Thursday, May 26, 2011

ACOs And Antitrust Enforcement: Familiar Rules Raise New Concerns

Posted by D. Daniel Sokol

Jane Willis, Mark Popofsky, & Daniel Bachner (Ropes & Gray) address ACOs And Antitrust Enforcement: Familiar Rules Raise New Concerns.

ABSTRACT: On March 31, 2011, the Federal Trade Commission ("FTC") and the U.S. Department of Justice ("DOJ") released a joint Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (the "ACO Statement" or "Statement"). The ACO Statement incorporates a market-share based "safety zone," a feature common to both the Antitrust Guidelines for Collaborations Among Competitors (2000) and the Statements of Antitrust Enforcement Policy in Health Care (1996). Unlike these prior guidelines, however, the ACO Statement requires mandatory agency review if a certain threshold is met. Because CMS (the U.S. federal agency that administers health insurance programs such as Medicare) will not approve ACOs that the antitrust enforcement agencies determine are subject to challenge, careful up-front attention to antitrust risk will be of vital importance to providers in navigating successfully the requirements for establishing ACOs.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Competition and Stability in Banking

Posted by D. Daniel Sokol

Xavier Vives, IESE Business School has an article on Competition and Stability in Banking.

ABSTRACT: I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on the intensity of competition.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Revising Merger Guidelines: Lessons from the Irish Experience

Posted by D. Daniel Sokol

Paul Gorecki (Economic and Social Research Institute, Dublin and Department of Economics, Trinity College, Dublin) describes Revising Merger Guidelines: Lessons from the Irish Experience.

ABSTRACT: Competition authorities typically issue Merger Guidelines setting out the framework within which merger assessment is conducted. Ireland is no exception. The Competition Authority is currently in the process of revising its 2002 Guidelines. In this paper we not only comment on the procedure that is being used to revise these Guidelines as well as the substance of the proposed revisions to the Guidelines, but also draw some wider lessons that might be of assistance to other competition authorities, particularly smaller competition authorities, in revising their Guidelines. The lessons include: carefully distinguishing between proposals for revising the Guidelines that incorporate existing merger assessment custom and proposals that mark a significant departure from current Guidelines as well as existing custom and practice. Proposals for revising the Guidelines, particularly when referring to existing custom and practice,! should be specific rather than general; and, if multijurisdictional mergers are important particular attention should be paid to the Guidelines in jurisdictions that are commonly included in such multijurisdictional mergers.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

How Effective is European Merger Control?

Posted by D. Daniel Sokol

Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)), Klaus Gugler (Vienna University of Economics and Business), and Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management) ask How Effective is European Merger Control?

ABSTRACT: This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement.! On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

UK: How to Escape Phase II Investigations in the Context of Mergers

Posted by D. Daniel Sokol

Stephen Kon and Amanda Butler (SJ Berwin) describe UK: How to Escape Phase II Investigations in the Context of Mergers.

ABSTRACT: The OFT has issued new substantive guidance on the three statutory exceptions to its duty to refer a merger to the CC for detailed phase II review; Much of the focus of the guidance is on the so called ‘de minimis’ exception where the markets are not regarded as sufficiently important to justify making a reference and where the OFT has developed a very detailed assessment process; The new guidance also updates and amends the OFT's earlier guidance on the situations in which it will consider accepting undertakings in lieu to the CC (particularly in relation to approval of purchasers and up-front buyer obligations). This article reviews the new guidance and its practical implications for parties.

May 26, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 25, 2011

A Not So Modest Proposal? The FTC/DOJ Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program

Posted by D. Daniel Sokol

Toby Singer & David Pearl (Jones Day) analyze A Not So Modest Proposal? The FTC/DOJ Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.

ABSTRACT: On March 31, 2011, the Federal Trade Commission and the Antitrust Division of the Department of Justice (the "FTC and "DOJ" or the "Agencies") issued a Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. ("Proposed Statement). The Proposed Statement offers guidance concerning how the Agencies will review for antitrust compliance combinations of physicians, hospitals, and other providers into Accountable Care Organizations ("ACOs") created pursuant to the Medicare Shared Savings Program of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act"). The thrust of the Medicare Shared Savings Program is that providers who form ACOs that lead to reduced costs for Medicare will share in any savings they helped create.

At a glance, it may not be apparent how a program to incentivize health care providers to lower Medicare costs could implicate the antitrust laws. Indeed, if an ACO chooses to contract only with the Medicare program, one would anticipate very little interest on the part of the Agencies. However, providers have made clear that they are unlikely to form ACOs unless they might also use them for their commercially-insured patients; because ACOs by their very nature involve competitors acting in concert, extending their reach to the commercial setting raises antitrust concerns and inevitably attracts the attention of the FTC and DOJ.

The Proposed Statement arises out of tight coordination between the Agencies and the Center for Medicare and Medicaid Service ("CMS"). One of the Proposed Statement's major accomplishments is to confer automatic Rule of Reason treatment on any ACO that has met certain eligibility criteria for the Medicare Shared Savings Program laid out in the CMS Notice of Proposed Rulemaking, Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations ("CMS Proposed Rule"). This represents a remarkable development, both because it pegs the Agencies' antitrust analysis to standards created by a different agency and because so much of the Agencies' prior evaluation of clinically integrated networks involved assessing whether or not the Rule of Reason was appropriate under a given set of circumstances. The removal of doubt regarding whether to apply the Rule of Reason seems to have shifted the emphasis forward such that the bulk of the Proposed Statement focuses on which ACOs need to undergo antitrust analysis in the first instance.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Canada: Still Open for Business? PotashCorp and the Investment Canada Act

Posted by D. Daniel Sokol

D. Jeffrey Brown and Michael Kilby (Strikeman Elliot) ask Canada: Still Open for Business? PotashCorp and the Investment Canada Act.

ABSTRACT: In three recent foreign investment review decisions, the Canadian Minister of Industry has either blocked or sought to impose post-closing sanctions on mergers and acquisitions of Canadian target companies. These decisions remind antitrust practitioners that, in some countries, foreign investment may be submitted to scrutiny beyond traditional merger control. This article analyses the situation in Canada, critically assessing the approach used by authorities in their review of foreign investment transactions. Notwithstanding recent events, the article concludes that Canada remains open for business, with increasingly open policies and ongoing recognition of the importance of encouraging foreign investment.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Acquisitions, Entry and Innovation in Network Industries

Posted by D. Daniel Sokol

Pehr-Johan Norback, Research Institute of Industrial Economics (IFN), Lars Persson, Research Institute of Industrial Economics (IFN), Centre for Economic Policy Research (CEPR), and Joacim Tag, Research Institute of Industrial Economics (IFN) analyze Acquisitions, Entry and Innovation in Network Industries.

ABSTRACT: Why do so many high-priced acquisitions of entrepreneurial firms take place in network industries? We develop a theory of commercialization (entry or sale) in network industries showing that high equilibrium acquisition prices are driven by the incumbents' desire to prevent rivals from acquiring innovative entrepreneurial firms. This preemptive motive becomes more important when there is an increase in network effects. A consequence is higher innovation incentives under an acquisition relative to entry. A policy enforcing strict compatibility leads to more entry, but can be counterproductive by reducing bidding competition, thereby also reducing acquisition prices and innovation incentives.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Louis Kaplow to Receive Jerry S. Cohen Award for Antitrust Scholarship

Posted by D. Daniel Sokol

AAI has announced:

Louis Kaplow, the Finn M.W. Caspersen and Household International Professor of Law and Economics at Harvard Law School, will be awarded the ninth annual Jerry S. Cohen Award for Antitrust Scholarship on June 23 in Washington, DC during a luncheon at the 12th Annual Conference of the American Antitrust Institute.

Kaplow is being recognized for his article "Why (Ever) Define Markets?" (124 Harv. L. Rev. 437) which "advances the immodest claim that the market definition process is incoherent as a matter of basic economic principles and hence should be abandoned entirely."

In addition to teaching at Harvard, Kaplow is the Associate Director of the John M. Olin Center for Law, Economics, and Business, a Research Associate at the National Bureau of Economic Research, and a Fellow of the American Academy of Arts and Sciences. He has a J.D. and a Ph.D. in economics from Harvard University.

This prize is well deserved.  Kaplow's article is worth reading.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Drawing the Line—the application of State Aid Provisions to Internet Activities of Public Broadcasters

Posted by D. Daniel Sokol

Christian Lewke (Broadcasting Council, Hessische Rundfunk hr (ARD)) discusses Drawing the Line—the application of State Aid Provisions to Internet Activities of Public Broadcasters.

ABSTRACT: In a number of recent cases, the EU Commission has raised objections concerning the internet activities of public service broadcasters. These objections dwelt on the extent to which such broadcasters can use public funds to subsidise their internet activities that are carried out in competition with private actors. In order to establish a clear test, inspiration can be drawn from practices in several Member States, particularly Germany.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Just Google it! - The Google Book Search Settlement: A Law and Economics Analysis

Posted by D. Daniel Sokol

Frank Müller-Langer, Max Planck Institute for Intellectual Property and Competition Law and Marc Scheufen, University of Hamburg - Institute of Law and Economics have written Just Google it! - The Google Book Search Settlement: A Law and Economics Analysis.

ABSTRACT: Beginning in December 2004 Google has pursued a new project to create a book search engine (Google Book Search). The project has released a storm of controversy around the globe. While the supporters of Google Book Search conceive the project as a first reasonable step towards unlimited access to knowledge in the information age, its opponents fear profound negative effects due to an erosion of copyright law. Our law and economics analysis of the Book Search Project suggests that – from a copyright perspective – the proposed settlement may be beneficial to right holders, consumers, and Google. For instance, it may provide a solution to the still unsolved dilemma of orphan works. From a competition policy perspective, we stress the important aspect that Google’s pricing algorithm for orphan and unclaimed works effectively replicates a competitive Nash-Bertrand market outcome under post-settlement, third-party oversight.

May 25, 2011 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 24, 2011

Daniel Sokol Book Symposium Comments on Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by D. Daniel Sokol

I applaud Caron and Ariel for their edited volume Criminalising Cartels: Critical Studies of an International Regulatory Movement. As someone who edits books myself (shameless plugs for my Stanford University Press series, previous edited volume, and a volume in the works on antitrust/competition economics with Oxford University Press), I know how difficult it can be to get a volume to be coherent. There are different analytical approaches, writing styles and themes for coverage to include. I liked nearly all of the chapters and believe that cover to cover, this is the best contemporary book on cartels. There are so many things worth mentioning about the book. Let me highlight just two.

1. We have seen that over time antitrust (and I use the US term for a reason), have become global. Perhaps the most important antitrust norm to be diffused elsewhere has been the push to criminalize collusion offenses. A number of chapters of the book suggest limits to the transplant effect of a US based legal concept onto different legal systems (including Kovacic's excellent chapter that explains why things have worked as well as they have in the US). This set of reactions provide an excellent case study on the limits in practice of good ideas in one jurisdiction of taking root in others.

2. The assumptions behind criminalization may not be accurate. Antitrust has not focused its attention in the compliance context on the various components within a firm. Instead, antitrust often treats the corporation as a “black box” in which it assumes away the internal workings of the firm and focuses instead at the firm level. Both theoretical and empirical work in a number of different fields, including economics, accounting, finance, organizational theory and sociology, provide important insights indicating that a firm is not merely a single entity in its actions. Rather, a firm has a number of various components, each of which has its own incentives that shape behavior. This literature suggests that organizational subunits and individuals within them need to be addressed. The organization’s environment and the amount of individual discretion offered affect decision-making for the entire organization and may constrain decision-making of individuals within them. I mention these other literatures because many IO economists and antitrust/competition law professors ignore the inner workings of the firm. As a result, there are a number of assumptions about how individuals and firms respond to punishment that may be wrong. Required reading for anybody writing on cartels should be Christine Parker's chapter (Chapter 11), where she provides a literature review of antitrust empirical work on cartels. One minor problem with her literature review is that she seems to be unaware of the growing literature in experimental economics on collusion. However, Parker does include some seminal works in organizational theory and sociology that often gets overlooks by economists. Maurice Stucke in his chapter points to some problems based on his behavioral antitrust model. Much of the insights he provides are interesting. Even if these are true, none of his recommendations are things that traditional rational choice types would find disagreement with - more empirical studies, improved compliance, and more informed merger review. What I would like to see is a set of policy recommendations that are workable unique to behavioral law and economics.

Where I disagreed with various authors on their analysis or conclusions (and I do not mean to pick on Christine and Maurice - both contributed very good chapters and my comments are meant with regard to the entire volume and collection of authors) it is because they grappled with topics that are not easy. The various authors in this volume challenged some of my assumptions and understandings. In doing so, they did their job. I highly recommend this book.

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Competitor Collaborations in Health Care: Understanding the Proposed ACO Antitrust Review Process

Posted by D. Daniel Sokol

Tasneem Chipty (Analysis Group, Inc.) describes Competitor Collaborations in Health Care: Understanding the Proposed ACO Antitrust Review Process.

ABSTRACT: Health care markets involve a complex interaction of facilities, physicians, and health plans to deliver patient care. Under ideal circumstances, the forces of competition would lead inevitably to appropriate, high quality patient care at low prices. The competitive process, however, requires sufficient flow of information and aligned incentives. Absent these conditions, the competitive process can (and has been known to) break down. Indeed, the last decade has seen a dramatic increase in the United States' cost of health care as a percentage of gross domestic product. Health care commentators trying to understand this growth have pointed to increases in the price and use of certain services, which they attribute to a number of factors such as an aging population and at times, use of unnecessary care and insufficient competitive pressure. To address some of these issues, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 encourage providers to better coordinate patient care through competitor collaborations called Accountable Care Organizations ("ACOs").

By incenting otherwise independent health care providers (through the Medicare Shared Savings Program) to better coordinate on patient care, the policy goal is to improve the quality and reduce the cost of health care. Unchecked, however, the same policy could facilitate competitor coordination on pricing and other aspects of behavior that may result in unintended and potentially undesirable effects. To address this concern, the Department of Justice and Federal Trade Commission ("the Agencies") have set forth a proposed antitrust policy statement regarding ACOs that describes a rule of reason approach to balance potential harm to competition from competitor collaboration in the form of an ACO with potential pro-competitive benefits to consumers.

While it is too early to know what type of antitrust scrutiny ACOs will receive in practice, the Agencies' Proposed Policy contains some important structural guidance. In particular, the Proposed Policy contains behavior requirements to which ACO participants must adhere along with three tiers of antitrust review. Among them is the creation of safe harbors that appear to mirror the three tiers of antitrust review contained in the Agencies' Merger Guidelines.

From a policy perspective, it is unclear whether the ACO review should be more or less stringent than the merger review process. On the one hand, one might expect the ACO review to be more stringent because of the financial incentives to participate in the Medicare Shared Savings Program. On the other hand, one might expect the reverse because, all else equal, the added behavioral stipulations by design help ensure that formation of an ACO presents less competitive risk than does a merger of the participants to a fully integrated firm.

This article uses numerical simulations to compare the proposed thresholds for ACO antitrust review to those established in the Merger Guidelines. For relatively unconcentrated markets, whether the ACO review process is more stringent than the merger review process depends on how restrictive the behavioral requirements are for the ACO participants. If they are not binding, the numerical simulations suggest that the ACO review process should be no more stringent than the merger review process for relatively unconcentrated markets and less stringent in relatively more concentrated markets. Otherwise, the ACO review may be more restrictive for some scenarios.

May 24, 2011 | Permalink | Comments (7) | TrackBack (0)

On the timing of vertical relationships

Posted by D. Daniel Sokol

Etienne Billette de Villemeur (Toulouse School of Economics, IDEI & GREMAQ), Richard Ruble (EMLYON Business School), and Bruno Versaevel (EMLYON Business School & CNRS) provide their thoughts On the timing of vertical relationships.

ABSTRACT: In a real option model, we show that the standard analysis of vertical relationships transposes directly to investment timing. Thus, when a firm undertaking a project requires an outside supplier (e.g., an equipment manufacturer) to provide it with a discrete input to serve a growing but incertain demand, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in firm decisions is characterized by a lerner-type index, and we show how market growth rate and volatility affect the extent of the distortion. If the initial market demand is high, greater volatility increases the effective investment cost and results in lower value for both firms. Vertical restraints can restore efficiency. For instance, the upstream firm can induce entry at the correct investment threshold by selling a call option on the input. Otherwise, if two downstream firms are engaged in a preemption r! ace, the upstream firm sells the input to the first investor at a discount which is chosen in such a way that the race to preempt exactly offsets the vertical distortion, and this leader invests at the optimal time.

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

More on AT&T - Greg Rosston Examines the Competitive Implications of the Proposed Acquisition of T-Mobile by AT&T Mobility

Posted by D. Daniel Sokol

Technology Acamdeics Policy (TAP) has an interesting piece by Greg Rosston (Deputy Director and a Research Fellow at Stanford Institute for Economic Policy Research (SIEPR)) on the propsoed AT&T/T-Mobile merger. See here.

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Strategic Separation from Suppliers of Vital Complementary Inputs: A Dynamic Markovian Approach

Posted by D. Daniel Sokol

Didier Laussel (Groupement de Recherche en Économie Quantitative d'Aix-Marseille (GREQAM)) and Ngo Van Long (McGill) discuss Strategic Separation from Suppliers of Vital Complementary Inputs: A Dynamic Markovian Approach.

ABSTRACT: In a model where a monopolistic downstream firm (assembler) negotiates simultaneously with each of its intermediate-input suppliers the prices of the complementary components which enter its product, we analyze the process by which the assembler separates from its suppliers as a Markov Perfect equilibrium. Due to a negative strategic effect (the prices and profits of independent suppliers decrease when their number increases), the assembler's marginal return from keeping an upstream subsidiary is lower than its market value as an independent supplier. Separation is immediate when the downstream firm's initial number of upstream subsidiaries is below a critical level. It is progressive in the reverse case and eventually leads to a mixed strategy whereby it keeps all the remaining subsidiaries with some probability, and sells all them off in one go with the complementary probability.

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Changes in Concentration Across Vertically Related Industries

Posted by D. Daniel Sokol

Mary J. Becker, University of Pittsburgh - Katz Graduate School of Business and Shawn E. Thomas, University of Pittsburgh - Finance Group explore Changes in Concentration Across Vertically Related Industries.

ABSTRACT: We investigate the magnitude, timing, and direction of the association between changes in concentration across vertically related industries over the period 1978-2008. We find robust evidence that changes in an industry’s level of concentration are significantly positively related to prior and simultaneous changes in the concentration of their customer industries. We find weaker evidence that changes in an industry’s level of concentration are related to changes in the concentration of their supplier industries. Thus, the association between changes in concentration across vertically related industries appears stronger in the upstream direction than in the downstream direction. We find that increased concentration across vertically related industries, perhaps reflecting countervailing power effects, explains in part the observed positive association between changes in concentration; however, we also find robust evidence that decreases in concentration, perhaps reflecting the effects of technological innovation in vertically related industries, are also important determinants of the observed association.

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Anestis Papadopoulos Book Symposium Comments on Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by Anestis Papadopoulos

“Criminalising Cartels: Critical Studies of an International Regulatory movement” has been a very interesting, informative and useful reading. The major strength of this work is that it offers a clear presentation and analysis of the historical development of the move towards criminalization of cartels, and the lively debate that has been developed in recent years and has generated arguments in favour of and against the adoption and application of penal law provisions in the field of competition law and policy.

This analysis has been carried out through the lens not only of competition law experts, but also through the lens of other areas of law, such as criminal law, human rights, and the regulation of institutions that enforce the law. The discussion is also informed by experts from other areas of political and social sciences, such as political economy and behavioral economics. These perspectives give a broader understanding of the various facets of the general theme under examination in the book.

 The analysis has been further strengthened by the presentation of the way in which criminal cartel laws have been applied in particular industrialized states, and the implications of the criminalization of cartels in the international competition law arena.

What clearly emerges from the book is that as with any major development in the field of competition law and policy, this trend towards criminalization of cartels originates from the US. With the exception of Germany where, as Wagner von-Papp shows, sanctions have been imposed for participation in bid rigging, and less so in the UK and Ireland where a broader cartel offence has been adopted but imprisonment of cartel participants has been rare, the US is the only country where the criminal law provisions (other than ones imposition of criminal fines) have been practically applied. As noted in the chapter of Ezrachi and Kindl, over 99% of the time served in jail by competition law violators around the world has been served in the US.

Donald Baker and William Kovacic discuss the way in which the prosecution of individual cartel participants has evolved in the US. They both show that the development of cartel criminalization has taken place at a slow pace, which has given the opportunity to academia, government, and the courts to develop the norms and improve the institutional framework in such a way so as to achieve more efficient enforcement of the relevant provisions. 

The major question that arises nevertheless is whether this trend towards cartel criminalization should be followed by other states. In more particular, whether states that have recently embarked in the adoption and/or consistent application of competition laws should move towards the criminalization of cartels. As noted, various contributors to this book develop a number of arguments made in favor of criminalization, the most common of which is that criminal sanctions may increase the deterrent effect of the relevant competition rules. Without underestimating these arguments, it has to be admitted that from the perspective of a practitioner from a jurisdiction (Greece) where the broader understanding about competition law in general is low and criminal sanctions for cartels infringements were included in the law only recently (in 2009), and have not been applied as yet, certain arguments raised in the book, which illustrate the concerns expressed in relation to the application of criminal rules in competition cases seem to be more persuasive.

In particular, as Cristine Parker notes, there are a number of questions that have not been addressed as yet regarding the criminalization of cartels, the most important of which asks ‘to what extent is criminalization morally appropriate’. This is a question also raised by Maurice Stucke and Rebecca Williams, and the answer to the question is important in view of the basic principle that imprisonment should be limited to practices that are socially considered not only as immoral but also as crimes. In a similar context, Ezrachi and Kindl note that the effectiveness of cartel criminalization may only be achieved through social acceptance of cartels as crimes.

Nonetheless, as also becomes evident from the book, such common understanding as to the morality of cartels criminalization is not clear, even in countries like the UK where there has been strong political support in the last few years for including cartels in the list of crimes. As Andreas Stephan, a supporter of criminalization, notes, in a 2007 survey in the UK, only 10% of the respondents felt that imprisonment was an appropriate sanction for cartel offenders. In a more judgmental manner, Stephen Wilks concludes his contribution by stating that “The US- style criminal cartel offence simply underlines the obsessive preoccupation for punishing cartels and the careless inattention given to abuse of dominance by large corporations…”

Irrespective from whether one agrees with this position, what goes beyond doubt is that there is a long way to go before criminalization of cartels is socially considered a criminal offence in a number of countries that have recently adopted competition rules, or have recently started applying competition rules in a consistent manner.

It should be noted that 72% of the 111 countries that had competition law in place in 2008, adopted such law recently, and in particular after 1991. Thus, it has been pointed out that in the vast majority of countries with competition law, courts have not had the time to review many competition cases, relevant academia has not had the time to examine and develop competition related principles, and agencies have not had much time to apply competition policy widely. Against this background, it seems that from a comparative and international competition law perspective, it is more important to achieve convergence in the analysis and understanding of the main practices covered by competition law, i.e. anticompetitive agreements (primarily cartels), abuse of dominance and the review of mergers.

Put differently, it seems that at least in countries that are at the early stages of competition law enforcement, it is vital to persuade politicians to support the transparent enforcement of competition laws, include competition law in the curricula of universities so as to produce competition experts and explain to market participants and consumers why cartels are bad for the economy and, in more general, for the society. Criminalisation of cartels is something that should chronologically follow these basic steps.

That said, works like the one edited by Caron Beaton Wells and Ariel Ezrachi are most welcomed, and should be the basis for further research that would examine the particular issues arising from the process of adoption and/or application of criminal sanctions for cartel conduct in more states, including developing countries.   

May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

Call for papers: Competition and regulation in network industries 25 November 2011 Brussels, Belgium

Posted by D. Daniel Sokol

Fourth Annual Conference on
Competition and Regulation in Network Industries

Europe and beyond

Brussels, Belgium - November 25, 2011

Main information
 

The liberalization process that has transformed network industries during the past decades is by no means limited to Europe or the United States. Emerging markets are undergoing a similar transition to more market-based forms of regulatory governance. In spite of notable differences across sectors, actors (governments, operators, regulators and other stakeholders) often find themselves faced with similar issues to tackle, such as regulation of monopolies, safeguarding of social service obligations, or definition of public values and national interests. Signification variations in institutional frameworks also impact the scope and speed of the reforms.

The conference takes a multi-disciplinary approach and explores the legal, economic, institutional and public policy aspects of this fundamental reform of network industries. In doing so, it highlights dominant current trends and issues affecting network-based and network-related industries in parallel sessions, including but not restricted to:

 

  • Challenges in network industry regulation
  • Inter/supra-nationalization of infrastructures
  • Investments and innovation in network industries
  • Liberalization models in network industries
  • Sector-specific issues (electricity, gas, railways, telecom, post, water, aviation, transport, Internet, ...)
  • Measuring network performance
  • Network industries in emerging markets
  • Urban network infrastructures
  • Keynote speakers (to be announced)

    For questions, please contact Marc Laperrouza

    Paper proposals should be between 600 and 1000 words long. The proposal should include:

  • Title of the paper
  • Name of the author(s) and full address of the corre-sponding author (postal, phone, fax and email)
  • The aim and methodology of the study
  • Results obtained or expected
  • A few keywords
  • We also encourage the submission of panel proposals.

    Important dates
    Deadline for panel submission: 1 May 2011
    Deadline for paper proposals: 1 June 2011
    Notification of acceptance: 1 July 2011
    Final paper submission (guidelines): 1 October 2011
    Deadline for registration and payment: 1 November 2011
    Deadline powerpoint presentation: 21 November 2011

    Fees
    Member of academic/non-profit institution; EUR150.-
    Member of business community: EUR 250.-
    A number of fee waiver are available for students - please contact Marc Laperrouza

    Venue
    Residence Palace, Rue de la Loi 155, 1040 Brussels (how to get there)

    Prize
    The CRNI Award will be given to the best paper

    Organizing Committee
    Matthias Finger (EPFL), Editor-in-Chief
    Rolf Künneke (Delft University of Technology), Editor-in-Chief
    Marc Laperrouza (EPFL), Managing Editor
    Daniel Scholten (Delft University of Technology), Assistant Editor

    May 24, 2011 | Permalink | Comments (0) | TrackBack (0)

    Do Cost-Sharing and Entry Deregulation Curb Pharmaceutical Innovation?

    Posted by D. Daniel Sokol

    Volker Grossmann, University of Fribourg - Faculty of Economics and Social Science asks Do Cost-Sharing and Entry Deregulation Curb Pharmaceutical Innovation?

    ABSTRACT: This paper examines the role of both cost-sharing schemes in health insurance systems and entry regulation for pharmaceutical R&D expenditure, drug prices, aggregate productivity, and income. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations adversely affect R&D spending in the pharmaceutical sector. In contrast, entry deregulation may lead to quality-improvements of pharmaceuticals, despite reducing price-setting power of pharmaceutical companies. Extension to an endogenous growth context suggests that, when individual labor supply depends on health status, both cost-sharing and entry barriers in the pharmaceutical sector also affect aggregate productivity and wage rates.

    May 24, 2011 | Permalink | Comments (0) | TrackBack (0)