Friday, July 12, 2013

Breaking Up Water Monopolies: Costs and Benefits

Posted by D. Daniel Sokol

Alexandros Maziotis, Fondazione Eni Enrico Mattei explores Breaking Up Water Monopolies: Costs and Benefits.

ABSTRACT: This article looks at vertical and horizontal integration in the English and Welsh water and sewerage industry, estimating the costs and benefits of breaking up monopolies. The results of the analysis suggest that the most cost effective organisational structure for water and sewage services requires a separate but vertically integrated operation of these services. Water and sewerage companies should be integrated, while their internal management and organization design should be structured separately for water and waste activities in order to manage the day-to-day operations at a more efficient scale.

July 12, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 11, 2013

Patent Settlements in the Pharmaceutical Industry: An Antitrust Perspective

Posted by D. Daniel Sokol

Jonas Severin Frank, Philipps University Marburg - Faculty of Business Administration and Economics and Wolfgang Kerber, Philipps University Marburg - Department of Business Administration and Economics provide Patent Settlements in the Pharmaceutical Industry: An Antitrust Perspective.

ABSTRACT: Patent settlements between originator and generic firms in the pharmaceutical industry are a controversial topic, both in EU competition policy and U.S. antitrust law. The main concern is that patent settlements, which involve large payments from the originator to generic firms (reverse payments) and simultaneously restrict or delay market entry of generic firms, might have to be regarded as anti-competitive agreements that protect weak and perhaps unjustified patents from challenges. Therefore, certain types of patent settlements might harm consumers, both by defending unjustifiable patents and restricting competition by generic firms. In this article, we use the dispute in U.S. antitrust law between the U.S. antitrust authorities and various U.S. courts about how to deal with patent settlements with reverse payments as a starting point for an economic analysis of this problem. We particularly focus on two aspects: (1) Patent settlements have also to be seen as potentially endangering the already weak mechanisms within patent law for challenging and weeding out weak patents. (2) The incentives for originator and generic firms for negotiating patent settlements depend crucially on the entire institutional framework in pharmaceutical markets. Therefore, the competitive assessment of patent settlements requires the analysis of the interplay between patent law rules, the regulations for drug approval (FDA regulations in the U.S.), antitrust law rules, and, in the U.S., the Hatch-Waxman Act with its specific rules for the relation between originator and generic firms. Important conclusions are the need for a much deeper analysis of this interplay of different regulations, and the insight that the U.S. criteria for assessing patent settlements might not be directly transferable to the EU, due to different institutional frameworks for pharmaceutical markets.

July 11, 2013 | Permalink | Comments (1) | TrackBack (0)

The White House v. Patent Assertion Entities: Round 1

Posted by D. Daniel Sokol

The Intellectual
Property Committee of the Section of Antitrust Law and
the Antitrust Committee of the Section of Intellectual Property Law



The White House v. Patent Assertion Entities:  Round 1

July 15, 2013

Noon-1:15 PM Eastern


On June 4, the White House issued five executive actions and
seven legislative recommendations designed to protect innovators from frivolous
litigation brought by patent-assertion entities and increase patent
quality.  In this program, panelists will discuss these initiatives and
other proposed legislation from the legislative, executive, and in-house
counsel perspectives. 


Crowell & Moring

1001 Pennsylvania Ave
NW Washington, DC 20004



Koren Wong-Ervin, Federal Trade



David Blonder, Intellectual
Property and Senior Antitrust Counsel, Blackberry

Victoria Jeffries, Columbia Law
School Law & Technology Fellow at U.S. Senate

Carl Shapiro, Professor at
University of California at Berkeley


For additional
information and to register, visit

July 11, 2013 | Permalink | Comments (0) | TrackBack (0)

The Prodigal Corporation: An Analysis on the Effectiveness of the ACCC's Immunity Policy for Cartel Conduct

Posted by D. Daniel Sokol

Anthony Gray, University of Sydney, Andrew Wait, University of Sydney and Bonnie Nguyen, University of Sydney have written The Prodigal Corporation: An Analysis on the Effectiveness of the ACCC's Immunity Policy for Cartel Conduct.

ABSTRACT: We examine the impact of the ACCC's leniency policy (Immunity Policy) on cartel stability. The policy, by reducing the fines of the first cartel members who cooperate with competition authorities, can act to deter collusion. However, we find that care is needed in how a leniency policy is implemented. It is possible that the leniency policy can make collusion easier to sustain than in its absence. Further, the ACCC's Cooperation Policy, which applies to all parties who assist the Commission with an investigation, can act to undermine the effectiveness of the leniency policy.

July 11, 2013 | Permalink | Comments (0) | TrackBack (0)

Public and Private Enforcement of Competition Law - A Differentiated Approach

Posted by D. Daniel Sokol

Kai Hüschelrath Centre for European Economic Research (ZEW) and Sebastian Peyer University of East Anglia (UEA) - Centre for Competition Policy describe Public and Private Enforcement of Competition Law - A Differentiated Approach.

ABSTRACT: We investigate the relationship between public and private enforcers introducing a more differentiated approach. In contrast to the existing literature, we take into account that the costs and benefits of detection and prosecution and, thus, the usefulness of each enforcement mode may change with a variation of the type of anticompetitive conduct. We define a set of parameters that determine the costs and benefits of both types to enforce the antitrust laws and discuss implications for European competition law and policy.

July 11, 2013 | Permalink | Comments (0) | TrackBack (0)

New Perspectives on Misuse of Market Power: How Should the Effects-Based Approach Complement the Existing Normative Solution?

Posted by D. Daniel Sokol

Erdem Buyuksagis, University of Fribourg asks New Perspectives on Misuse of Market Power: How Should the Effects-Based Approach Complement the Existing Normative Solution?

ABSTRACT: This article delivers an analysis of the EU Commission’s new competition policy regime, with specific consideration given to abuse of dominant position cases. Given that the new regime based on the effects-based approach makes provision for a shift from the protection of competition towards the protection of consumers, the article forecasts its eventual implementation into European national laws (e.g. Swiss law) as well as its eventual outcome on consumer welfare. It concludes by highlighting the need for the new regime to be complemented by structural and procedural mechanisms in order to contribute to a more efficient competition law enforcement.

July 11, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 10, 2013

Cartel Appeals to the Court of Justice: The Song of the Sirens?

Posted by D. Daniel Sokol

Peter D. Camesasca, Johan Ysewyn, Thomas Weck and Brian Bowman (Clifford Chance) ask Cartel Appeals to the Court of Justice: The Song of the Sirens?

ABSTRACT: This article reviews the cartel precedent of the General Court and the European Court of Justice to quantify the chances of success on appeal. It appears still most promising to direct the appeal mainly against the reasoning underlying the fining decision, in particular where the latter was increased for reason of aggravating circumstances or for deterrence. For factual or substantial pleas, clients should—to the extent possible—develop a convincing “story” establishing why the purported infringement they are accused of did not exist at all, or only existed to a lesser extent As regards procedural matters, they should focus on clear violations of their rights - e.g. unequal treatment.

July 10, 2013 | Permalink | Comments (0) | TrackBack (0)

Competition Law Issues in the Human Resources Field

Posted by D. Daniel Sokol

Gonenc Gurkaynak, Ayse Guner and Ceren Ozkanlı (Elig) analyze Competition Law Issues in the Human Resources Field.

ABSTRACT: Competitor agreement not to solicit or hire each other's employees as well as agreements among competitors to poach a rival entity's key employees could be deemed as a violation of competition law principles (and in some jurisdictions, public policy doctrines). European and US jurisprudence shows that an agreement or merely the exchange of information concerning human resources data, such as wage/salary, among competitors could run afoul of competition law rules. As an area of competition law, these more settled forms of anti-competitive risk-bearing practices deserve meticulous and sustained attention from practitioners in the field.

July 10, 2013 | Permalink | Comments (0) | TrackBack (0)

Ebooks Opinion is Out

Posted by D. Daniel Sokol

Judge Cote's ebooks antitrust decision is out. See the attached pdf. The important part reads:

This Opinion presents the Court’s findings of fact and conclusions of law following the bench trial that was held from June 3 to 20, 2013 to resolve the issue of Apple’s liability and the scope of any injunctive relief. As described below, the Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow.

Download Opinion

Update: The DOJ Press release is here.

July 10, 2013 | Permalink | Comments (0) | TrackBack (0)

Google: The Unique Case of the Monopolistic Search Engine

Posted by D. Daniel Sokol

Albert A. Foer and Sandeep Vaheesan (AAI) present Google: The Unique Case of the Monopolistic Search Engine.

ABSTRACT: In early January, the Federal Trade Commission (FTC) closed its nearly two-year investigation into Google's conduct. Unanimously, the Commissioners stated that Google's alleged favouring of its own vertical search features in search results was not an antitrust violation. They found that changes to Google's search algorithm were intended to offer more informative search results. The FTC acknowledged that modifications of Google's algorithm deprived some vertical search sites of traffic, but stated that harm to competitors is a ‘common byproduct of “competition on the merits”’. Responding to other allegations, Google agreed voluntarily to stop appropriating content from vertical search engines and allow online advertisers greater flexibility to manage concurrent ad campaigns on multiple search engines. Investigations into Google's practices continue in other jurisdictions, including the European Commission (EC) and the Korea Fair Trade Commission (KFTC). Given the high level of cooperation between these authorities in the Google matter, it seems unlikely that the pending investigations will reach significantly different results. Unconfirmed reports indicate that the EC will legally require Google to label its own vertical features and display rival vertical sites in search results, which would go further but still not be dramatically different from Google's voluntary pledges to the FTC.

July 10, 2013 | Permalink | Comments (0) | TrackBack (0)


Posted by D. Daniel Sokol

Luis Marin-Tobar (Perez Bustamante & Ponce) has a paper on COMPETITION REGULATION IN ECUADOR.

ABSTRACT: Economic growth has been restricted in developing countries because of the existence of high degrees of concentration and numerous market failures affecting development. In these types of markets, implementation of competition law and policy is fundamental to work toward a much-desired equilibrium, or, at a minimum, to correct these market failures and promote transparent competition. The experience of other countries and their approach to the implementation of competition regulation may provide substantial benefits for developing countries, which can refer to the tools, successes, and failures in their implementation processes. The Andean Community has an emerging history of implementing competition law through community legislation and domestic laws. The most remarkable of these cases, which provides material for a case study, is the country of Ecuador, which in the absence of domestic regulations was allowed to apply the Andean Community Decision 608 on competition. After two years of application of such general community legislation on competition, Ecuador finally enacted its first domestic competition law on October 13, 2011. That law's authority was appointed in September 2012. Ecuador is immersed in the first stages of implementation.

July 10, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 9, 2013

Private Antitrust Litigation in China - The Burden of Proof and its Challenges

Posted by D. Daniel Sokol

Adrian Emch, Hogan Lovells and Jonathan Liang, Hogan Lovells have written on Private Antitrust Litigation in China - The Burden of Proof and its Challenges.

ABSTRACT: This article examines how the burden of proof is allocated in private antitrust suits in China, and tries to assess whether the criticism about the high burden of proof is merited.

The article is organized as follows: Section 1 provides an introduction, and section 2 explains the legislative background. Section 3 lays out the general principle for the burden of proof in antitrust cases. Sections 4 and 5 describe two broad ways for parties to "lower" the burden of proof — by resorting to presumptions and by seeking discovery through the courts. Section 6 concludes.

July 9, 2013 | Permalink | Comments (0) | TrackBack (0)

The Political Economy Of Competition Law In Asia

Posted by D. Daniel Sokol

Mark Williams, The Hong Kong Polytechnic University has edited The Political Economy Of Competition Law In Asia.

BOOK ABSTRACT: This detailed book describes and analyses the essential political economy features that provide the backdrop to the competition policies and competition law regimes of several of the most important Asian economies.

The book also discusses the impact of these political economy influences in determining whether the adopted competition policy is effective. Each of the authors – experts in their respective countries – offer specific insights into the nature and structure of their competition regimes and discuss to what extent the varied political economy factors unique to that country help to determine whether and to what extent the established system promotes or hinders economic competition in that jurisdiction.


1. Introduction
Mark Williams

2. Japan
Toshiaki Takigawa

3. Korea
Jaemin Lee

4. China
Mark Williams

5. Vietnam
David Fruitman

6. Philippines
Mark Williams and Ruby Ann Jalit

7. Malaysia and Singapore
May Fong Cheong and Yin Harn Lee

8. Thailand
R. Ian McEwin, Sakda Thanitcul

9. Indonesia
Ningrum Sirait

10. India
Pradeep S. Mehta

11. Australia
Deborah Healey

12. Australia – Regulatory’s Perspective
Allan Fels

13. Conclusion
Mark Williams

July 9, 2013 | Permalink | Comments (0) | TrackBack (0)

Ten Years of Regulation 1/2003 - A Retrospective

Posted by D. Daniel Sokol

Wouter Wills offers Ten Years of Regulation 1/2003 - A Retrospective.

ABSTRACT: Regulation 1/2003 brought about a radical change in the way in which the EU antitrust prohibitions contained in Articles 101 and 102 TFEU are enforced. The previous enforcement regime, under Regulation 17, which dated from 1962, was characterised by a centralised notification and authorisation system for Article 101(3) TFEU. Regulation 1/2003 abolished this system and replaced it by a system of decentralised ex post enforcement, in which the European Commission and the competition authorities of the EU Member States (national competition authorities), forming together the European Competition Network, pursue infringements of Articles 101 and 102 TFEU.

July 9, 2013 | Permalink | Comments (0) | TrackBack (0)

The business model of patent assertion entities in IT: unilateral restraints of competition or business as usual?

Posted by D. Daniel Sokol

Paul Gagnon (Max Planck) asks The business model of patent assertion entities in IT: unilateral restraints of competition or business as usual?

ABSTRACT: This article aims to determine whether the business models of patent assertion entities (PAE) can qualify as restraints of competition under European competition law, and under which circumstance. To do so, the article highlights the main characteristics of the PAE business model and articulates a theory of harm compatible with the competition law of the European Union (EU). The article will consider the framework of the Treaty on the Functioning of the European Union, 2008 O.J. C-115/47 (TFEU), particularly Article 102 TFEU as regards unilateral restraints of competition. The framework of Article 101 TFEU on concerted practices remains relevant, but will not be the main focus of this article. In sum, a general theory of harm can be articulated as regards PAE activities. Assertions by PAEs take advantage of the hold-up value of a technology, ie PAEs extract revenues based on the prospect of an infringement suit. By doing so, PAEs hinder dynamic competition by reducing incentives to innovate. They also inhibit static competition by increasing prices and potentially removing products from the market. As such, European competition law is applicable within the framework described in this article.

July 9, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, July 8, 2013

Competition Policy for Industry Standards

Posted by D. Daniel Sokol

Richard Gilbert, University of California, Berkeley has written Competition Policy for Industry Standards.

ABSTRACT: This paper is a chapter in the forthcoming Oxford Handbook on International Antitrust Economics. The chapter surveys issues raised by the development of industry standards, whether accomplished through a formal standard setting committee structure or the activities of a single sponsor. The focus is on the tradeoff between the benefits from standards and possible costs that standards and the activity of standard development may impose on consumers. A particular focus is on the consequences of intellectual property rights for standards.

July 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Bork on Vertical Integration: Leverage, Foreclosure, and Efficiency

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law has an excellent piece Bork on Vertical Integration: Leverage, Foreclosure, and Efficiency.

ABSTRACT: Robert H. Bork wrote his fist article about vertical integration and antitrust policy in 1954, a year after he graduated from the University of Chicago Law School.  He noted a recent increase in antitrust attacks on vertical integration and disagreed with those who believed that these attacks were a novelty.  At the time, judicial hostility toward vertical integration was rampant.  But Bork overstated his case about the period prior to the 1930s. Through the 1920s judicial attitudes toward vertical integration were more benign than Bork suggested.  This position was largely consistent with the pre-Depression economics literature, which emphasized production cost savings and, to a lesser extent, savings in transaction costs.

That all changed with the Depression and the New Deal.  From then through the 1960s the dominant school of industrial organization was hostile toward vertical integration.  Ronald Coase's "Nature of the Firm" lay ignored by all, including Bork, while writers relentlessly criticized both vertical ownership and vertical contractual integration as devices of monopoly.  The dominant critiques can be roughly classified as "leverage" and  "foreclosure," although the line between the two is often blurred.

Richard Posner once identified the rise of the Chicago School with the critique of "leverage" arguments against firms that operated in multiple markets.  Looking back at centrist industrial organization theory in the 1950s and 1960s, he described it as "untheoretical, descriptive, institutional, and even metaphorical."  As the prime example he offered the "leverage" theory of ties, which he attributed to Donald F. Turner, Edward Mason, and Joe S. Bain.

Bork's mature thought about vertical integration, presented in The Antitrust Paradox in 1978, was beguilingly simple.  First, if vertical integration created efficiencies, then a vertically integrated firm would have cost advantages over unintegrated rivals.  In that case vertical integration would deter unintegrated entry, but it is not antitrust's purpose to condemn cost savings.  Second, if vertical integration did not create any efficiencies, then it would not impede entry by anyone.  Firms that wished to enter at one stage alone could contract with firms at the other stage and be just as efficient as the vertically integrated firm.  Third, if vertical integration resulted in higher costs, then vertically integrated firms would decline in favor of unintegrated firms. Fourth, in competitively structured markets vertical integration would lead to self-dealing, but that would do no more than force realignment in purchasing and sale patterns. Bork's observations were built on an extraordinarily narrow conception of entry barriers.  He barely mentioned patents or other intellectual property rights.  There was no conception that sunk costs plus risk could facilitate entry deterrence.

July 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Regulation of Road Accident Externalities when Insurance Companies have Market Power

Posted by D. Daniel Sokol

Maria Dementyeva (VU University Amsterdam), Paul R. Koster (VU University Amsterdam) and Erik T. Verhoef (VU University Amsterdam) explore Regulation of Road Accident Externalities when Insurance Companies have Market Power.

ABSTRACT: Accident externalities are among the most important external costs of road transport. We study the regulation of these when insurance companies have market power. Using analytical models, we compare a public-welfare maximizing monopoly with a private profit-maximizing monopoly, and markets where two or more firms compete. A central mechanism in the analysis is the accident externality that individual drivers impose on one another via their presence on the road. Insurance companies will internalize some of these externalities, depending on their degree of market power. We derive optimal insurance premiums, and "manipulable" taxes that take into account the response of the firm to the tax rule applied by the government. Furthermore, we study the taxation of road users under different assumptions on the market structure. We illustrate our analytical results with numerical examples, in order to better understand the determin! ants of the relative performance of different market structures.

July 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Software Upgrades under Monopoly

Posted by D. Daniel Sokol

Jiri Strelicky (CERGE) and Kresimir Zigic (CERGE) discuss Software Upgrades under Monopoly.

ABSTRACT: We study price discrimination in a monopolistic software market. The monopolist charges different prices for the upgrade version and for the full version. Consumers are heterogeneous in taste for infinitely durable software and there is no resale. We show that price discrimination leads to a higher software quality but raises both absolute price and price per quality. This price discrimination does not increase sales and it decreases the total number of consumers compared to no discrimination. Finally, such discrimination decreases consumers' surplus but increases the developer's profit and social welfare that attains the social optimum in the limit.

July 8, 2013 | Permalink | Comments (0) | TrackBack (0)

Saturday, July 6, 2013

Competition and Payment Systems

Posted by D. Daniel Sokol

The OECD has published a policy roundtable on Competition and Payment Systems.

July 6, 2013 | Permalink | Comments (0) | TrackBack (0)