-déjeuner débat:

Transaction et concurrence

Quels enseignements des

premières décisions communautaires ?

Points de vue européen et français

Avec

Kris Dekeyser

Chef d'Unité, Direction Cartels

DG COMP, Commission européenne

 

Et

 

Virginie Beaumeunier

Rapporteure générale de l'Autorité de la concurrence

Animé par

Christophe Lemaire

Maître de conférences à l'Ecole de droit de la Sorbonne,

Avocat à la Cour et membre du Comité de rédaction de la revue Concurrences

Mardi 30 novembre 2010

8h30 - 10h30

Université Paris I Panthéon Sorbonne

12 place du Panthéon, Salle 1

 Paris, 75 005

RER Luxembourg

Métro Maubert/Mutualité

Leniency Programmes and Protection of Confidentiality: The Experience of the European Commission

Posted by D. Daniel Sokol

Antonio Caruso (DG Comp) describes Leniency Programmes and Protection of Confidentiality: The Experience of the European Commission.

ABSTRACT: The principle of confidentiality of leniency submissions is a key point of the EU Leniency Programme. Largely drawn from the functioning of the US programme, the EU Leniency Programme gradually strengthened the protection of the confidentiality of leniency submissions, in order not to put at a disadvantage leniency applicants compared to non-applicants. Protection is nevertheless not absolute and varies depending on the entities that interact with the Commission, such as parties to the proceedings, third parties, foreign, EU Member States' judges or other authorities. The legal framework is complex: leniency submissions are covered by the notion of ‘professional secrecy’ (Art. 339 of TFEU) and considered in principle confidential, for the purposes of Regulation 1049/2001 and the publication of decisions. Their disclosure is subject to very specific conditions before judges/national authorities. Whereas EU Courts will be prompted in forthcoming key cases to scrutinize the status of confidentiality of leniency submissions under Regulation 1049/2001 and other regimes, Commission policy remains aimed at protecting the confidential status of corporate statements in all circumstances, whereas enabling disclosure of pre-existing documents only subject to certain conditions.

Current Issues in Competition and Consumer Protection Enforcement in the Retail Sector

Posted by D. Daniel Sokol

This is the shopping season.  It therefore makes sense to highlight Tom Rosch's (FTC) recent speech on Current Issues in Competition and Consumer Protection Enforcement in the Retail Sector. 

Transaction et concurrence Quels enseignements des premières décisions communautaires ? Points de vue européen et français

Posted by D. Daniel Sokol

La revue Concurrences,

en partenariat avec les

 Petits-déjeuners Sorbonne Affaires,

vous invitent à assister à un petit-déjeuner débat:

Transaction et concurrence

Quels enseignements des

premières décisions communautaires ?

Points de vue européen et français

 

Avec

 

 

 

 

 

 

 

Kris Dekeyser

 

Chef d'Unité, Direction Cartels

DG COMP, Commission européenne

 

Et

 

 

 

 

 

 

Virginie Beaumeunier

 

Rapporteure générale de l'Autorité de la concurrence

 

Animé par

 

Christophe Lemaire

 

 

 

 

 

Maître de conférences à l'Ecole de droit de la Sorbonne,

 

Avocat à la Cour et membre du Comité de rédaction de la revue Concurrences

 

 

Mardi 30 novembre 2010

8h30 - 10h30

Université Paris I Panthéon Sorbonne

12 place du Panthéon, Salle 1

 Paris, 75 005

RER Luxembourg

Métro Maubert/Mutualité

Using Rival Effects to Identify Synergies and Improve Merger Typologies

Posted by D. Daniel Sokol

Tomaso Duso, Humboldt University of Berlin - School of Business and Economics, Wissenschaftszentrum Berlin für Sozialforschung (WZB) - Competitiveness and Industrial Change and Joseph A. Clougherty, University of Illinois at Urbana-Champaign, Centre for Economic Policy Research (CEPR) describe Using Rival Effects to Identify Synergies and Improve Merger Typologies.

ABSTRACT: The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by effi-ciency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity.

Optimal Contract Reformation as a New Approach to Private Antitrust Damages in Cartel Cases

Posted by D. Daniel Sokol

Alessio Aresu, College of Europe, Bruges, Latham & Watkins - Law describes Optimal Contract Reformation as a New Approach to Private Antitrust Damages in Cartel Cases.

ABSTRACT: This article proposes an incentive-based method to facilitate private antitrust enforcement in the European Union. Focusing exclusively on cartels, the article first explains why antitrust enforcement benefits from being both public and private. It goes on to suggest that through an improved co-ordination of leniency and fining policies, sufficient deterrence can be achieved through public enforcement alone, without the need to add further deterrence with private actions. As a consequence, private enforcement could be re-focused solely on compensation and thus avoid the complications implied in the pursuit of deterrence. Furthermore, an incentive-based bargaining scheme, namely an optimal contract reformation model based on contract law, is proposed, which would facilitate the judge’s task in establishing damages and seeks to encourage parties to settle. The scheme attempts to address the inherent lack of access to evidence experienced by claimants in private antitrust litigation. If the scheme can have a positive impact for follow-on actions, stand-alone actions may still need to rely on instruments such as court disclosure orders. Finally, the article attempts to establish a theoretical background for the proposed optimal reformation model on the basis of contract law.

Games Judges Don't Play: Predatory Pricing and Strategic Reasoning in US Antitrust

Posted by D. Daniel Sokol

Nicola Giocoli, University of Pisa - Department of Economics explores Games Judges Don't Play: Predatory Pricing and Strategic Reasoning in US Antitrust.

ABSTRACT: The paper analyzes the last three decades of debates on predatory pricing in US antitrust law, starting from the literature which followed Areeda & Turner 1975 and ending with the early years of the new century, after the Brooke decision. Special emphasis is given to the game-theoretic approach to predation and to the reasons why this approach has never gained attention in courtrooms. It is argued that, despite their mathematical rigor, the sophisticated stories told by strategic models in order to demonstrate the actual viability of predatory behavior fail to satisfy the criteria which guide the decisions of antitrust courts, in particular their preference for easy-to-apply rules. Therefore predation cases are still governed by a peculiar alliance between Chicago-style price theory - which, contrary to game theory, considers predatory behavior almost always irrational - and a Harvard-style attention for the operational side of antitrust enforcement.

The Future of U.S. Antitrust: Do Landmark Changes Portend A Turbulent Future?

Posted by D. Daniel Sokol

The Future of U.S. Antitrust: Do Landmark Changes Portend A Turbulent Future?

A non-CLE teleconference
proudly presented by the

ABA SIL International Antitrust Law Committee

November 30, 2010
12:00 p.m. – 1:30 p.m. EST

Register Today

U.S. antitrust law is experiencing a moment of historical change. Through the newly released Merger Guidelines, proposed changes to the HSR rules, and the rebirth of Section 5, the U.S. Agencies have brought a decidedly more activist enforcement agenda to Washington. Across town, the Supreme Court's recent opinions in Twombly, Iqbal, Leegin, Linkline, and American Needle demonstrate a similar intent to reshape antitrust litigation for the next generation. Developments in Congress and the lower federal and state courts have also greatly impacted U.S. practice.

This teleconference will seek to synthesize these recent changes to predict what lies ahead for practictioners and parties in the years to come. Join us for what promises to be a lively discussion of trends on issues such as the future of merger control, the use of economics at the Agencies and the federal courts, discovery, class certification, and indirect purchaser standing.

Speakers:

Samuel Miller
Sidley Austin LLP

Ethan Litwin
Hughes Hubbard & Reed LLP

John Johnson
Edgeworth Economics

Register Today

EU Cartel Law and the Shaking Foundations of Judicial Review

Posted by D. Daniel Sokol

Damien Gerard, Louvain University - Law explains EU Cartel Law and the Shaking Foundations of Judicial Review.

ABSTRACT: Over the years, the Court of Justice has played an important role in framing the development of antitrust enforcement in the European Union. The vast majority of those cases which have set the boundaries of the exercise of the European Commission’s powers in the field of competition policy have involved direct actions brought by participants in horizontal agreements and hard core cartels. With the increasing number of competition-related cases brought before the General Court (“GC”) at first instance and then appealed to the European Court of Justice (“ECJ”), the foundations of judicial review seemed to have reached a point of equilibrium around the turn of the century. A few recent cases, however, appear to have shaken that fragile equilibrium. This short note aims to account for and criticize that recent case law, which jeopardizes the essence of legal certainty and due process. To that end, Section I summarizes the foundations of the EU judicial review system, as they have emerged in the Court of Justice’s case law in the field of cartels, while Section II deals specifically with the recent cases and the questions they raise.