Antitrust & Competition Policy Blog

EU Competition Law: An Analytical Guide to the Leading Cases (3rd Edition)

Posted by D. Daniel Sokol

Ariel Ezrachi (Oxford) has come out with EU Competition Law: An Analytical Guide to the Leading Cases (3rd Edition).

BOOK ABSTRACT: This book is the third edition of the highly practical guide to the leading cases of European Competition Law. It focuses primarily on Article 101 TFEU, Article 102 TFEU and the European Merger Regulation. In addition it explores the public and private enforcement of Competition Law, the intersection between Intellectual Property Rights and Competition Law and the application of Competition Law to State action. Each chapter outlines the relevant laws, regulations and guidelines for each of the topics. Within this framework, cases are reviewed in summary form, accompanied by analysis and commentary.

Don't Throw The Flag: How The FTC Acts Like Replacement Refs

Posted by D. Daniel Sokol

Ronn Cass (International Center for Economic Research) explains Don't Throw The Flag: How The FTC Acts Like Replacement Refs in Forbes.

Generic Drugmakers Will Challenge Patents Even When They Have a 97% Chance of Losing: The FTC Report that K-Dur Ignored

Posted by D. Daniel Sokol

Kelly Smith & Jonathan Gleklen (Arnold & Porter) have an interesting paper on how Generic Drugmakers Will Challenge Patents Even When They Have a 97% Chance of Losing: The FTC Report that K-Dur Ignored.

ABSTRACT: A striking aspect of the Third Circuit's decision on Hatch-Waxman patent settlements in the K-Dur litigation is the panel's repeated reliance on conclusions that the Federal Trade Commission ("FTC") has drawn from internal studies. It is hard to get through the opinion without running up against "a 2010 analysis by the FTC found," a "2002 study conducted by the FTC concluded that," or a "[d]ata analyzed by the FTC suggest," leading up to a "we agree . . . with the FTC that."

We leave to others the issue of due process in relying on an advocate's characterization of evidence it has shared with no one else. We focus instead on an FTC finding that neither the Court nor, to our knowledge, anyone else has noticed. According to the FTC, the structure of the Hatch-Waxman Act creates economic incentives for generic drug makers ("Generics") to mount extraordinarily thin patent challenges. A rational Generic, the FTC tells us, would challenge the patents protecting nearly 90 percent of the branded drugs sold in the United States (as measured by wholesale dollar sales) if it were the first to do so (a "first filer") and it had even a three percent chance of success. Or to put it another way, a rational Generic company executive who is told by his lawyers that he has on the order of a 95 percent chance of losing, should respond, "Great! Challenge the patent."

Is the google platform a two-sided market?

Posted by D. Daniel Sokol

Giacomo Luchetta, LUISS University (Rome) asks Is the google platform a two-sided market?

ABSTRACT: Probably not. Or, at least, it is a sui generis two-sided market. Unlike other platforms, such as Microsoft Windows operating system, credit cards, or night clubs, where a single transaction is performed via the platform, two different transactions take place on Google. Users look for search results, while advertisers look for users' eyeballs. Whilst operating systems, credit cards, and night clubs would be meaningless if either of the two sides were missing, search engines (like TV or newspapers) can exist under different market configurations. Indeed, in search engines network externalities run only from the number of users to advertisers, and not the other way around. This thesis is supported by the analysis of the existing literature on two-sided markets and the applications carried out so far to the economics of search engines. According to this analysis, a new construction of the relevant market where Google operat! es is proposed. Google operates as a retailer of eyeballs, or users' attention. In the upstream market, on one side, it buys well-profiled eyeballs from large retailers, i.e. major websites, at a positive price (Traffic Acquisition Costs); on the other side, it buys eyeballs from single consumers in exchange of search services (in-kind payment). Then, it sells well-profiled eyeballs to advertisers in the downstream market. Based on this market construction, the allegations against Google are analysed as alleged violations of competition law along this vertical chain.

Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion

Posted by D. Daniel Sokol

Hugo E. Silva (VU University), Erik T. Verhoef (VU University) and Vincent A.C. van den Berg (VU University) describe Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion.

ABSTRACT: This paper analyzes airlines' strategic interactions and airport efficient pricing, with a deterministic bottleneck model of congestion, in Cournot-Nash competition and in sequential competition where a Stackelberg leader interacts with perfectly competitive airlines. We show that the internalization of self-imposed congestion by non-atomistic carriers is consistent with earlier literature based on static models of congestion, but the congestion tolls are not. The tolls derived for fully atomistic airlines achieve the social optimum, when charged to all carriers, in the simultanous setting as well as in the sequential setting. We also find that alternative efficient pricing schemes exist for the sequential competition between a dominant airline and a competitive follower. The analysis suggests that airport congestion pricing has a more signicant role than what previous studies have suggested. Moreover, the financial defi! cit under optimal pricing may be less severe than what earlier studies suggest, as congestion toll revenues may cover optimal capacity investments. Political feasibility would be enhanced as ecient congestion charges do not depend on market shares and therefore may not be perceived as inequitable.

Deterring EU Competition Law Infringements: Are We Using the Right Sanctions? Hotel SAS, Brussels, 3 December 2012

Posted b y D. Daniel Sokol

The registration information and updated conference agenda is available here.

"From Astra-Zeneca to Pfizer" Stage II: The Italian Administrative Court Reverses the Monopolization Claim Established by the Autorita Garante della Concorrenza e del Mercato

Posted by D. Daniel Sokol

Stefano Grassani (Pavia e Ansaldo) has written on "From Astra-Zeneca to Pfizer" Stage II: The Italian Administrative Court Reverses the Monopolization Claim Established by the Autorita Garante della Concorrenza e del Mercato.

ABSTRACT: As reported in the July edition of this Chronicle, on Jan. 11, 2012, the Italian Antitrust Authority ("IAA") found Pfizer Inc. and its Swedish and Italian subsidiaries guilty of abuse of dominant position pursuant to Article 102 of the Treaty on the Functioning of the European Union ("TFUE"). The IAA alleged that these subsidiaries jointly engaged in unlawful exclusionary conducts so as to unlawfully extend IP exclusive rights over Pfizer's Xalatan blockbuster drug, deterring or, in any event, delaying entry of generic competition on the Italian market. A fine in excess of US$ 11 million was levied on Pfizer.

Pfizer lodged an appeal against the decision before the competent Administrative Court which, with a judgment issued on Sept. 3, 2012, reversed the holding of the IAA and the ensuing fine.

How bank competition affects firms'access to finance

Posted by D. Daniel Sokol

Inessa Love (University of Hawaii) and Maria Soledad Martinez Peria (World Bank) explore How bank competition affects firms'access to finance.

ABSTRACT: Combining multi-year, firm-level surveys with country-level panel data for 53 countries, the authors explore the impact of bank competition on firms'access to finance. They find that low competition, as measured by high values of the Lerner index, diminishes firms'access to finance, while commonly-used bank concentration measures are not robust predictors of firms'access to finance. In addition, they find that the impact of competition on access to finance depends on the environment that banks operate in. Some features of the environment, such as greater financial development and better credit information, can mitigate the damaging impact of low competition. But other characteristics, such as high government bank ownership, can exacerbate the negative effect.

Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal

Posted by D. Daniel Sokol

Ryan L. Lampe (DePaul) Petra Moser (Stanford) ask Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal.

ABSTRACT: Patent pools, which allow competing firms to combine their patents, have emerged as a prominent mechanism to resolve litigation when multiple firms own patents for the same technology. This paper takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools on innovation within 20 industries. Difference-in-differences regressions imply a 16 percent decline in patenting in response to the creation of a pool. This decline is driven by technology fields in which a pool combined patents for substitute technologies by competing firms, suggesting that unregulated pools may discourage innovation by weakening competition to improve substitutes.

New and larger costs of monopoly and tariffs

Posted by D. Daniel Sokol

James A. Schmitz, Jr. (Federal Reserve Bank of Minneapolis) explains New and larger costs of monopoly and tariffs.

ABSTRACT: Fifty-eight years ago, Harberger (1954) estimated that the costs of monopoly, which resulted from misallocation of resources across industries, were trivial. Others showed the same was true for tariffs. This research soon led to the consensus that monopoly costs are of little significance—a consensus that persists to this day. This paper reports on a new literature that takes a different approach to the costs of monopoly. It examines the costs of monopoly and tariffs within industries. In particular, it examines the histories of industries in which a monopoly is destroyed (or tariffs greatly reduced) and the industry transitions quickly from monopoly to competition. If there are costs to monopoly and high tariffs within industries, we should be able to see these costs whittled away as the monopoly is destroyed. In contrast to the prevailing consensus, this new research has identified significant costs of monopoly. Monopoly (and high tariffs) is shown to significantly lower productivity within establishments. It also leads to misallocation within industry: resources are transferred from high to low productivity establishments. From these histories a common theme (or theory) emerges as to why monopoly is costly. When a monopoly is created, “rents” are created. Conflict emerges among shareholders, managers, and employees of the monopoly as they negotiate how to divide these rents. Mechanisms are set up to split the rents. These mechanisms are often means to reduce competition among members of the monopoly. Although the mechanisms divide rents, they also destroy them (by leading to low productivity and misallocation).

A Short Note on Plea Agreements in Canadian Antitrust Cases

Posted by D. Daniel Sokol

Graham Reynolds, Q.C. (Osler) provides A Short Note on Plea Agreements in Canadian Antitrust Cases.

ABSTRACT: To date, most Canadian antitrust cartel cases have been resolved by means of guilty pleas by defendants. The means of accomplishing this in Canada is through the mechanism of a plea agreement which is negotiated with the Public Prosecution Service of Canada ("PPSC"), the independent prosecuting authority charged with bringing Competition Bureau ("Bureau") cases before the courts. This brief article aims at describing the process and procedure for resolving criminal antitrust cases in Canada, with some comments on distinctions from other jurisdictions.

Responses of European competition policy to the challenges of the global economic crisis

Posted by D. Daniel Sokol

Abel Czekus (University of Szeged) describes the Responses of European competition policy to the challenges of the global economic crisis.

ABSTRACT: European competition policy has been one of the common policies since the beginning of European integration. The European level economic policy coordination and the customs union have required a uniform framework for competition policy covering the whole Community. Nowadays the economic integration of Europe is suffering from its biggest crisis ever, which also affects companies based and/or operating in Europe. This brings about new challenges for common competition policy as it has to assure, on one hand, a legal framework to maintain fair competition. The importance of cooperation between competition authorities, for example in the field of restrictive agreements, has been recognised by the European Commission. The Commission, on the other hand, has to deal with an increasing number of merger cases because, after the decline of the number of cases in 2008 and 2009, concentrations have started to intensify again. This is due to the recovery of companies in 2010 and the relaunch of lending activity. Also, competition policy has to stimulate markets as it is also a way to put the European economy on a growing path. Much more emphasis should be put on state aid because it does not only spur economic growth but it could have negative effects as well. This type of excessive spending is problematic in the sense of competition policy and it could eventually even worsen the long term economic perspectives of Europe. The crisis in Europe escalated three years ago. I summarise the legal development and guidelines relating to competition policy after 2008. I examine the block exemption schemes and the extended state aid activities. These are developments that may contribute to the recovery from the crisis. It is essentially important to shape competition policy so that it effectively guards companies’ adaptation process to the new economic circumstances, and stimulates their economic activity.

Competuition Law and Economics classes at UCL for the 20120-13 academic year - spaces still available

Posted by D. Daniel Sokol

The UCL Centre for Law, Economics and Society is pleased to announce that places are open on a number of its competition and economics CPD courses for the Autumn term 2012.

The courses are:

The Role of Economics in Competition Law
10 x 2-hour seminars from October to March 2013 - Tuesdays, 6 - 8pm
This course introduces the economic theories that underlie competition law and the methods that are used to assess whether business practices are nefarious, benign or health. There are two parts to the course: 1. provides an introduction to microeconomics and industrial organisation theory, and 2. the application of economics to competition policy. The course is taught by experts from Charles River Associates.
Download the course brochure


Law and Economics of Regulated Markets and Industries: Between Competition and Regulation
10 x 2 hour seminars from October to December 2012 - Thursdays, 6 - 8pm
This course examines the legal and economics principles involved in the analysis of the traditional regulated industries (e.g. telecoms, energy) in Europe, the US and the UK.
Download the course brochure


EU Competition Law
20 x 2 hour seminars from October to March 2013 -  Mondays, 6 - 8pm
This course introduces the substantive issues in EU competition law, with a particular focus on vertical and horizontal agreements, abuse of dominant position, and merger control law and policy.
Download the course brochure

You can sign up online for these courses by clicking on the link below or use the booking form in the course brochures.

The application deadline has now been delayed to Friday 28 September 2012.

If you have any querie s, please contact the UCL Faculty of Laws Events & CPD Manager, Lisa Penfold by emailing [email protected] or calling 020 7679 1514.

Evaluating Mergers for Coordinated Effects and the Role of 'Parallel Accommodating Conduct'

Posted by D. Daniel Sokol

Joe Harrington (Johns Hopkins) explores Evaluating Mergers for Coordinated Effects and the Role of 'Parallel Accommodating Conduct'.

ABSTRACT: The 2010 Horizontal Merger Guidelines propose a form of coordinated effects, referred to as "parallel accommodating conduct," that is claimed not to involve the usual evaluation of the ability of firms to detect compliance and punish non-compliance with respect to supracompetitive prices. That claim is argued here to be false. Where the concept of parallel accommodating conduct is valid and constructive is in identifying coordinated effects that do not involve firms having an agreement. These issues are explored here in the context of a more general examination of how firms coordinate on and implement supracompetitive outcomes.

Defensive Disclosure under Antitrust Enforcement

Posted by D. Daniel Sokol

Ajay Bhaskarabhatla (Erasmus University Rotterdam) and Enrico Pennings (Erasmus University Rotterdam) discuss Defensive Disclosure under Antitrust Enforcement.

ABSTRACT: We formulate a simple model of optimal defensive disclosure by a monopolist facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM during 1955-1989. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are disclosed defensively, and that defensive disclosure served as an alternative but less successful mechanism to patenting at IBM in appropriating returns from R&D.

Does Reliable Pirated Product Lead to More Piracy?

Posted by D. Daniel Sokol

Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics) and Sougata Poddar (Department of Economics, Auckland University of Technology) ask Does Reliable Pirated Product Lead to More Piracy?

ABSTRACT: Conventional wisdom would suggest if a pirated product, which is cheaper than the original product, becomes more reliable then the relative demand of the pirated product or the rate of piracy will increase when consumers have different willingness to pay. However, is this always true? We address this question in a framework where the original product developer makes costly investment to deter pirate(s) in a given regime of IPR protection. We show that the relationship between the rate of piracy and the reliability of the pirated product depends on the nature of the pirate as well as on the nature of the market competition if the pirate is commercial. Under commercial piracy, when the original firm and the pirate compete in quantities, the conventional wisdom holds i.e. the more reliable the pirated product, the higher is the rate of piracy. However, the relationship is non-monotonic, hence the wisdom does not hold when they compete in prices or the pirates are the end-users.

The Canadian "Sir" Process: A Progress Report

Posted by D. Daniel Sokol

Mark Katz & Erika Douglas (Davies Ward) explore The Canadian "Sir" Process: A Progress Report.

ABSTRACT: In March 2009, the Canadian Competition Act's merger review process was amended to align it more closely with U.S. merger review under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR ACT"). The key change involved the adoption of an initial 30-day review period, which could be extended with the issuance by the Competition Bureau (the "Bureau") of a "Supplementary Information Request" ("SIR"). As a result of these changes, the Canadian merger review process is now more directly and closely analogous to the merger review process in the United States.

Convergence in the merger review processes between different competition agencies can generally be helpful for merging parties, reducing the complexity and cost of compliance while speeding up the timeline for competition approval. In the specific case of information gathering, convergence may enable parties to save time and money in collecting, reviewing, organizing, and producing the requested information and records.

There has now been sufficient experience with Canada's new SIR process to offer a few conclusions about the efficacy of its operation, and particularly whether it has helped to make it easier for merging parties to deal with information requests when issued by agencies in both Canada and the United States. As discussed in more detail in this article, the SIR process has functioned quite well in practice, although there still remain areas of divergence that can make the merger review process in Canada more difficult for parties and counsel involved in cross-border Canada/U.S. mergers.

Technical progress and product reliability under competition and monopoly

Posted by D. Daniel Sokol

Donald George (University of Edinburgh) describes Technical progress and product reliability under competition and monopoly.

ABSTRACT: Technical progress lowers costs and prices but appears to have an ambiguous effect on product reliabilty. This paper presents a simple model which explains this observation.

Regulated input price, vertical separation, and leadership in free entrymarkets

Posted by D. Daniel Sokol

Toshihiro Matsumura (University of Tokyo) and Noriaki Matsushima (Osaka University) review Regulated input price, vertical separation, and leadership in free entrymarkets.

ABSTRACT: We examine incentives of bottleneck facility holders to manipulate access charge accounting in free entry downstream markets. We consider the situation wherein one firm holds an upstream bottleneck facility and new entrants use it at the regulated price (access fee) to provide final products. The bottleneck facility holder affects the regulated input price. We investigate how vertical separation affects the incentive for manipulation and the resulting input price. We find that the results depend on whether the incumbent is the Stackelberg leader in the product market. If the incumbent cannot take leadership in the product market and faces Cournot competition, vertical separation reduces the incentive for manipulation and the resulting input price. The opposite result is derived when the incumbent can take leadership in the product market.

Scope economies, entry deterrence and welfare

Posted by D. Daniel Sokol

Cesaltina Pacheco Pires (CEFAGE-UE, Departamento de Gestao, Universidade de Evora) and Margarida Catalao-Lopes (CEG-IST, Instituto Superior Tecnico, Technical University of Lisbon) observe Scope economies, entry deterrence and welfare.

ABSTRACT: This paper develops a model where the incumbent may expand to a second related market so as to signal the existence of scope economies and deter potential entry. We show that the incumbent only expands to another market when scope economies are large enough. Thus expansion is indeed a signal of larger economies of scope and, for certain parameter values, it leads to entry deterrence. We show that the perfect bayesian equilibrium may involve entry accommodation, entry deterrence or a mixed strategy equilibrium. We investigate the welfare implications of prohibiting an entry deterrent expansion. In our model, such prohibition would always decrease consumer surplus. The welfare impact of preventing entry deterrence is ambiguous but negative for many parameter values.