Antitrust & Competition Policy Blog

Does hospital competition harm equity? Evidence from the English National Health Service

Posted by D. Daniel Sokol

Richard Cookson (Centre for Health Economics, University of York, UK), Mauro Laudicella (Imperial College Business School, London, UK) and Paolo Li Donni (Department of Economics, Finance and Business, University of Palermo, Italy) ask Does hospital competition harm equity? Evidence from the English National Health Service.

ABSTRACT: Increasing evidence shows that hospital competition under fixed prices can improve quality and reduce cost. Concerns remain, however, that competition may undermine socio-economic equity in the utilisation of care. We test this hypothesis in the context of the pro-competition reforms of the English National Health Service progressively introduced from 2004 to 2006. We use a panel of 32,482 English small areas followed from 2003 to 2008 and a difference in differences approach. The effect of competition on equity is identified by the interaction between market structure, small area income deprivation and year. We find a negative association between market dispersion and elective admissions in deprived areas. The effect of pro-competition reform was to reduce this negative association slightly, suggesting that competition did not undermine equity.

Horizontal Agreements in the Environmental Context

Posted by D. Daniel Sokol

When are horizontal agreements relating to environmental objectives necessary or efficient from a social perspective? When should they be discontinued pursuant to competition concerns? Such agreements can create interesting challenges for competition authorities.

The OECD today published Horizontal Agreements in the Environmental Context, a compilation of the materials presented and discussed at a Competition Committee roundtable held in October 2010. This publication, which includes an executive summary, a summary of the discussion and contributions by national delegations, is available at http://www.oecd.org/dataoecd/55/15/49139867.pdf.

Corporate Social Responsibility and Firms Ability to Collude

Posted by D. Daniel Sokol

Luca Lambertini and Alessandro Tampieri (University of Bologna) analyze Corporate Social Responsibility and Firms Ability to Collude.

ABSTRACT: We examine a duopoly with polluting production where firms adopt a form of corporate social responsibility (CSR) to define their objective functions. Our analysis focusses on the bearings of CSR on collusion over an infinite horizon, sustained by either grim trigger strategies or optimal punishments. Our results suggest that assigning a weight to consumer surplus has a pro-competitive e¤ect under both full and partial collusion. Conversely, a higher impact of productivity on pollution has an anti-competitive effect under partial collusion, while exerting no effect under full collusion. Under partial collusion, the analysis of the isoquant map of the cartel reveals that complementarity arises between the two weights.

Regulation of ATM fees in a model of spatial competition

Posted by D. Daniel Sokol

Karen Kaiser and Carlos Lever Guzman provide thoughts on Regulation of ATM fees in a model of spatial competition.

ABSTRACT: Following the Hotelling model of spatial competition used by Massoud and Bernhardt (2002) to analyze competition in ATM fees, in this paper we analyze the effects of banning fees on the usage of ATMs by account holders. We find that the prohibition also reduces the fees charged to non-account holders but increases fixed fees. This latter increase is on average smaller than the decrease of the former two, which leads total consumer welfare to increase. We also find that the prohibition decreases total surplus but that this decrease is absorbed by the banks' profits. The model does not consider the decision of banks to open or close down ATMs, which we leave for future research.

Antitrust Analysis of Merger Control: A Case Study on the Coca-Cola/Huiyuan Merger

Posted by D. Daniel Sokol

Wang Chuanhui and Ge Fei have published the first book treatment (in Chinese) on the failed Coco-Cola/Huiyuan proposed merger in their book Antitrust Analysis of Merger Control: A Case Study on the Coca-Cola/Huiyuan Merger.

The book consists of three parts. The first part provides a general analysis of the failed merger from antitrust and strategic perspectives. The second part provides an in-depth economic analysis of the relevant market, vertical restraints, economies of scale, and barriers to entry. The third part discusses the accountability and capacity building issues of China’s anti-monopoly enforcement agencies. The book also provides an analytical framework for the Coco-Cola/Huiyuan proposed merger and the Chinese translation of two relevant foreign decisions, the 2007 decision made by the Irish Competition Authority regarding the Britvic/C&C merger and the 2003 decision made by the Australian Competition and Consumer Commission on the Coca-Cola Amatil/Berri proposed merger.

Do States Free Ride in Antitrust Enforcement?

Posted by D. Daniel Sokol

Robert M. Feinberg and Thomas A. Husted (American University) ask Do States Free Ride in Antitrust Enforcement?

ABSTRACT: Recent research has documented a substantial role in antitrust enforcement by U.S. states. While many of the cases litigated involve small local firms, a non-trivial portion encompass multiplestate issues. Some previous literature has investigated whether states engage in free-riding behavior in environmental regulation, and whether governments free ride on private decisions in provision of public goods. In this paper, we analyze a sample of antitrust cases involving crossstate impacts (from the Multi-State Antitrust Database, provided by the National Association of Attorneys General) and explain the determinants of free-riding (which we define as participatingin a case, but not as a lead plaintiff).

Excessive Pricing: The Flaws of ‘Tea Party’ Competition Policy

Posted by D. Daniel Sokol

Nicolas Petit (University of Liege) addresses Excessive Pricing: The Flaws of ‘Tea Party’ Competition Policy.

ABSTRACT: Since the adoption of the Guidance Communication in 2009, the Commission has kept exploitative abuses—and in particular excessive pricing cases—in a state of artificial hibernation, and focused on exclusionary cases as a matter of enforcement priority. The Commission's small antitrust policy against exploitative abuses is predicated on ‘ Tea Party’ competition economics: in the long term, high prices are presumed to deliver efficient outcomes, and competition enforcers risk doing more harm than good in trying to improve market outcomes.

Tea Party competition gurus are, however, wrong on three counts. First, they are wrong on the theory. Contrary to the ominous suspicion that competition agencies fiddle with excessive pricing laws to tax dominant firms' profits and achieve distributional transfers, there is a sound conceptual basis to justify the control of dominant firms' excessive prices.

Guilty of a Fault that one has not Committed. The Limits of the Group-Based Sanction Policy Carried out by the Commission and the European Courts in EU-Antitrust Law

Posted by D. Daniel Sokol

Stefan Thomas, Professor of Law at the Eberhard Karls University Tubingen discusses Guilty of a Fault that one has not Committed. The Limits of the Group-Based Sanction Policy Carried out by the Commission and the European Courts in EU-Antitrust Law.

ABSTRACT: The economic entity doctrine allows the Commission to fine a parent company if its subsidiary has infringed the competition rules. In such cases, the Commission holds the subsidiary and the parent jointly and severally liable. The EU Courts have acknowledged this sanctioning concept as based on an interpretation of the notion of “undertaking”. Group companies are deemed to form one unitary undertaking in terms of the competition rules. However, the economic entity doctrine faces increasing criticism. It is argued that being a parent can hardly suffice to establish liability for the infringement of the subsidiary. Also, the rule stating that a 100 % shareholder is presumed to form an economic entity with its subsidiary is seen to conflict with the in dubio pro reo principle. As far as joint and several liability is concerned, practical problems arise with respect to recourse litigation between the corporate entities. The practical significance of the problems is rising. Although the Court of Justice has espoused the economic entity doctrine, there are reports that a Dutch company has recently asked the European Court of Human Rights to rule on whether such a concept is compatible with the presumption of innocence. Moreover, the national Courts struggle with the problem of how to apportion liability between the jointly and severally liable group companies with respect to recourse claims. The General Court has recently tried to establish general principles in that respect in its Siemens/VA Tech judgment which, however, seem to have created further problems.

Exchange of Information as Restriction by Object? The STANPA Cases in Spain

Posted by D. Daniel Sokol

Alvaro Ramos (Cisco) asks Exchange of Information as Restriction by Object? The STANPA Cases in Spain.

ABSTRACT: Are exchanges of price and/or quantity information illegal where they have no impact on business behaviour or that impact is not established? The Commission appears to answer in the positive in the horizontal guidelines as it indicates that business decision sharing generally leads to cartels. That strict approach has recently been applied, in Spain, in two important cases.

Public Service and EU Competition Law

Posted by D. Daniel Sokol

Luc Gyselen (Arnold & Porter) explains Public Service and EU Competition Law.

ABSTRACT: It would seem that the jurisprudence regarding the application of competition law to public services is now settling progressively. This appears from the ruling issued by the ECJ in AG2R Prévoyance regarding the de-monopolisation of public services performing economic activities. A complementary approach is advocated by the Commission in a new Communication detailing the conditions under which financial assistance can be provided for the provision of services of general interest.

Merger Referrals in Practice—Analysis of the Cases under Article 22 of the Merger Regulation

Posted by D. Daniel Sokol

Gianni De Stefano (Latham), Rita Motta (Latham), and Susanne Zuehlke (Latham) describe Merger Referrals in Practice—Analysis of the Cases under Article 22 of the Merger Regulation.

ABSTRACT: To date, there have been 26 referral cases under Article 22 of the Merger Regulation and the Commission has declined to accept jurisdiction in three instances only. Although they were apparently restrictive in the use of Article 22 in the past, Member States tend to consider that possibility more often nowadays. An analysis of practice demonstrates that referrals can have dramatic consequences on the outcome of cases.

Anticompetitive Product Design in the New Economy

Posted by D. Daniel Sokol

John M. Newman (DOJ) has written on Anticompetitive Product Design in the New Economy.

ABSTRACT: Claims alleging anticompetitive product design and redesign lie at the very core of one of antitrust law’s most challenging dilemmas: the intersection between innovation and regulation, invention and intervention. For over three decades, courts and scholars have struggled to determine the proper analytical framework within which to address such cases. Meanwhile, the very industries in which challenged conduct occurs have been undergoing fundamental changes.

As demonstrated by the ongoing and recent antitrust litigation involving high-technology firms Apple, Intel, and Microsoft, distinctive features characterize most product markets in what has been called the “New Economy” - and increasingly has become simply “the economy.” Many of these features not only uniquely incentivize anticompetitive design-related conduct, but also render such conduct uniquely susceptible to antitrust scrutiny. Accordingly, this Article both supplies a proper understanding of code-based product markets and, perhaps more importantly, provides a structured, efficient, and rational method of analyzing design-related conduct in those markets.

A Note on the Value of Residual Claimancy with Competing Vertical Hierarchies

Posted by D. Daniel Sokol

Riccardo Martina (Universita di Napoli Federico II and CSEF) and Salvatore Piccolo (Universita di Napoli Federico II and CSEF) provide A Note on the Value of Residual Claimancy with Competing Vertical Hierarchies.

ABSTRACT: In this short paper we study a competing vertical hierarchies model where the allocation of residual claimancy is endogenous and is determined jointly with production and contractual decisions. We .nd a set of circumstances in which the (equilibrium) allocation of residual claimancy is affected by competition in a non trivial manner. More precisely, although revenue-sharing contracts foster agents. (non-contractible) surplus enhancing effort, we show that competing principals dealing with exclusive and privately informed agents might still prefer to retain a share of the surplus from production when dealing with inefficient types. This is because reducing the surplus share of inefficient types reduces the information rent given up to efficient types. Hence, the equilibrium allocation of residual claimancy follows a pro-cyclical rule.

Quality Choice, Competition and Vertical Relationship in a Market of Protected Designation of Origin

Posted by D. Daniel Sokol

Zohra Bouamra-Mechemache and Jianyu Yu, Toulouse School of Economics (Gremaq, INRA) address Quality Choice, Competition and Vertical Relationship in a Market of Protected Designation of Origin.

We show that the farmers' choice of quality may differ from the processors' choice, de- pending on the demand and technology characteristics of the Protected Designations of Origin (PDO) product. In particular, farmers will prefer a higher quality standard than processors under two conditions. First, the demand for the PDO product should be inelastic enough such that the oligopoly power will lead to a higher price for a small decrease in quantity. Second, when the agricultural input technology exhibits decreasing return to scale, an increase in quality should generate a further reduction in farmers' return to scale, such that a higher quality can be sustained by a higher procurement price while the oligopsonistic processors cannot easily adjust their quantity. We also show that when farmers and processors have conflicting incentive in the choice of PDO quality standard, the equilibrium quality standard is the result from the negotiation between farmers and processors and depends on the relative bargaining power of farmers when negotiating with firms.

Today's free program - Antitrust and Judaism November 28, 2011 12pm-1:30pm EST

Posted by D. Daniel Sokol

The American Bar Association
ABA Section of Antitrust Exemptions & Immunities Committee
Antitrust and Judaism
November 28, 2011
12pm-1:30pm EST

In light of the Supreme Court's pending decision of the scope of religious organizations’ immunity from civil liability, as well as prominent recent scholarship on the antitrust treatment of rabbinical orders and concerns expressed by some over their conduct in employment, kosher certification, and other matters, the top-flight panelists will ask whether antitrust could and should be used to police markets also regulated by rabbinical authorities. This seminar will put the oy back in oy vey!

Link to the program details here.

Speakers:

• Makan Delrahim, Brownstein Hyatt Farber Schreck, LLP
• David Dunn, Hogan Lovells
• Robert Litan, Kauffman Foundation and Brookings Institution
• Barak Richman, Duke University Law School

Moderator:

• D. Daniel Sokol, University of Florida Levin College of Law

The ABA is not seeking CLE credit for this program. You will not receive CLE credit for attending/viewing/listening.

To register for the conference. You will receive the dial in numbers in your confirmation.

Recordings of this program will be posted on the Section website and downloadable in an MPEG-3 format, provided all releases have been obtained. Please visit our Committee Program Audio page after the program to listen to/download the audio.

Left Behind by Modernisation? Restrictions by Object Under Article 101(1)

Posted by D. Daniel Sokol

Alison Jones, King's College London - School of Law asks Left Behind by Modernisation? Restrictions by Object Under Article 101(1).

ABSTRACT: This article charts the journey that the European Commission has taken to "modernize" the interpretation and application of Article 101. It commences by analyzing the Commission's initial formalistic approach to Article 101 and examining why change was necessary. It then considers how, and the extent to which, reform has occurred, focusing on the treatment of "object" or "hardcore" restraints, which are still treated on a strict and inflexible basis. Indeed, it concludes that the process of modernization may have made it less likely that firms will be willing to incorporate such hardcore restraints in their agreements, even when they consider them to be indispensable to the working of a pro-competitive arrangement.

Mexico Talks Monopoly Reform - A Good Step to Increasing Efficiency in Mexico

Posted by D. Daniel Sokol

Mary Anastasia O'Grady's weekly op-ed on the Americas focuses this week on PEMEX- the Mexican oil monopoly and potential efforts to privatize it. Given the relative success of privatization (at least when the introduction of competition goes hand in hand with such privatization measures), this would be a good development for Mexico, even if politically difficult. I have written in detail about privatization and competition here.

Neutral on Internet Neutrality: Should There Be a Role for the Federal Trade Commission?

Posted by D. Daniel Sokol

Tom Rosch (FTC) asks Neutral on Internet Neutrality: Should There Be a Role for the Federal Trade Commission?

A Trip Around the Cartel Victims Remedy Buffet

Posted by D. Daniel Sokol

Kent Bernard (Fordham Law) offers A Trip Around the Cartel Victims Remedy Buffet.

ABSTRACT: The debate about whether the European Union should adopt a community-wide system to compensate victims of illegal cartel activityx has generated a lot of heat, but perhaps less enlightenment, over the past years. Some people are arguing for grafting a U.S. style class action litigation system onto the EU structure, somehow modifying that U.S. graft to avoid the costs of the U.S. system while all the while preserving and reflecting European cultures and traditions.

Almost no one suggests that we should be encouraging the formation or longevity of cartels. And it is certainly a legitimate question to see how better to provide a way for the victims of illegal cartel behavior to be made whole. But while cartels are bad, they are not the only bad things out there. Do we need to be looking at a remedy that has a wider application? Or is there no need for any new remedy at all? There is a respectable argument that, in the time since this flirtation with the U.S. litigation structure for cartel damages began in 2005, market forces and the availability of actions in the national courts have begun to fill the perceived gap and that the best approach here would be to let that process continue. Others point out that areas such as alternate dispute resolution remain underexplored. And there may be something else out there that deserves consideration.

Network Interconnectivity with Regulation and Competition

Posted by D. Daniel Sokol

Jolian McHardy (Department of Economics, The University of Sheffield), Michael Reynolds, and Stephen Trotter address Network Interconnectivity with Regulation and Competition.

ABSTRACT: A simple theoretical network model is introduced to investigate the problem of network interconnection. Prices, profits and welfare are compared under welfare maximisation, network monopoly and network monopoly with competition over one part of the network. Given that inducing actual competition may bring disbenefits such as cost duplication and co-ordination costs, we also explore the possibility of a regulator using the threat of entry on a section of the monopoly network in order to bring about the socially preferred level of interconnectivity. We show that there are feasible parameter values for which such a threat is plausible.