Antitrust & Competition Policy Blog

First Sale Doctrine on a Blank Slate

Posted by Shubha Ghosh

On Tuesday, February 19, the Supreme Court heard oral arguments in Bowman v. Monsanto, a case involving the first sale doctrine and patented genetically modified seeds. When Bowman, an independent farmer from Indiana, planted soybean seeds purchased from the aftermarket supplied by granaries, he could not expect that nine Justices might produce new precedent on something as obscure as the first sale doctrine. But that new precedent vary likely will be the fruit of the aftermath of Bowman’s innocent efforts.

As the Court affirmed in its Quanta decision in 2008, the first sale doctrine allows a purchaser of a patented invention to resell the product or process embodying the invention. However, in the range of cases involving the first sale doctrine, the resold product or process could not recreate itself. The facts of Bowman introduce this wrinkle. Consequently, the Federal Circuit held that there was an exception to the first sale doctrine for “self-replicating technologies” such as seeds. The Court now has to decide whether such an exception is consistent with its precedent.

Judging from last Tuesday’s oral arguments, the Court seems poised to sidestep that question. Justice Breyer’s questions for Bowman’s attorney focused on the established point that the first sale doctrine allows the purchaser to resell, but not to make another copy of the product. Bowman, Justice Breyer asserted, did make another copy of the patented genome by planting the seed and germinating it. The other Justices followed similar lines of inquiry in favor of Monsanto. Surprisingly, Justice Scalia asked the Assistant SG whether limiting the first sale doctrine would disadvantage farmers in their replanting of seeds. In that vein, Justices Kagan and Sotomayor raised questions about innocent patent infringement by farmers not knowing which seeds are patented. All in all, though, the oral arguments signaled a victory for Monsanto.

Justice Breyer’s questions assume that there is no difference for patent infringement between making genetic material in the lab and making it through natural reproductive processes. But the word “make” in the Patent Act certainly encompasses the first but not the second. We know this because when Congress enacted the Patent Act it had enacted a separate statute to deal with plant patents. It was only in 2000 that the Court ruled in JEM v. Pioneer Hybrid that genetically modified plants could be protected by both the Plant Patent Act and the Patent Act. The Court will most likely continue this broadening of the Patent Act by ruling that “make” now includes planting seeds and having them grow through natural processes.

If the Court rules that Bowman does not have advantage of the first sale doctrine because he made another product, the decision would have the appearance of preserving the first sale doctrine without exception while benefitting distributors of inventions that self-reproduce. This holding would have implications not only for industries that create technologies from the life sciences but also for those making digital and other electronic inventions. In ruling for Monsanto, the Court will be reshaping the first sale doctrine for the age of biotechnology and digital technologies. Perhaps this is an appropriate result for a common law rule like the first sale doctrine in patent law. However, common law development should take into account the range of interests affected by the rule and not just patent owners. With Justice Scalia asking questions that are pro-farmer, could he actually be the savior of the first sale doctrine?

Big health: Consolidation and competition under the Affordable Care Act

Posted by D. Daniel Sokol

AEI presents

Big health: Consolidation and competition under the Affordable Care Act

About This Event

Friday, March 01, 2013 | 9:15 a.m. – 11:00 a.m.

AEI, Twelfth Floor
1150 Seventeenth Street, NW
Washington, DC 20036

US health care markets have become more concentrated over the last decade. How should policymakers ensure that the forces of competition will improve the cost and quality of health care?

Traditional antitrust enforcement tools have done little to halt extraordinary consolidation in local hospital markets, and the Affordable Care Act may encourage other health care providers and insurers to grow larger as well. Our expert panel will examine the current state of US health care competition and review policy reform options.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Agenda

9:00 AM
Registration

9:15 AM
Panelists:
Martin Gaynor, Carnegie Mellon University
Robert Murray, Catalyst for Payment Reform
Barak Richman, Duke University School of Law

Moderator:
Thomas P. Miller, AEI

11:00 AM
Adjournment

Event Contact Information

For more information, please contact Catherine Griffin at [email protected], 202.862.5920.

Indonesian Competition Policy and Law: Where It's Heading

Posted by D. Daniel Sokol

Deswin Nur (Indonesia Competition Commission) summarizes Indonesian Competition Policy and Law: Where It's Heading.

ABSTRACT: Indonesia may not be one of the famous countries in the world. Tourists mostly know Bali (one of the islands in Indonesia) rather than the country itself. Not too many people are aware that this country is the largest archipelago country in the world, as well as the largest economy in Southeast Asia, and is one of the emerging market economies of the world. Indonesia is also a member of G-20 major economies. In the 1960s, Indonesian economy deteriorated due to political instability, which led to severe poverty, unemployment, amid enormous annual inflation (up to 1,000 percent). That was then; the New Order administration under President Soeharto has brought a degree of discipline to economic policy that quickly tackles inflation, currency fluctuations, and attracts foreign aid and investment. The New Order has lasted for more than thirty years.

However, high levels of economic growth from 1987-1997 masked a number of structural weaknesses in Indonesia's economy. Growth came at a high cost in terms of weak and corrupt institutions, severe public indebtedness through mismanagement of the financial sector, the rapid depletion of Indonesia's natural resources, and a culture of favors and corruption in the business elite.

During those years, some Indonesian academicians raised the issue of a need for competition policy and law in Indonesia to guarantee a fair business environment in Indonesia. Debates were inevitable in drafting the law as many interests interfered. One fundamental debate was the structural issue on market share threshold, as the government, private sectors, and most economists agreed that the law should focus on conduct rather than structure. Limiting market share was deemed to be irrational and could be contra-productive toward national investment.

Despite these debates, in 1995 some academicians, together with parliament members, discussed major points that were expected to lead to a national competition policy and law. However, the draft was not favorably timed due to the political and economic situation during that period. The draft was then canned and no longer discussed.

Since 1997, as with many other countries in Southeast Asia, Indonesia has been in the center of a long and exhausting economic problem. The world economic downturn in 1998 severely damaged the Indonesian economy, which was crowded with enormous foreign debt. It was then believed that one of the factors that influenced the level of damages caused by the crisis was high market concentration in Indonesia, which had not been controlled by sufficient and clear competition policy. At that point, the International Monetary Fund ("IMF") presented a bail out package to assist many countries in Southeast Asia, including Indonesia, to help them rise from the crisis. However, the financial commitment was not cheap.

Among the fifty points in the January 1998 IMF Letter of Intent for its loan-rescue program, there were at least seven proposals for the need of a national competition law. Their over-all program was extensive and covered reforms in many areas, including reduction of some export taxes; elimination of the clove monopoly; liberalization of imports of many agricultural commodities; reduction of import tariffs; removal of trade monopolies in cement, rattan, and plywood; removal of local content requirements for automobiles; removal of restrictions on Foreign Domestic Investment; and enforcement of extensive macroeconomic targets. Furthermore, the IMF also required Indonesia to pass a law that would ensure fair competition in the market. This led to the initiative by Parliament to issue their long-standing draft law which was promulgated on March 5, 1999 as the Law No. 5/1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition.

Looking Ahead to 2015: Competition Outreach in ASEAN

Posted by D. Daniel Sokol

Simone Warwick (OECD) is Looking Ahead to 2015: Competition Outreach in ASEAN.

ABSTRACT: It is a good time to reflect on competition outreach and capacity building activities in the Association of Southeast Asian Nations ("ASEAN"). The start of 2013 brings ever closer the 2015 deadline for the ten ASEAN Member States to introduce nationwide competition laws and policy. That deadline is an integral part of a broader commitment to establish the ASEAN Economic Community ("AEC") by 2015. The AEC will be a single market with free movement of goods, services, investment, skilled labor, and a freer flow of capital.

The start of the year has also seen a new ASEAN Secretary-General take the helm. Mr. HE Le Luong Minh, the first Vietnamese Secretary-General of ASEAN, will serve a 5-year term. His inaugural speech made specific mention of the need for enhanced technical assistance to help ASEAN Member States meet their 2015 goals.

International Handbook on Unfair Competition

Posted by D. Daniel Sokol

Frauke Henning-Bodewig (Max Planck) has edited the International Handbook on Unfair Competition.

BOOK ABSTRACT: Written by a worldwide team of experts, this new work surveys and comments on the unfair competition laws of the world's leading economic powers. Following a standard pattern, each chapter introduces the reader to the latest developments in each jurisdiction, highlighting the ways in which the basic legislation and case law relates to enforcement issues, and how unfair competition laws fit with wider considerations of consumer protection and within prevailing intellectual property and competition law frameworks.

Each of the country reports follows the same standard structure: I. Background and General Approach to Unfair Competition Law. II. Legal Basis of Unfair Competition Law and Relations to Neighbouring Areas of Law III. General Considerations IV. General Clause Against Unfair Competition V. Marketing V. Protection of Competitors Against Unfair Trade Practices VI. Specific Protection of Consumers Against Unfair Trade Practices VII. Enforcement

The handbook includes country reports from the following countries: Australia, Austria, Brazil, Canada, China, France, Germany, Hungary, India, Italy, Japan, Lithuania, Netherlands, Poland, Spain, South Africa, Sweden, Switzerland, Turkey, UK, USA

IP Foreclosure & Antitrust Foreclosure

Posted by D. Daniel Sokol

Steven Semeraro, Thomas Jefferson School of Law battles over IP Foreclosure & Antitrust Foreclosure.

ABSTRACT: Professor Christina Bohannan’s IP Misuse as Foreclosure enlightens the debate over the patent misuse doctrine’s role in regulating intellectual property owners’ ever-expanding claims. Presently, courts scrutinize licensing restrictions under the antitrust laws only after determining that the IP holder has exceeded what the Federal Circuit has called the “exclusionary zone” of the IP right. Professor Bohannan wisely rejects this question-begging inquiry, explaining that “[e]very licensing agreement contains terms that are not express in the [IP] grant, and the beyond-the-scope test does not provide a meaningful way to determine which of these terms lies ‘within the scope’” To bring coherence to this area, Professor Bohannan would eschew the existing two-step test in favor of an exclusive focus on “the core IP values of promoting innovation and protecting access to the public domain.”

Commenting on her piece, Professor Thomas Cotter points out that antitrust law and IP policy cannot be distinguished so easily. IP holders simultaneously possess both (1) a property right to foreclose competition; and (2) a privilege to compete in an open market. As Professor Cotter recognizes, antitrust law, no less than IP policy, seeks to mediate these rights and privileges. He suggests broadening antitrust doctrine, if necessary, rather than using IP policy to condemn licensing restrictions as misuse that antitrust doctrine would otherwise permit.

The misuse problem, however, is more fundamental than either Professors Bohannan or Cotter suggest. IP policy and antitrust law seek precisely the same objectives — an optimal melding of a property-rights regime that insulates owners from competition, and a competitive regime in which everything that might constitute property is up for grabs. A coherent solution will not come from tweaking either IP or antitrust. Both already serve as syntheses of society’s dual commitment to property rights and competitive markets. Instead, the law must step back and focus directly on how one structures a legal regime that commits itself to these conflicting goals.

Part I summarizes existing law and Professor Bohannan’s proposal. Part II explains that since IP policy and antitrust doctrine share common goals, her approach essentially replicates what modern courts do in misuse cases. Part III suggests a potentially more fruitful path.

Developments in Vietnamese Competition Law and Policy

Posted by D. Daniel Sokol

Trinh Anh Tuan (Vietnam Competition Authority) offers Developments in Vietnamese Competition Law and Policy.

ABSTRACT: Beginning in the early 1990s, Vietnam started to open up its economy, promote external trade, and has received FDI capital. Its admission into ASEAN in 1995 marked the first important step in the process of Vietnam's integration with the international economy. ASEAN has decided to form an ASEAN Economic Community ("AEC") in 2015. According to the commitment among Member States, all ASEAN economies shall promulgate a competition law by 2015 to ensure a healthy and fair competition environment. On that basis, ASEAN member states will establish a mechanism for coordination and cooperation among ASEAN competition authorities to enforce competition laws and policies in ASEAN region.

Also, while in the process of negotiating accession to international trade/economic organizations like APEC or WTO, with respect to the competition area Vietnam was under great pressure to make a strong commitment to build a transparent legal framework, effectively implement competition policies, and establish an independent competition agency to ensure a level playing field for both local and foreign enterprises operating in Vietnam.

Along with reform and an opening-up policy, Vietnam's economy has achieved impressive growth in the late 20th and early 21st centuries. Rapid development of many industries and services has created competition pressure on enterprises and set out a requirement to build a legal framework to facilitate the competition environment. The transition from a centrally planned economy to a market-oriented economy with state management has raised awareness of a number of unfair competition acts or anticompetitive acts that can cause negative effects on economic development. In addition, the economy developed from a low starting point that included the existence of a number of sectors or areas characterized by state monopoly. This led to restrictions in the development of non-state enterprises and a negative impact on the competition environment in general.

Before the promulgation of the Competition Law, anticompetitive acts or monopolies in some specific areas had been regulated by separate and scattered provisions in a number of legislations such as the Ordinance on Price, the Ordinance on Telecommunications, the Law on Credit Institutions, Commercial Law, Electricity Law, etc. However, implementation of this type of legislation was not really effective, partly due to lack of a complete and consistent legal framework, lack of state management competency on competition and monopoly control, lack of sanctions, etc.

In that context, in 2000 the National Assembly and the Government saw the need to put the Competition Law into a legislative program. Vietnam Competition Law was passed by the National Assembly on November 9, 2004, and came into force on July 1, 2005. The Law was a result of a four-year process that saw various drafts circulated for comments from both domestic and international experts. The Competition Law is the first of its kind in Vietnam.

The Effects of Credit Competition on Banks’ Loan Loss Provision Timeliness: A Natural Experiment Across Contiguous State Borders

Posted by D. Daniel Sokol

Yiwei Dou, New York University (NYU) - Department of Accounting, Taxation & Business Law, Stephen G. Ryan, New York University (NYU) - Leonard N. Stern School of Business and Youli Zou, University of Toronto - Rotman School of Management have a paper on The Effects of Credit Competition on Banks’ Loan Loss Provision Timeliness: A Natural Experiment Across Contiguous State Borders.

ABSTRACT: Prior research has documented specific benefits, but not costs, of timelier loan loss provisioning for reporting banks and the overall financial system. We examine one such cost in this paper. We argue that potential entrants into a local loan origination market use incumbent banks’ reported loan loss provisions to assess incumbents’ loan underwriting quality and thus the desirability of market entry. By loan underwriting quality, we mean banks’ ability to evaluate credit risk to determine which loans to grant as well as the interest rates and other contractual terms of granted loans. Incumbents with better loan underwriting quality leave fewer profitable lending opportunities for potential entrants. We use variation in interstate branching deregulation across states from 1994 to 2005 as a natural experiment to investigate how increased threat of entry affects incumbent banks’ loan loss provision timeliness. We predict and find that incumbents more subject to entry reduce the timeliness of their bad news (but not good news) loan loss provisions to increase their perceived loan underwriting quality. Further, we predict and find variation in this behavior across loan origination markets attributable to incumbents’ loan portfolio composition and borrower turnover in those markets.

Information and Learning in Oligopoly: An Experiment

Posted by D. Daniel Sokol

Maria Bigoni, University of Bologna - Department of Economics and Margherita Fort, University of Bologna have an interesting paper on Information and Learning in Oligopoly: An Experiment.

ABSTRACT: This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.

Transparency and due process survey (please make time to take this)

Posted by D. Daniel Sokol

Below is a link to a survey on transparency and due process practices followed by competition enforcement agencies worldwide. This survey is being conducted in parallel to the Investigative Process Project (the "Project ") currently undertaken by the Agency Effectiveness Working Group ( "AEWG ") of the International Competition Network.  Through this survey, we are trying to gather information on actual experiences (both good and bad) of practitioners before different competition enforcement agencies.  A goal of this survey would be to assist the AEWG's work with respect to the Project, and to inform potential best practice principles that are developed in the area of transparency and due process.

 

We recognize that this survey may request potentially sensitive information about past or current matters pending before competition enforcement agencies. All of the specific responses gathered by this survey will be kept confidential and will only be seen by the three individuals below.  The results of this survey will be aggregated in a manner that protects both the identities of specific investigations or matters as well as the individual survey respondents, and a summary report will presented to the Project Chairs (the U.S. FTC and DG Comp) to give a meaningful overview of the survey responses.  All respondents will have an opportunity to review this summary report before it is provided to the Project Chairs.

 

We are forwarding this survey to you as an respected international competition law practitioner.  Please feel free to forward it to additional practitioners who may be interested in the Project.  Thanks in advance for participating in the survey, and please contact any of us if you should have questions.  The deadline for response to this survey is March 11. 

 

James F. Rill, ICN NGA, Baker Botts LLP, [email protected]

Chuck Webb ICN NGA, Baker Botts LLP, [email protected]

Sean Heather, ICN, NGA, U.S. Chamber of Commerce, [email protected]

 

CLICK HERE TO LAUNCH THE SURVEY

Margin Squeeze in the Telecommunications Sector: A More Economics-Based Approach

Posted by D. Daniel Sokol

Ramin Silvan Gohari, University of Fribourg, Department of Commercial and Business Law, advocates for Margin Squeeze in the Telecommunications Sector: A More Economics-Based Approach.

ABSTRACT: A margin squeeze occurs when a vertically integrated company, dominant in the supply of an indispensable upstream input, pursues a pricing policy which prevents downstream competitors from trading profitably, thereby leading to their ultimate exclusion from the downstream market.

In the telecommunications sector, where large ex-State firms still enjoy considerable market power, margin squeeze has long been frequent. Interestingly, the United States and the European Union have tackled this problem in considerably different ways. Dismayed by the idea of an antitrust court intervening in a company's price setting, the US Supreme Court held that margin squeeze was exclusively the domain of regulation. Conversely, the Court of Justice of the European Union has endorsed a modern economics-based approach enabling competition authorities to engage in a coherent and verifiable antitrust assessment of the price differentials that potentially amount to a margin squeeze.

This paper will argue that (1) the economics-based approach is the right solution in the European context, but that (2) this approach will only lead to convincing results if it includes a rigorous and transparent analysis of the effects on competition and consumers.

Developments in Competition Law and Policy

Posted by D. Daniel Sokol

Teo Wee Guan (Competition Commission of Singapore) explores Developments in Competition Law and Policy.

ABSTRACT: Singapore has consistently been ranked among the world's most competitive economies. Since it was founded, Singapore has relied on a set of sound economic policies focusing on trade openness, human capital development, and infrastructure development.

Singapore started developing a generic competition law following the recommendations of the Economic Review Committee in 2003 to create a pro-competitive business environment that would be more conducive for large and small businesses. This would serve as an extension of existing policies to create an open business and trade regime in Singapore, with an emphasis on continued market innovation and productivity.

Competition, Efficiency, and Stability in Banking

Posted by D. Daniel Sokol

Klaus Schaeck, University of Wales - Bangor Business School and Martin Cihak, World Bank offer thoughts on Competition, Efficiency, and Stability in Banking.

ABSTRACT: We examine the effect of competition on banking stability using a new measure of competition based on the reallocation of profits from inefficient banks to efficient ones (Boone, 2008). Examining a sample of European banks, we show that this measure does capture competition, that competition is stability-enhancing, and that the stability-enhancing effect of competition is greater for healthy banks than for fragile ones. Our results suggest that efficiency is the conduit through which competition contributes to stability and that regulators must condition policy on the health of existing banks.

Margin Squeeze in the Telecommunications Sector: A More Economics-Based Approach

Posted by D. Daniel Sokol

Ramin Silvan Gohari, University of Fribourg, Department of Commercial and Business Law has posted Margin Squeeze in the Telecommunications Sector: A More Economics-Based Approach.

ABSTRACT: A margin squeeze occurs when a vertically integrated company, dominant in the supply of an indispensable upstream input, pursues a pricing policy which prevents downstream competitors from trading profitably, thereby leading to their ultimate exclusion from the downstream market.

In the telecommunications sector, where large ex-State firms still enjoy considerable market power, margin squeeze has long been frequent. Interestingly, the United States and the European Union have tackled this problem in considerably different ways. Dismayed by the idea of an antitrust court intervening in a company's price setting, the US Supreme Court held that margin squeeze was exclusively the domain of regulation. Conversely, the Court of Justice of the European Union has endorsed a modern economics-based approach enabling competition authorities to engage in a coherent and verifiable antitrust assessment of the price differentials that potentially amount to a margin squeeze.

This paper will argue that (1) the economics-based approach is the right solution in the European context, but that (2) this approach will only lead to convincing results if it includes a rigorous and transparent analysis of the effects on competition and consumers.

The Liberalisation of the Postal Service Market in Estonia and Its Effect on Competition

Posted by D. Daniel Sokol

Juri Sepp, University of Tartu and Raigo Ernits, University of Tartu explore The Liberalisation of the Postal Service Market in Estonia and Its Effect on Competition.

ABSTRACT: The liberalisation of infrastructure sectors through opening up markets as a method for increasing the efficiency of infrastructure services is an international tendency. Emerging competition has been seen as an essential element in this process. On the other hand, the liberalisation of the market for universal services can cause several problems in ensuring quality and access to services. In this article we evaluate the results of liberalisation in the Estonian postal sector as an infrastructure specific sector offering a universal service in a decreasing market in a small country.

Protecting Consumers and Small Suppliers from Anticompetitive Conduct: The Goal with the Widest Support

Posted by D. Daniel Sokol

John B. Kirkwood, Seattle University School of Law advocates Protecting Consumers and Small Suppliers from Anticompetitive Conduct: The Goal with the Widest Support.

ABSTRACT: The goals of antitrust law continue to be debated because there is no single goal that is unambiguously correct. There is one goal, however, that now commands wider support than any other: protecting consumers and small suppliers from anticompetitive conduct – conduct that creates market power, transfers wealth from consumers or small suppliers, and fails to provide them with compensating benefits. This goal is the predominant objective in the legislative histories, it is broadly supported by the American people, it is easier to administer than total welfare, and it is now espoused by the majority of courts.

Proponents of total welfare advance two principal arguments, but neither warrants elevating it over consumer and small supplier protection. First, from a normative perspective, total welfare is arguably the superior goal because it considers the welfare of all participants in the economy, including producers and consumers outside the relevant market. It ignores, however, the transfer of wealth that anticompetitive conduct causes, a transfer that many people regard as exploitative and unfair. Second, from a legal perspective, total welfare is arguably the goal of section 2 of the Sherman Act because it allows a firm to gain monopoly power through superior efficiency. But this safe harbor is equally consistent with a consumer protection goal, since it encourages firms to succeed in the marketplace by providing customers with better products, lower prices, and wider choice.

Beyond price discrimination: welfare under differential pricing when costs also differ

Posted by D. Daniel Sokol

Yongmin Chen (University of Colorado) and Marius Schwartz (Georgetown) have written about Beyond price discrimination: welfare under differential pricing when costs also differ.

 ABSTRACT: We extend the analysis of monopoly third-degree price discrimination to the empirically important case where marginal costs also differ between markets. Differential pricing then reallocates output to the lower-cost markets, hence welfare can increase even if total output does not, unlike under pure price discrimination. To induce output reallocation the firm varies its prices but---again, unlike under pure price discrimination---with no upward bias in the average price. Due to this price dispersion, differential pricing motivated solely by cost differences will increase consumer surplus (and total welfare) for a broad class of demand functions. We also provide sufficient conditions for beneficial differential pricing in the hybrid case where both demand elasticities and marginal costs differ.

Aviv Nevo new DAAG for Economics at DOJ Antitrust

Posted by D. Daniel Sokol

I am happy to report that Northwestern's Aviv Nevo will take academic leave to serve the US government as the next chief economist (technically, as Deputy Asssitant Attorney General for Antitrust) at DOJ Antitrust. Aviv's econometrics writing is very good and he has been involved in a number of antitrust cases. This is a high quality choice for Bill Baer and the DOJ Antitrust team. I am sure that Aviv's family has much nachat (very well deserved) from his appointment.

Forward trading and collusion of firms in volatile markets

Posted by D. Daniel Sokol

Markus F. Aichele, Tubingen discusses Forward trading and collusion of firms in volatile markets.

ABSTRACT: Assuming deterministic demand Liski and Montero (2006) show that forward trading is able to facil- itate collusion. We present a more concise model incorporating the main reason for forward trading: Uncertainty. In general, uctuations make collusion harder to sustain (Rotemberg and Saloner, 1986). However, using forward contracts, rms are able to decrease the incentives to deviate from a collusive agreement even in very volatile markets. This makes collusive strategies more sustainable and decreases social welfare.

Do Retail Mergers Affect Competition? Evidence from Grocery Retailing

Posted by D. Dnaiel Sokol

Daniel S. Hosken, Government of the United States of America - Federal Trade Commission, Luke Olson, Government of the United States of America - Federal Trade Commission and Loren Smith, Government of the United States of America - Federal Trade Commission ask Do Retail Mergers Affect Competition? Evidence from Grocery Retailing.

ABSTRACT: This study estimates the price effects of horizontal mergers in the U.S. grocery retailing industry. We examine fourteen regions affected by mergers including both highly concentrated and relatively unconcentrated markets. We identify price effects by comparing markets affected by mergers to unaffected markets using both difference-in-difference estimation and the synthetic control method. Our results are robust to the choice of control group and estimation technique. We find that mergers in highly concentrated markets are most frequently associated with price increases, while mergers in less concentrated markets are most often associated with price decreases.