Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, April 30, 2013

Competition law enforcement in times of crisis

Posted by D. Daniel Sokol

Rene Smits, Netherlands Competition Authority and University of Amsterdam explores Competition law enforcement in times of crisis.

ABSTRACT: Since the start of the current economic crisis, there have been calls on competition authorities to take a step back in their enforcement activity. How should authorities respond to these calls? Professor René Smits, Netherlands Competition Authority and University of Amsterdam, addresses this question and provides recent examples of how ‘crisis cartels’ have been dealt with in the Netherlands and elsewhere.

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Commitments as Surrogates of Civil Redress in Competition Law: The Hungarian Perspective

Posted by D. Daniel Sokol

Csongor Istvan Nagy, University of Szeged, Faculty of Law; Budapest University of Technology and Economics discusses Commitments as Surrogates of Civil Redress in Competition Law: The Hungarian Perspective.

ABSTRACT: This paper analyses and evaluates the Hungarian Competition Office’s private enforcement generating decisional practice on commitments. It pertains to this practice that commitments often remedy the detrimental consequences of competition violations and provide compensation for the victims. The paper examines what role commitment procedures could have in promoting competition law’s private enforcement.

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Norman Siebrasse on Comparative Patent Remedies

Posted by Norman Siebrasse

Tom Cotter’s “Comparative Patent Remedies A Legal and Economic Analysis,” is a beautiful piece of scholarship. Cotter demonstrates a remarkable mastery of the remedial law of multiple jurisdictions. His book is worth reading for its descriptive value alone. It is also very clearly written. Difficult points of both doctrine and policy are described in a way that makes it easy to understand both the fundamental principles and issues as well as details of the law and refinements of the policy debate. His policy analysis is both thorough and judicious, with well-balanced analysis that marries theoretical and pragmatic points. As it happens, I agree almost entirely with the his basic approach, and with most of the details. This is really a pleasure, as always I have the sense that any disagreements will be productive, rather than merely talking at cross purposes. But even those who do not agree as wholeheartedly with his framework will find this book useful, as Cotter is very careful to define and justify his approach. If you do find yourself in disagreement, at least you will know exactly where you disagree, and why. Consequently, this book is an essential foundation not just to comparative patent remedies, but to the policy analysis of patent remedies generally.

Cotter’s book is, as he emphasizes, not just a work of comparative law, but a work of comparative law and economics (p 33). This leads to a tension. Is the focus to be on comparison of a particular facet of the law in different systems in light of economic analysis, or is the focus to be on assessing different systems of law in light of an economic analysis? Put another way, is the analysis to be organized by legal rule, or by legal system? In his introductory chapter Cotter indicates that he will take the first route. He says that his methodology will be “(1) identifying differences and similarities among states with respect to the competing rules, standards, or institutions at issue; (2) positing possible reasons for the relevant features and their differences, if any, from the practices of other states; (3) evaluating the plausibility of posited reasons for the observed features and differences; and (4) where possible, reaching a normative judgment as to the merits of the competing rules, standards, or institutions” (p 35). But as the book is actually laid out, it largely embodies the second approach. Chapter 2 sets out Cotter’s law and economics framework, and Chapter 3 assesses US law in light of this framework, with very little reference to the law of other jurisdictions. Subsequent chapters, focusing on different legal systems, also critique those legal systems primarily in terms of Cotter’s economic framework, though, in contrast with the US chapter, there are regular references to contrasting rules discussed in other chapters. So, despite his introductory statements, I would characterize his methodology as focusing primarily on comparative law and economics, with an admixture of comparative law.

This is not intended as a criticism. Using economic analysis as the tertium comparationis for assessing different legal systems is an entirely legitimate and productive approach. Any kind of comparative law grounded in a systematic normative theory faces a three-way comparison between the rule, the legal system and the normative framework. Indeed, I think the way Cotter has actually carried out his project is preferable to a focus on individual rules. The law and economics focus is often productive in its own right. So, for example, one crucial point emphasized by Cotter is that in assessing monetary remedies it is essential to consider the likelihood that, but for the infringement, the defendant would have competed using the best non-infringing alternative. That is, it is not the patentee’s lost profits that should constitute damages, but the difference between the profits that were actually made and those that would have been made had the infringer competed using the best non-infringing alternative. This may be referred to as the patentee’s “differential loss” (my term, not Cotter’s). Conversely, the infringer’s differential profit is the difference between its actual profit and that which it would have earned using the best non-infringing alternative. It is the differential loss (or profit) that represents the loss (or profit) caused by the infringement (p 9). As Cotter points out, some legal systems are simply deficient in failing to recognize this: see eg the discussion of the English House of Lords decision in United Horse Shoe (p 188).

Moreover, as Cotter’s chapters show, individual rules must be assessed as part of a system. For example, the popularity of an accounting of profits in Canada as compared with Germany may be due to the more limited discovery in Germany making proof more difficult (p 271). While I am not a comparativist by training, it strikes me that the comparative law aspect of the comparative law and economics project must consequently be undertaken at a higher level of generality than the individual rule, though a comparison at the full system level is likely to be too unwieldy to be productive. An intermediate level of generality is required, perhaps focusing on a functional objective. Cotter’s tertium comparationis approach provides the essential foundation for this type of functional analysis.

I will try to illustrate this functional comparison by considering the question of deterrence in Canadian and US law. To do so I need to set out Cotter’s basic approach, and to quibble with it slightly. Cotter’s basic premise is that “courts should take as a given the judgment that patent rights in general. . .generate a surplus of social benefits over costs,” and consequently “patent remedies should be designed so as to preserve the incentive structure and trade-offs that are embodied in the existing substantive law” (pp 50-51). This is a remedial premise; it is not to assert that the existing regime does generate a net social surplus, but rather that if it does not, that shortcoming should be addressed by changing the substantive law rather than by judicial under-compensation in particular cases. Indeed, this is largely a principle of monetary remedies; Cotter notes that existing law relating to injunctive relief requires the court to consider broader public interest considerations, and he does not doubt the propriety of doing so (p 50).

In summarizing the implications of this premise for monetary remedies, Cotter describes five principles. The first principle is that (1) “in order to preserve the patent incentive implicit in the substantive law, the law of damages. . . should ensure that the patentee winds up no worse off. . .than she would have been, but for the infringement” (p 63). His second principle is that, (2) “absent some compelling reason, courts generally should not award the patentee more than would be necessary to restore her to the position she would have occupied, but for the infringement.” Cotter argues that a contrary rule would have two consequences: (2a) “The first is that potential users rationally would be over deterred from engaging in some marginally lawful conduct” (p 64); and (2b) “the prospect of recovering such awards may encourage some patent owners to lie in wait, as it were, rather than to negotiate up front before the user has committed to the arguably infringing design—a type of conduct sometimes referred to as ‘patent ambush’” (p 65). These substantive principles are tempered by subsidiary principles that accuracy may have to be compromised for simplicity, and that ease of administration must be considered.

My quibble is that this framework conflates distinct effects on the patentee and the (potential) infringer. As Cotter emphasizes throughout Chapter 2, the infringer’s differential profit is not generally the same as the patentee’s differential loss. For example, if the infringer competes directly with the patentee but is less efficient at manufacturing, the infringer’s gain will be less than the patentee’s loss. On the other hand, if the infringer sells into markets that would not have been tapped by the patentee, the infringer’s gain will be more than the patentee’s loss. It is therefore useful to consider separately the traditional goal of remedies, namely compensation and deterrence.

Compensation looks to the effect on the plaintiff, which is to say the patentee. In order to preserve the incentive to invent, the patentee should not be under-compensated; that is, the patentee should be placed in a position at least as good as that which it would have been in but for the infringement. This is Cotter’s first principle. Because Cotter’s second principle also looks to the patentee, it amounts to saying that over-compensation should be avoided. The justification for this, based on the effect on patentee behaviour, is that parties may be more inclined to seek patents for litigation value rather than innovation value, and then lie in wait rather than negotiating ex ante; this is what I have labeled Cotter’s justification 2b. But Cotter’s justification 2a, over-deterrence of potential users, does not support his principle 2. Deterrence looks to the effect on potential infringers, not the patentee. A potential user will only be deterred by a monetary award if the user would be made worse off by that award than it would have been had it not infringed (neglecting litigation costs and sunk costs of developing the infringing product). Because the patentee’s loss may be less than the infringer’s gain, an award that lies between the two may simultaneously over-compensate and under-deter. Put another way, there is a difference between an over-compensatory award, which is greater than the patentee’s differential loss, and a punitive award, which is greater than the infringer’s differential profit. So I consider Cotter’s justification 2a to support the distinct principle that the court should not award the patentee an amount that would make the infringer worse off than if it had not infringed; that is, over-deterrence should be avoided.

This leaves an obvious gap in a four-way scheme, namely the principle that under-deterrence should be avoided. Cotter does state and discuss this principle at length, in particular at p 52 where he notes that “Absent litigation and other costs, the minimum damages necessary to deter the unauthorized use by the less-efficient infringer would be (some minute increment above) the infringer’s profit attributable to the infringement.” (I would tweak this to refer to the expected minimum damages.). But in his five summary principles, deterrence as such is discussed primarily in the context of the fifth principle “that courts may from time to time wish to consider damages multipliers or other more extensive remedies to correct for a low probability that the infringement will be detected” (72). To my mind, this is not the same as the principle that under-deterrence should be avoided by ensuring that expected damages are equal to the infringer’s profits. Even with perfect enforcement, damages equal to the patentee’s differential loss will under-deter if the infringer’s differential gain is larger than that loss. Another difficulty is that while the enforcement problem is perhaps the main reason why expected damages may be less than actual damages, it is not clear that a multiplier based on damages, understood as the patentee’s differential loss, will provide the correct deterrence, which turns on the infringer’s differential profit.

In my view, the two primary principles are that under-compensation and over-deterrence should be avoided. Adequate compensation goes to the heart of the patent incentive. But I would argue that over-deterrence – not under-deterrence – is the other major problem. As Cotter explains, over-deterrence is a consequence of incomplete information (p 64). With perfect information a monetary remedy could not over-deter because the potential infringer could avoid being made worse off by avoiding infringement in the first place. Put another way, with perfect information the optimal remedy would be punitive. But information is not perfect, so punitive remedies may deter non-infringing conduct. While Cotter refers to this as “marginally lawful conduct,” the downside is not necessarily marginal. First, the “margin” may be very large, but as importantly, we do not want to discourage potential infringers from challenging the validity of patents, as there is a large positive externality to doing so. The current trolls debate highlights the crucial importance of avoiding over-deterrence. In contrast, under-deterrence is certainly a concern, but so long as under-compensation is avoided, the patent incentive is not impaired. The argument for under-deterrence turns on the degree to which damages that are in principle compensatory are actually under-compensatory in practice.

With this framework, consider the different treatment of deterrence in the US and Canadian systems. In the US, an accounting of profits is no longer an available remedy, but treble damages may be awarded for wilful infringement, while in Canada, a patentee can normally elect an accounting, but punitive damages are very rarely awarded (both are discretionary in principle.)

The difficulty with the US approach is that while compensatory damages alone may not provide an adequate deterrent, treble damages is a crude instrument that risks doing more harm than good. Because of the risk of over-deterrence, it is confined to cases of wilful infringement, but information costs mean that the wilfulness line is imperfect. If it is too narrowly drawn, it will not provide adequate deterrence in cases where wilfulness is not established; but if it is too broadly drawn, the risk of treble damages will result in over-deterrence.

In contrast, in the Canadian approach punitive damages are rarely awarded, thus avoiding the risk of over-deterrence and the need for a difficult wilfulness inquiry. The accounting remedy provides adequate deterrence because it deprives the patentee of its differential gain, without being punitive, in the sense that it does not make the infringer worse off than it would have been had it never infringed: see the discussion by Zinn J in Monsanto Canada Inc v Rivett 2009 FC 317 ¶¶22-27 (var’d 2010 FCA 207). This means an accounting avoids both under- and over-deterrence. The goal of avoiding under-compensation is also achieved because a patentee is always entitled to elect damages. The only drawback of the accounting remedy is that it may be over-compensatory, which, as explained above, is a relatively minor drawback. In this analysis I have to disagree with Cotter’s remark at p 149, in discussing the US system, that “If the analysis presented in chapter 2 is correct, this decision [to abolish the accounting remedy in utility patents] may have been correct, if such awards pose a substantial risk of overdeterrence of lawful conduct.” In my view, an accounting does not present a risk of over-deterrence, because it is not punitive. Cotter points out at p 197 that any risk of over-deterrence is largely avoided if the profits are assessed as differential profits over what would have been earned by the infringer using the next best alternative. That principle is now well-established in Canadian law: Monsanto Canada Inc v Schmeiser 2004 SCC 34 ¶ 102. The risk of over-deterrence therefore arises only from litigation and sunk costs (and the latter depends on how sunk costs are treated in the accounting calculation, which is too complex to discuss here). The other objection to an accounting, which led to its abolition in the US, is the purported complexity of this remedy. However, there is no reason in principle why calculating differential profits should be any more difficult than calculating differential costs; the mechanics are exactly the same, and the only difference is whether the inquiry is focused on the patentee or the infringer. The Canadian experience bears this out.

This is by no means to say that the Canadian remedial system is perfect. It is to say that comparative economic analysis of patent remedies has the potential to improve patent remedies everywhere. As the debates over patent trolls and standard-essential patents show, improved remedies is one crucial part of the pressing task of improving the global patent system. Cotter’s book is the essential foundation for this project.

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Marketa Trimble on Comparative Patent Remedies

Posted by Marketa Trimble

In most cases sound legal advice begins with an attorney learning about the outcome a client wishes to achieve. Matching the desired outcome with an appropriate strategy allows the attorney to recommend litigation and other actions that are most likely to steer the course of events to the desired outcome. Patent cases are no different. A client facing an opponent (who may or may not be a competitor) who manufactures, uses, offers to sell, or sells a product that infringes the client’s patent might have a number of outcomes in mind – preventing the alleged infringer from offering the product online (or making the alleged infringer stop selling the product online), preventing the alleged infringer from offering the product at a trade show, getting damages for infringements, preventing or stopping the importation of cheaper products from abroad, or perhaps gaining leverage for future licensing negotiations.

Increasingly, legal and business advice must be based on multi-jurisdictional strategies as the number of cross-border cases – cases that involve foreign-country parties and/or conduct in foreign countries – increases. The competitor in the example above might be manufacturing in China while offering to sell worldwide via his website that is hosted in Sweden with a domain name registered in the United States, while at the same time offering to sell in the United States at a trade show in Germany and also selling in Japan. In cross-border cases, a client’s expectations create complex scenarios calling for an assessment of the potential impact of national conflict-of-laws rules (rules of jurisdiction, choice of law, and recognition and enforcement of foreign judgments) and patent and other substantive national laws. As is the case in a single-country scenario, the cross-border context requires the knowledge of possible remedies, their availability, their scope, and their effectiveness in practice if an attorney is to provide competent advice and shape an effective course of action for the client.

In order to be able to advise clients on cross-border matters, lawyers need to be familiar with remedies that are available in other countries and how foreign courts award and enforce the remedies. Some remedies are already aligned across most countries because of international treaties (most particularly under the TRIPS Agreement), which provide for some basic minimum standards that countries must meet when designing remedies in intellectual property cases. However, because of various flexibilities that have been included in the treaties, national laws may contain significant differences in the remedies they make available. In the European Union, the EU IPR Enforcement Directive (2004/48/EC) addresses the availability of remedies in intellectual property cases throughout the Union but still allows individual member countries of the Union to vary their laws. Because an individual lawyer is unlikely to be able to master the systems of remedies of all or even multiple countries, consulting a local lawyer with specific knowledge of a particular national law will always be advisable at some point. But all lawyers need to be aware of the existence of differences in national rules on remedies and appreciate the potential extent and effects of the differences.

As have other areas of law, patent law has been exposed to the increasing globalization of the legal practice. Although it was virtually non-existent just a couple of decades ago, cross-border patent litigation exists and – as recent empirical work suggests – appears to be on the rise. With more and more cross-border issues appearing, lawyers need comparative information about remedies available in patent disputes. Therefore, Thomas Cotter’s book Comparative Patent Remedies: A Legal and Economic Analysis (Oxford University Press 2013) is an extremely timely and most welcome contribution to the comparative literature on intellectual property law and the law of remedies.

In looking beyond U.S. borders, Cotter relies on his deep expertise in U.S. patent remedies from his previous publications. His knowledge enables him to detail a theoretical framework for remedies from a law and economics perspective (pp. 39-75), and it is within this framework that he presents his description and analysis of the law and practice of remedies in the United States (which covers slightly more than a fifth of the book – pp. 76-162), and several foreign countries, including the major patent litigation countries – the United Kingdom, Germany, and China. The coverage of countries is impressive because publications spanning this number of countries rarely appear in single-author monographs – they usually result from an international collaboration of several authors.

What makes the book particularly enjoyable – in addition to its feeding the curiosity that a comparative perspective generates – are Cotter’s balanced views on many of the issues discussed in the book. For example, the cost-benefit analysis of intellectual property protection (pp. 28-29) shows Cotter’s careful thought about the effects that intellectual property law and policy have had on the economy and society. Cotter does not claim that one national system is inherently better than another; he appreciates the complexity of individual systems in the context of their historical, social, economic, and other backgrounds (pp. 34 and 379-382). Similarly, he has a balanced position on the role that courts should play in enforcing patent laws; while he argues that courts should apply the law as it is, he acknowledges that courts do have a policy function (pp. 49-50).

Cotter also presents a balanced view in his analysis of the potential role of law and economics in shaping intellectual property laws; he does not claim that law and economics provides answers to everything, and he is aware of the limitations inherent in a law and economics analysis. At the same time, he maintains that the analysis “can be a useful tool for better understanding the workings of IP systems in general and of the system of patent remedies in particular” (p. 32).

Given Cotter's focus on a comparative law and economics analysis it is possible that readers who focus on law and society might miss a law and society insight, such as information about the public relations aspects of litigation in various countries or the likelihood of a party’s nationality affecting the outcome of patent litigation and thus the availability of remedies. While these aspects would certainly be susceptible to close comparative scrutiny as well and may impact the strategies that parties adopt in patent disputes, such an analysis is outside the scope of Cotter’s endeavor in this book.

The law and economics focus of the book also explains why Cotter does not discuss non-economic remedies. Although he covers injunctions and declaratory judgments, he does not mention remedies that are not designed to have a direct and immediate economic impact. One such example is a publicity measure – a court’s order to disseminate information about the court’s decision in a case (see, e.g., Article 15 of the EU IPR Enforcement Directive (2004/48/EC)); another example is a court-ordered public apology. That these types of remedies have a place in the patent litigation landscape was recently confirmed in the Samsung v. Apple design patent saga (see Judge Briss’s order in Samsung v. Apple, Chancery Division, July 2012). The omission of these remedies from Cotter’s book is understandable, not only because of their non-economic nature but also because of their minimal impact, if any, on a party’s choice of litigation strategies.

If there is any additional analysis that could be added to the book’s comparative analysis of patent law remedies, it would be a discussion of the scope of injunctions that are available in the various countries. While patent injunctions tend to be phrased similarly across countries, the actual scope of injunctions can vary significantly – in terms of the conduct they prohibit or order and also the products that they cover. Of course, a comparative study of the differences in the scopes of injunctions would itself fill an entire book – it would require a comparison of countries’ interpretations of the scope of patent rights (including their territorial scope) under their national laws and also an analysis of the standards that courts apply when they enforce injunctions and determine whether a design-around falls within the scope of an injunction. Given the magnitude of such a study it is not surprising that an author as detail-oriented as Cotter chose to leave the problem of injunction scope for another study.

The book’s focus on patent law remedies, or remedies that might be available in patent cases (which may or may not be strictly patent law remedies, meaning remedies stemming from a national patent act), raises another understandable limitation: the book does not cover instances in which patent protection overlaps with protection provided by other intellectual property or other laws that may provide for additional or alternative remedies (p. 18). In practice, the consideration of such additional protection is of paramount importance; an attorney should evaluate all scenarios comprehensively and explore all legal and extra-legal options available to the client. By focusing on patent law remedies Cotter provides a solid building block and suggests that future work contribute additional blocks to construct a comprehensive structure of knowledge about remedies.

Though he set out to write the book to “fill the gap [he] perceived in the scholarly literature” (p. xi), Cotter does a remarkable job of speaking to a variety of audiences. He has produced a work of scholarship that is not only intriguing to academics but also easily accessible for practitioners – whether they practice in the United States or elsewhere. The book will also be valuable reading for law students interested in patent law. Some critics could view a wide breadth of potential audiences negatively – as a sign that a book does not have a focus that is sufficient to satisfy a single category of readers. However, Cotter’s book’s wide appeal corresponds to the best tradition of the legal profession – a tradition based on perpetual learning, the mutual dependence between practice and theory, and the perspective of both practitioner and academic.

The book gives valuable insights that should resonate with the well-rounded attorney – an attorney who appreciates the interrelationships between the practical and the academic. As such the book spurs our thinking about the future course of legal education – a current topic of hot debate. Perhaps law schools should educate the type of students who want to read this book – future lawyers who will always want to stay abreast of current law, learn about new and novel developments in legal doctrine, understand the trends that influence current practice, and understand theoretical frameworks and policy arguments. These future lawyers should continually strive to understand how other countries approach legal issues, because it is only with this knowledge that they will be able to provide superior advice to their clients in cross-border scenarios and identify specific policy choices made in other countries that might be worth following or avoiding in the United States (pp. 8-9).

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Blog Symposium for Tom Cotter's Comparative Patent Remedies: A Legal and Economic Analysis

Posted by D. Daniel Sokol

Today we are hosting a book symposium on a new book by Tom Cotter (University of Minnesota) - Comparative Patent Remedies: A Legal and Economic Analysis. Providing commentary are: Norman Siebrasse (University of New Brunswick), Marketa Trimble (UNLV) and Peter Yu (Drake).

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Recent Competition Law Enforcement in Korea: Arbitrary and Capricious

Posted by D. Daniel Sokol

Nam Woo Kim, LG Electronics describes Recent Competition Law Enforcement in Korea: Arbitrary and Capricious.

ABSTRACT: The Korean Competition Law, 'Monopoly Regulation and Fair Trade Act (MRFTA),' has a similar provision, Sectio 23 to Section 5 of the Federal Trade Commission Act (FTC). Precisely speaking, Section 23 is close to Section 5 of the FTC Act before the 1980s, which was protecting competitors, not competiton. Section 23 of the MRFTA broadly restricts business conduct under the principle of unfairness. In a recent case, the Korean Fair Trade Commission (KFTC) banned vertical agreement of KookSoonDang (KSD), a Korean traditional liquor company, to split the market between its distributors. The KFTC, without sophisticated economic analysis on the interbrand competiton or horizontal market, ruled that vertical agreement to carving out the market substantially restrain the intrabrand competition. The decision demonstrated that intracompetition should be envigorated.

Contrastingly, the KFTC has implemented so-called distance limit on the franchise contracts. The KFTC alleged that the frachisors had taken advantage of their power so as to hatch too many franchisee stores without considering proper profit level of the franchisees. Therefore, cutthroating intra-brand competition has been resulted so that mitigation tool, distance limit, is needed to lessen intrabrand competition.

The KFTC's policies are arbitrary and even capricious. Competition law and policy, due to broad wording, need consistent enforcement principles to save compliance cost for market players.

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Registration Open for AAI's 14th Annual Conference - Wednesday June 12, 2013

Posted by D. Daniel Sokol

Registration Open for AAI's 14th Annual Conference

                

The AAI's 14th Annual Conference will cover a variety of issues relating to antitrust compliance. This conference will focus on the changing role of in-house counsel and of counseling generally with respect to antitrust compliance, taking special account of international enforcement trends affecting global competitive strategies. CLE credits are anticipated.

Tuition for this program is $500 with a discounted rate of $120 for government employees, educators, public interest advocates, and students.

Register Here.

 

April 30, 2013 | Permalink | Comments (0) | TrackBack (0)

On Vertical Market Structure and Buyer Countervailing Power

Posted by D. Daniel Sokol

Xu-liang WU, Center for Industrial and Business Organization,DUFE,China provides thoughts On Vertical Market Structure and Buyer Countervailing Power.

ABSTRACT: The paper redefines different types of vertical market structure, such as double monopoly, bilateral monopoly, and two-sided monopoly. The core issue can be stated as follows: When there is bilateral monopoly, what are the differences between two-sided monopoly and one-sided monopoly as far as welfare consequences of retailers’ rising buyer power are concerned. The results show that in tow-sided monopoly situation, from consumer welfare perspective, the results of vertical integration are better than the results of vertical separation, whereas in one-sided monopoly situation, the results of vertical separation are better than the results of vertical integration, so the vertical market structure of one-sided monopoly or one-sided competition effectively overcomes double marginalization problem, to counter the forces at this time the buyer countervailing power hypothesis is somewhat reasonable. Taking Inter-period factor into account, this conclusion is even more credible.

April 30, 2013 | Permalink | Comments (2) | TrackBack (0)

Monday, April 29, 2013

There is Still Time to Register for either - Antitrust Provisions in IP Deal Documents - May 1, 2013 program held at Google HQ (dial in number available too)

Posted by D. Daniel Sokol

ABA Section of Intellectual Property Law
Antitrust Interface with Intellectual Property Committee
In cooperation with
ABA Section of Antitrust Law Intellectual Property Committee
Present
Antitrust Provisions in IP Deal Documents
May 1, 2013
1:00-2:00 pm (EDT)

In this program hosted by the ABA Section of Intellectual Property Law and ABA Section of
Antitrust Law, panelists will discuss antitrust-related provisions in transactions involving
intellectual property, including cross-licenses with non-practicing entities, patent pools, grant
backs, and the reacquisition of intellectual property.
Click the “REGISTER NOW” button to register for the dial-in program.
(http://bit.ly/11beH2d)
Dial-in information will be provided in your confirmation.

Moderator
Rosie Lipscomb, Google, Inc.

Panelists
Mark Nelson, Partner, Cleary Gottlieb Steen & Hamilton LLP
Mark Popofsky, Partner, Ropes & Gray LLP
Logan Breed, Partner, Hogan Lovells LLP

In-Person Attendance Location
Google Inc.
1600 Amphitheater Parkway, Building 43
(Benghazi Conference Room)
Mountain View, CA
To attend in person, please rsvp to
Makala Kaupalolo at
makalak@google.com.
Space is limited.

CLE
The ABA is not seeking CLE accreditation for this
program.
Questions? dorothy.grantbryant@americanbar.org

For the program pdf see the link below:

Download Antitrust Committee Program May 1, 2013 (v2)[1]

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

The Making of Competition Policy: Legal and Economic Sources

Posted by D. Daniel Sokol Daniel A. Crane (Michigan) and Herbert Hovenkamp (Iowa) have edited The Making of Competition Policy: Legal and Economic Sources.

BOOK ABSTRACT: This book provides edited selections of primary source material in the intellectual history of competition policy from Adam Smith to the present day. Chapters include classical theories of competition, the U.S. founding era, classicism and neoclassicism, progressivism, the New Deal, structuralism, the Chicago School, and post-Chicago theories. Although the focus is largely on Anglo-American sources, there is also a chapter on European Ordoliberalism, an influential school of thought in post-War Europe. Each chapter begins with a brief essay by one of the editors pulling together the important themes from the period under consideration.Read the introduction here.

Introduction

Chapter 1. Classical Theories

Adam Smith, The Wealth of Nations
David Ricardo, Principles of Political Economy and Taxation
John Stuart Mill, Principles of Political Economy

Chapter 2. Federalism, Antifederalism, and Jacksonianism

Max Farrand, Records of the Federal Convention of 1787
Agrippa, To the People
Alexander Hamilton, Contintentalist
Thomas Cooley, Limits to State Control of Private Business

Chapter 3. Classicism, Neoclassicism, and the Sherman Act

Alfred Marshall, Principles of Economics
Arthur Twining Hadley, Economics: An Account of the Relations Between Private Property and Public Welfare
Henry Rand Hatfield, The Chicago Trust Conference (of 1899)

Chapter 4. Progressivism and the 1912 Election

Theodore Roosevelt, The Trusts, the People, and the Square Deal
William Howard Taft, We Must Get Back to Competition
Woodrow Wilson, The Tariff and the Trusts

Chapter 5. Imperfect, Monopolistic, and Workable Competition

Edward Chamberlin, The Theory of Monopolistic Competition
Joan Robinson, The Economics of Imperfect Competition
John Maurice Clark, Toward a Concept of Workable Competition

Chapter 6. The New Deal and the Institutionalists

Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property
Louis Brandeis, The Curse of Bigness
Rexford Tugwell, The Industrial Discipline and the Governmental Arts
Thurman Arnold, The Bottlenecks of Business

Chapter 7. Antitrust After Populism

Richard Hofstadter, What Happened to the Antitrust Movement?

Chapter 8. Ordoliberalism and the Freiburg School

Franz Böhm, Walter Eucken & Hans Grossmann-Doerth, The Ordo Manifesto of 1936
Franz Böhm, Democracy and Economic Power

Chapter 9. Competition and Innovation

Joseph Schumpeter, Capitalism, Socialism and Democracy
Kenneth Arrow, Economic Welfare and the Allocation of Resources for Invention

Chapter 10. Structuralism

Joe Bain, Industrial Organization
Carl Kaysen and Donald Turner, Antitrust Policy: An Economic and Legal Analysis
The Neal Report (1967)

Chapter 11. The Chicago School

George Stigler, The Organization of Industry
Aaron Director and Edward Levi, Law the Future: Trade Regulation
Robert H. Bork, The Antitrust Paradox
Richard A. Posner, The Chicago School of Antitrust Analysis

Chapter 12. Transactions Costs Economics and the Post-Chicago Movement

Oliver Williamson, Markets and Hierarchies: Analysis and Antitrust Implications
F.M. Scherer, Conservative Economics and Antitrust: A Variety of Influences
Herbert Hovenkamp, Post-Chicago Antitrust: A Review and Critique

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

State-Controlled 'National Champions' of the Russian Banking Market: Concentration, Competitiveness and Efficiency

Posted D. Daniel Sokol

Andrei Vernikov, National Research University Higher School of Economics, Institute of Economics Russian Academy of Sciences, State-Controlled 'National Champions' of the Russian Banking Market: Concentration, Competitiveness and Efficiency.

ABSTRACT: This paper tries to assess some of the effects from industrial policy of growing state-controlled “national champions” in the Russian banking industry. We look at market concentration and competitiveness and average bank efficiency. A modified method of calculating the indicators of market concentration suggests that main segments of the market have crossed the threshold of high concentration, whereas household deposits market became close to a monopoly situation. High market share of core public banks enhances their market power and explains their higher profitability as compared to other groups of market players. Replacement of direct state control by indirect control and the comparative efficiency of banks representing different forms of ownership are also discussed.

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Journal of Antitrust Enforcement (OUP) – First issue published and freely available online

Posted by D. Daniel Sokol

The first Issue of the Journal of Antitrust Enforcement (JAE) has now been published in hard copy and is also available online.
 
The JAE covers a wide range of enforcement related topics, including: public and private competition law enforcement, cooperation between competition agencies, the promotion of worldwide competition law enforcement, optimal design of enforcement policies, performance measurement, empirical analysis of enforcement policies, combination of functions in the mandate of the competition agency, competition agency governance, procedural fairness, competition enforcement and human rights, the role of the judiciary in competition enforcement, leniency, cartel prosecution, effective merger enforcement and the regulation of sectors.
 
Volume 1, Issue 1, April 2013:
 
·       Peter Freeman ‘The Competition and Markets Authority: can the whole be greater than the sum of its parts?’
·       William Blumenthal ‘Models for merging the US antitrust agencies’
·       Wouter P. J. Wils ‘Antitrust compliance programmes and optimal antitrust enforcement’
·       Joshua D. Wright and Angela M. Diveley ‘Do expert agencies outperform generalist judges? Some preliminary evidence from the Federal Trade Commission’
·       Barry J. Rodger ‘Why not court? A study of follow-on actions in the UK’
·       John Temple Lang ‘The strengths and weaknesses of the DG Competition Manual of Procedure’
·       Maurice E. Stucke ’Is competition always good?’
·       Caron Beaton-Wells and Christine Parker ‘Justifying criminal sanctions for cartel conduct: a hard case’
 
For free access to these articles click here.
 
Advanced access to articles from Issue 2:
·       Terry Calvani and Kaethe M. Carl ‘The Competition Act 2002, ten years later: lessons from the Irish experience of prosecuting cartels as criminal offences’
·       Edward M. Iacobucci ‘Cartel class actions and immunity programmes’
·       Malcolm B. Coate ‘The use of natural experiments in merger analysis’
 
For free access to these articles click here.
 
 

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Mergers When Prices are Negotiated: Evidence from the Hospital Industry

Posted by D. Daniel Sokol

Gautam Gowrisankaran, University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER), Aviv Nevo, Northwestern University - Department of Economics; National Bureau of Economic Research (NBER) and Robert J. Town, University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER) analyze Mergers When Prices are Negotiated: Evidence from the Hospital Industry.

ABSTRACT: In healthcare and other bilateral oligopoly markets, prices are often negotiated by the contracting parties. Many hospitals have merged in recent years in part to gain bargaining leverage with managed care organizations (MCOs), leading to several antitrust trials. We specify and estimate a bargaining model of competition between hospitals and MCOs using claims and discharge data from Northern Virginia. We find that MCO bargaining restrains hospital prices significantly relative to standard insurance. Increasing patient coinsurance tenfold would reduce prices by 16%. A proposed hospital acquisition that was challenged by the Federal Trade Commission would have significantly raised hospital prices.

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Injunctive Relief as an Antitrust Violation or as an Enforcement Tool: An EU Antitrust Perspective

Posted by D. Daniel Sokol

Yves Botteman & Jean-François Guillardeau (Steptoe & Johnson) offer Injunctive Relief as an Antitrust Violation or as an Enforcement Tool: An EU Antitrust Perspective.

ABSTRACT: The Apple/Samsung mobile device war has been raging for quite some time. In the European Union, Samsung sought injunctive relief before several Member States' courts to prevent Apple from selling certain versions of its iPhone on the grounds that Apple was violating Samsung's standard essential patents pertaining to the 3G mobile telephony standard. Early last year, the European Commission initiated a formal inquiry to assess whether Samsung had abused its dominant position by breaching its prior commitment to license its SEPs under FRAND terms. The EC has apparently focused its inquiry on the potential (ab)use of injunctive relief rather than on the alleged breach of Samsung's FRAND commitment. In December, it sent formal charges against Samsung. This case, which is not the only one in the pipeline, re-opens the debate on injunctive relief as a source of antitrust concern.

On the other side of the intellectual property/competition fence, over the past decade the EU antitrust watchdog has not used the interim measures mechanism provided for in Article 8 of Regulation 1/2003 even once. The provision empowers the EC to adopt interim measures in order to maintain the status quo pending the final outcome of antitrust infringement proceedings.

This article explores both aspects of injunctive relief, namely the use of injunctions by SEP owners and by the EC. Based on a review of existing case law, it first takes a critical look at the possible theories of harm that the EC may put forward in the context of injunctive relief viewed as a violation of the antitrust rules. It then examines why interim measures have remained an unexploited enforcement tool and whether the EC has alternative tools to enforce the antitrust laws in the context of threats of imminent and irreparable harm to competition.

April 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Friday, April 26, 2013

Antitrust's Rule of Reason: Only Competition Matters

Posted by D. Daniel Sokol

Greg Werden (DOJ) blasts a number of scholars with his paper Antitrust's Rule of Reason: Only Competition Matters.

ABSTRACT: The rule of reason is the standard for testing whether a restraint violates the Sherman Act. The thesis of this article is that the only issue under the rule of reason is the impact of a restraint on the competitive process; the Sherman Act does not employ a welfare standard. This thesis is developed by reviewing Supreme Court decisions articulating and explicating the rule of reason, then outlining its proper application consistent with precedent. Debates of recent decades are revisited to clarify welfare concepts and explain how the views of Robert Bork were distorted and maligned. The article also explains how promoting welfare can be the overarching goal of the Sherman Act, even though welfare considerations are not directly relevant in applying the Act. Finally, the article shows that no Sherman Act case cited by scholars as adopting or implying a welfare standard actually did so.

April 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Howard Shelanski to Become Obama's New Regulatory Czar

Posted by D. Daniel Sokol

Howard Shelanski (Georgetown Law and currently FTC) has been nominated to become Obama's regulatory czar. Howard is brilliant - a serious scholar with important policy experience at both the FCC and FTC. I could not think of a more qualified pick.  Howard understands competition and hopefully will move regulation in a direction to benefit consumers.

Of course, discussions of czars remind me of this lovely scene from Fidler on the Roof:

Young Jewish Man: Rabbi, may I ask you a question?
Rabbi: Certainly, my son.
Young Jewish Man: Is there a proper blessing for the Tsar?
Rabbi: A blessing for the Tsar? Of course! May God bless and keep the Tsar... far away from us!

It will remain to be seen if Czar Howard will get such blessings from business, activist progressives, rent seeking government officials or all of the above. My  hope is that Howard is able to accomplish something akin to Australia’s National Competition Policy (NCP), which in my mind went further than any other regulatory review in the world in creating a more effective regulatory scheme to improve Australia's country competitiveness.

April 26, 2013 | Permalink | Comments (0) | TrackBack (0)

'Passing on' Defense in Antitrust Litigation: Preliminary Notes for a General Analysis

Posted by D. Daniel Sokol

Marco Bellia, LUISS Guido Carli University analyzes 'Passing on' Defense in Antitrust Litigation: Preliminary Notes for a General Analysis.

ABSTRACT: This article offers a short summary and some references on the “passing on” defense admissibility in antitrust litigation. The US, EU and some European Member States are taken into account. The aim of this working paper is to facilitate a new analysis of the topic, which seems to be “passed over” by academics.

April 26, 2013 | Permalink | Comments (0) | TrackBack (0)

A Short Treatise on Amateurism and Antitrust Law: Why the NCAA's 'No Pay' Rules Violate Section One of the Sherman Act

Posted by D. Daniel Sokol

Marc Edelman (Barry University) offers A Short Treatise on Amateurism and Antitrust Law: Why the NCAA's 'No Pay' Rules Violate Section One of the Sherman Act.

ABSTRACT: The National Collegiate Athletic Association (“NCAA”) oversees nearly every aspect of the $11 billion college sports industry. Its powers include scheduling championship events, determining eligibility rules, entering into commercial contracts, and punishing members that refuse to follow its authority. In recent years, some NCAA members have become increasingly wealthy – grossing annual revenues upwards of $100 million per year. However, the NCAA’s rules still deprive these members of the opportunity to share their wealth with student-athletes.

This article explains why the NCAA’s “no pay” rules violate Section One of the Sherman Act. Part I of this article introduces the NCAA, its Principle of Amateurism, and its traditional enforcement mechanisms. Part II provides a brief overview of Section One of the Sherman Act – the “comprehensive charter of economic liberty” in American trade. Part III provides a detailed explanation about why the NCAA ‘no pay’ rules constitute both an illegal form of wage fixing and an illegal group boycott. Part IV then explores eight lower-court decisions that incorrectly find the NCAA eligibility rules to be non-commercial and thus exempt from antitrust scrutiny. Meanwhile, Part V analyzes four additional lower-court decisions that misconstrue the NCAA eligibility rules to be pro-competitive under a Rule of Reason review. Finally, Part VI concludes that even if a court were to find that competitive balance is a reasonable basis for upholding certain “no pay” rules, such rules still should not come from the NCAA, but rather from the individual conference level.

April 26, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 25, 2013

Industrial Policy and Competition Enforcement: Is There, Could There and Should There Be a Nexus?

Posted by D. Daniel Sokol

Nicolas Petit, University of Liege and Norman Neyrinck, University of Liege ask Industrial Policy and Competition Enforcement: Is There, Could There and Should There Be a Nexus?

ABSTRACT: This paper muses on whether there can be, there is, and there should exist a nexus between European Union (“EU”) competition law and industrial policy. A well-known, long lasting grievance in the history of EU competition law is indeed that the European Commission (“the Commission”) has allegedly enforced the competition rules dogmatically, and turned a blind eye on industrial policy considerations. Lately, this policy debate has revived. With the current economic debacle in the Western world, decades of free-market economic policies – including competition policies – inherited from the so-called “Washington consensus” are called into question. In contrast, thriving economic models like Brazil, China, or India where the State interferes with the market at the expense of free competition, are increasingly looked by the “old world” as a possible source of inspiration.

Those new developments justify devoting another paper to the question whether industrial policy considerations could and should inform EU competition enforcement. To address it, we follow a four steps methodology. We first solve definitional issues by describing the various possible meanings of “industrial policy” (I). Second, we follow a legalistic approach to review whether such considerations can, as a matter of positive law, play a role (II). Third, we turn to empirical analysis, to examine if there has been some industrial policy influence in the Commission’s case-law (III). Fourth, we review consequentialist arguments to assess whether industrial policy considerations should play a stronger role in EU competition enforcement (IV).

April 25, 2013 | Permalink | Comments (0) | TrackBack (0)

Blurry Vision: Parallel Imports, Medical Devices, and Competition in the European Market for Contact Lenses

Posted by D. Daniel Sokol

P. Sean Morris, University of Helsinki - Faculty of Law reports on Blurry Vision: Parallel Imports, Medical Devices, and Competition in the European Market for Contact Lenses.

ABSTRACT: Shopping for prescription contact lenses is part of a daily routine common to many consumers in major parts of the world. Consumers usually choose to buy their prescription contact lenses from either their local eye care professional or a secondary online supplier. This freedom of choice benefits consumers and enables manufacturers of prescription contact lenses to expand distribution and increase sales. This Article provides an analysis of the market for prescription contact lenses in the European Union (EU). The Article explores the branding and pricing of contact lenses and posits that consumers who wear prescription contact lenses benefit from the option to purchase contact lenses online or offline. In addition, the Article argues that the nature of parallel trade in the EU facilitates such benefits for consumers. Therefore, the main goal of the Article is to determine whether and how the sale and pricing of contact lenses in the EU affects consumers, competition, and competition law. The research found that there is a healthy dose of competition in the market for contact lenses, that European consumers prefer shopping online for contact lenses, and that eye care professionals generally direct their customers to their online stores to purchase contact lenses as opposed to selling them offline in their brick-and-mortar operations.

April 25, 2013 | Permalink | Comments (0) | TrackBack (0)