Tuesday, December 31, 2013
Ioannis Lianos (UCL) and Damien Geradin (Covington & Burling, George Mason University, US and Tilburg University) have edited Handbook On European Competition Law: Enforcement and Procedure.Handbook on European Competition Law: Enforcement and Procedure sets out in detail the procedural aspects of EU competition law, ranging from fines, remedies and judicial review. It also gives unique insight into both private and public enforcement of completion law, and offers commentary on the relationship between EU competition law and national competition law, and on the relationship between competition law and private international law.
The companion volume, Handbook on European Competition Law: Substantive Aspects, sets the context for examination of substantive law by reviewing and analyzing the goals of competition law. It then covers the substantive building blocks of EU competition law, including horizontal and vertical agreements, cartels, mergers, and also provides valuable coverage of the interaction between competition and regulation, hub and spoke collusion, and information exchange agreements. The importance of the abuse of dominance doctrine is reflected in three discrete chapters considering exploitative abuses, exclusionary pricing abuses, and exclusionary non-pricing abuses.
1. Econometric Evidence in EU Competition Law: A Theoretical and Empirical Analysis
Ioannis Lianos and Christos Genakos
2. The Public Enforcement of Articles 101 and 102 TFEU under Council Regulation No 1/2003: Due Process Considerations
3. Public Enforcement: The ECN – Network Antitrust Enforcement in the European Union
4. Private Enforcement in the EU with Emphasis on Damages Actions
5. Procedural Aspects of Merger Control
6. The EU Competition Fining System
Damien Geradin, Christos Malamataris and John Wileur
7. Competition Law Remedies in Europe
8. EU Competition Law and Private International Law: A Developing Relationship
9. Judicial Review in EU Competition Law
10. Relationship between EU Competition Law and National Competition Laws
11. Legal Uncertainty, Penalties, and the Limits to Effects – Based Standards
Yannis Katsoulacos and Da
Wolf Sauter. Tilburg Law and Economics Center (TILEC); Dutch Healthcare Authority; Tilburg Law School is Squaring EU Competition Law and Industrial Policy: The Case of Broadband.
ABSTRACT: Industrial and competition policy are often seen as logical opposites: inherently conflicting. In my earlier research (1997) I have found that at EU level these two policies are in principle compatible if industrial policy is defined as promoting structural reform. This was illustrated by the telecommunications liberalization which was then ongoing. An update of this research based on the example of broadband roll-out shows that the finding of consistency remains the same or at least similar. However the impact of competition policy has broadened. It has moved from antitrust and mergers to include more active policies on state aid and sectoral competition policy. At the same time in the context of broadband these policies favour (i) more public intervention (aid) and (ii) perpetuate sectoral regulation where originally a rapid transition to general antitrust had been envisaged. This example suggests that to balance industrial policy and competition policy as a whole consistency and predictability – including between the different branches of competition policy – is essential.
Damien Geradin, George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC); Covington & Burling LLP and Christos Malamataris, Covington & Burling analyze the Application of EU Competition Law in the Postal Sector Overview of Recent Cases.
ABSTRACT: With the implementation of the Third Postal Directive, the European Union took an essential step towards full market opening. According to the Directive, all Member States must fully liberalize their postal markets by the end of 2011 or 2012, at the latest. Having thus created scope for competition through regulatory reform, the European Union needs to ensure that competition in the open postal markets can actually develop for the benefit of citizens and businesses. This is achieved through the enforcement of EU competition law rules.
Against this backdrop, this paper explores the application of EU Competition law rules to the postal sector, with references to judgments and decisions adopted in 2012 and 2013. It is structured as follows. Section 2 discusses judgments of the EU and EFTA Courts which broke new ground with respect to substantial and procedural competition law. Section 3 analyzes the decisional practice of the European Commission ("Commission") in cases involving incumbent postal operators. Section 4 concludes.
Monday, December 30, 2013
Roy Hoffinger (Qualcomm) advocates Ending the "Confidentiality Exception" to Due Process.
ABSTRACT: It is time to end the "confidentiality" exception to according a Respondent due process. At the same time, prohibitions and measures to enforce against the disclosure by the agency of any party or third-party's confidential documents and information, except to the Respondent pursuant to a protective order, should be maintained and, if necessary, enhanced. The disclosure to competitors, customers, or suppliers of non-public business or technical information can inflict substantial harm on the disclosing party and perhaps its customers and suppliers. Nothing here is intended to suggest otherwise. Providing access to a Respondent is necessary as a matter of due process. However, no one other than the Respondent has a legitimate compelling interest in receiving such access.
Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute), Doh-Shin Jeon, Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR), and Byung-Cheol Kim, Georgia Institute of Technology discuss Asymmetric Neutrality Regulation and Innovation at the Edges: Fixed vs Mobile Networks.
ABSTRACT: We study how net neutrality regulations affect high-bandwidth content providers investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved trac management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally.
Aurelien Leroy , University of Orleans examines Competition and the Bank Lending Channel in Eurozone.
ABSTRACT: This paper examines how banks respond to the monetary policy of the European Central Bank (ECB) according to their characteristics and, in particular, to their market power, using banking micro-data from Eurozone countries over the period from 1999 to 2011. Our results suggest that banks with market power, which is proxied by the Lerner index, have a credit supply that is less sensitive to monetary policy shock. The market structures (aggregated measures) in which the banks operate have a similar effect. Therefore, increased competition enhances the effectiveness of monetary policy transmission through the bank lending channel. We find also over the period from 2008 to 2011, that this channel has been strengthened, but the negative effect of market power on monetary effectiveness has remained.
I am very hapy to report that Paul Denis of Dechert has been profiled in the WSJ for his antitrust merger work. Two of the biggest deals of 2013 are his - US Air/American Airlines and Office Max/Office Depot. See here. Paul is an excellent lawyer - and very sharp. I remember my first meeting with Paul as a summer associate in summer 1999. We chatted about antitrust mergers and the new economy. We followed up that first meeting with lunch at Miss Saigon in Georgetown. I have been a big fan of Paul ever since. We continue to chat about merger issues. This is a long way of saying that the profile is well deserved. I should add that others also think very favorably of Paul. His Chambers USA ranking notes, "Paul Denis is noted for his impressive knowledge of antitrust law and policy, with one source pointing out that "he has so much experience with the agencies.""
Svetlana Avdasheva, National Research University Higher School of Economics and Polina Kryuchkova, National Research University Higher School of Economics address Law and Economics of Antitrust Enforcement in Russia.
ABSTRACT: Law enforcement by regulatory authorities on complaints may replicate not only advantages but also disadvantages of both public and private enforcement. In Russian antitrust enforcement there are strong incentives to open investigations on almost every complaint. The increasing number of complaints and investigations decreases both the resources available per investigation and the standards of proof. It also distorts the structure of enforcement, increases the probability of both wrongful convictions and wrongful acquittals, and lowers deterrence. Statistics of antitrust enforcement in the Russian Federation, including Russian regions, highlight the importance of complaints for making decisions on whether to open investigations and the positive dependence of convictions on the number of investigations.
Sunday, December 29, 2013
Rosa Abrantes-Metz (Global Economics Group) asks Is There Misdiagnosis and Mistreatment in the Market for Credit Ratings?
ABSTRACT: Credit Rating Agencies were at the center of the recent financial crisis, with some critics going so far as to blame them for the crisis itself. A number of proposals have been made to reign in the CRAs and recently we have seen the creation of a new CRA in Europe, welcomed by many as the first step to solving the problem generated by a supposed lack of competition in this market. But we must first define the problem accurately before we can find an appropriate solution. First, look at the historical facts. In the recent financial crisis, the problem with ratings was largely contained to structured finance. Corporate ratings performed within typical recessionary levels, and municipal ratings performed quite well, despite concerns for a time that they could become the next crisis. Within structured finance, the problem was largely contained to U.S. Residential Mortgage Backed Securities and related derivatives, as the CRAs (along with most everyone else) underestimated the potential for catastrophic price declines in the U.S. housing market.
With this history in mind, I argue that the underlying problem is "rating shopping," combined with a monopsony power unique to the structured finance market. The structured finance market is characterized by a few large investment banks who issue these securities and who have the market power to influence CRAs to at least adopt more liberal analytics-if not outright compromise them. (It should be noted that some equate "rating shopping" with the "Issuer Pays" model - the debt issuer pays for the rating - but they are distinct. "Issuer Pays" is probably necessary but is not sufficient for rating shopping.) If rating shopping in structured finance is indeed the problem, rather than the lack of competition, then policies must solve that problem.
Saturday, December 28, 2013
Josh Wright (FTC) has written on Recalibrating Section 5: A Response to the CPI Symposium.
ABSTRACT: I want to thank the participants in Competition Policy International's Symposium on the Federal Trade Commission's unfair methods of competition authority under Section 5 of the FTC Act and, in particular, discussing my Proposed Policy Statement suggesting one approach to defining what constitutes an UMC. The Symposium elicited many thoughtful contributions and identified some misunderstandings about the rationale for my proposal. I will take this opportunity to share my view of the current state of play with respect to FTC guidance for Section 5, suggest the intellectual distance between the various UMC definitions offered for public scrutiny is relatively small, address a few criticisms of my Proposed Policy Statement, and demonstrate why I believe there is significant reason to be optimistic that this Commission can finally produce much needed guidance in this important area.
As the FTC enters its second century, it is an especially appropriate time to reflect upon whether the agency's various enforcement and policy tools are being put to the best possible use to help the agency fulfill its competition mission. Now is the time to sharpen tools that have long been deployed effectively and to evaluate whether tools that have not proven up to the task should be salvaged or scrapped. One of these tools-the Commission's UMC authority under Section 5 of the FTC Act-is a particularly suitable candidate for evaluation. I have made no secret of the fact that I think the Commission's record with respect to Section 5 is bleak. The historical record reveals a remarkable and unfortunate gap between the theoretical promise of Section 5 as articulated by Congress and its application in practice by the Commission. This gap has grown in large part due to the absence of any guidance articulating what constitutes a UMC. Both the existence and cause of the Section 5 performance gap are well understood. Indeed, for at least the past twenty years, commissioners from both parties have acknowledged that a principled standard for application of Section 5 would be a welcome improvement and have called for formal UMC guidance. In the absence of guidelines, the Commission's UMC authority cannot possibly contribute effectively to the agency's competition mission. At best, without UMC guidelines, the gap will remain. At worst, the absence of UMC guidelines can be counterproductive to the FTC's competition mission, raising issues of fundamental fairness and potentially deterring consumer welfare-enhancing conduct.
Friday, December 27, 2013
Sara G. Castellanos (BBVA) and Jesus G. Garza-Garcia (Mexican Ministry of Finance) explain Competition and Efficiency in the Mexican Banking Sector.
ABSTRACT: The Mexican banking sector experienced a process of liberalization which aimed towards increasing the level of competition and efficiency. This paper studies the evolution of the efficiency of the Mexican banking sector from 2002 to 2012 and also analyses its relationship with the degree of banking competition. To do so, efficiency scores are estimated by applying the non-parametric methodology, Data Envelopment Analysis. Furthermore, the Boone Indicator is used to assess the degree of competition and included among other possible determinants of bank efficiency. The main results indicate increasing trends of efficiency in the banking sector during the period of study. Moreover, a direct relationship between banking competition and efficiency is observed. Besides, the capitalization index, market share and loan intensity increase efficiency whereas noninterest expenses and non performing loans decrease the level of efficiency. Lastly, in regards to the relative efficiency of local or foreign ownership of banks, it is found that the system's average efficiency trend is observed among both local and foreign banks, but local banks are somewhat more efficient.
Thursday, December 26, 2013
Alfonso Llorente Caballero ( LOPEZ RODO & CRUZ FERRER ABOGADOS) has written on Electricity Tariffs and State Aids in the EU.
ANSTRACT: The enforcement of the competition and state aids regulation is one of the limits of the efforts of the member States in the European Union to attract or/and keep the location of strong investments in a given territory. In this case, the failed essay of Italy to maintain the reduced electricity tariffs for two big producing factories of aluminum is object of study.
F.M. Scherer (Harvard) discusses Patents, Monopoly Power, and the Pricing of Pharmaceuticals in Low-Income Nations.
ABSTRACT: This paper reviews the theory and historical developments that made it possible for the world's least affluent citizens to obtain the benefits of modern pharmaceutical therapy at affordable prices. Considered in turn are the theory of differential prices, the reasons why differential pricing was not widely practiced by pharmaceutical companies selling patented medicines; how low prices eventually became available, with emphasis on AIDS anti-retrovirals; and the consequences of low prices in the least developed nations for the creation of new and more effective medicines.
Cassey LEE (University of Wollongong, Australia) and Yoshifumi FUKUNAGA (Economic Research Institute for ASEAN and East Asia) explore Competition Policy Challenges of Single Market and Production Base.
ABSTRACT: Competition policy is an important beyond-the-border element of the single market and production base envisioned in the ASEAN Economic Community (AEC). The targets for competition policy in the AEC Blueprint have been largely met. Looking beyond 2015, ASEAN needs to consider broadening the policy measures for competition policy to encompass the state’s presence and interventions that affect the level playing field within markets. In the longer term, the main challenge for AEC will be related to the depth of integration desired in terms of harmonization of competition policy. Deeper integration may require fundamental changes in ASEAN institutions.
Wednesday, December 25, 2013
Joao Macieira (Department of Economics, Virginia Tech), Pedro Pereira (Autoridade da Concorrencia and Centro de Estudos e Formacao Avancada em Gestao e Economia, Universidade de Evora), and Joao Vareda (Autoridade da Concorrencia and Centro de Estudos e Formacao Avancada em Gestao e Economia, Universidade de Evora) examine Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play.
ABSTRACT: We analyze firms' incentives to bundle and tie in the telecommunications industry. As a first step, we develop a discrete-choice demand model where firms sell products that may combine several services in bundles, and consumers choose assortments of different types of products available from various vendors. Our approach extends standard discrete-choice demand models of differentiated product to allow for both flexible substitution patterns and to map demand for each choice alternative onto the demand for each service or bundle that a firm may sell. We exploit these properties to examine bundling behavior when firms choose: (i) prices, and (ii) which products to sell. Using consumer-level data and survey data from the Portuguese telecommunications industry, we estimate our demand model and identify firm incentives to bundle and tie in this industry. We use the model to perform several policy related conterfactuals and evaluate their impact on prices and product provision.
Tuesday, December 24, 2013
Jon Baker, American University - Meiwah (Chevy Chase, MD)
Joe Bauer, Notre Dame - Gerrard’s Corner (London, UK)
Dennis Carlton, University of Chicago - Uncle Tai's (Boca Raton, FL)
Anthony Chavez, Exxon - Qin Dynasty (Houston, TX)
Thomas Cheng, Hong Kong University - Fook Lam Moon (Wanchai, Hong Kong)
Naval Chopra, Amarchand - China Kitchen (New Delhi, India)
Jim Fishkin, Dechert - Meiwah (Chevy Chase, MD)
Andy Gavil, Howard University - Foong Lin (Bethesda, MD)
Rich Gilbert, Berkeley and Compass Lexecon - King Yuen (Berkeley, CA)
Lee Greenfield, WilmerHale - Joe's Noodle House (Rockville, MD)
Carole Handler, Lathrop & Gage - Red Medicine (Beverly Hills, CA)
Ilana Kattan, Freshfields - Foong Lin (Bethesda, MD)
Ben Klein, UCLA and Compass Lexecon - Hakkasan (Beverly Hills, CA but a number of locations globally)
Salil Mehra, Temple University - Yangming (Bryn Mawr, PA)
Doug Melamed, Intel - Shanghai Village (Bethesda, MD)
Gil Ohana, Cisco - Tai Pan (Palo Alto, CA)
Bill Page, University of Florida - Five Happiness (New Orleans, LA)
Scott Perlman, Mayer Brown - Fortune (Falls Church, VA)
Michael Salinger, Boston University - Ken Lo’s Memories of China (London, UK)
Carl Shapiro, Berkeley - Yang Sing (San Francisco, CA)
Scott Sher, Wilson Sonsini - Shanghai Village (Bethesda, MD)
Danny Sokol, University of Florida - Meiwah (Chevy Chase, MD)
Craig Waldman, Jones Day - Nanking (San Francisco, CA)
Spencer Waller, Chicago Loyola - Yummy Yummy (Chicago, IL)
Abe Wickelgren, University of Texas - Asia Cafe (Austin, TX)
Phil Weiser, University of Colorado - City Lights (Washington, DC)
Peter Arcidiacono (Duke), Paul B. Ellickson (Rochester), Peter Landry (Duke) and David B. Ridley (Duke) describe Pharmaceutical Followers.
ABSTRACT: We estimate a model of drug demand and supply that incorporates insurance, advertising, and competition between branded and generic drugs within and across therapeutic classes. We use data on antiulcer drugs from 1991 to 2010. Our simulations show generics and ``me-too'' drugs each increased consumer welfare more than $100 million in 2010, holding insurance premiums constant. However, insurance payments in 2010 fell by nearly $1 billion due to generics and rose by over $7 billion due to me-too antiulcer drugs.
Duarte Brito (Universidade Nova de Lisboa and CEFAGE-UE), Pedro Pereira (Autoridade da Concorrencia and CEFAGE-UE) and Joaquim Ramalho (CEFAGE-UE) discuss Mergers, Coordinated Effects and Efficiency in the Portuguese Non-Life Insurance Industry.
ABSTRACT: We evaluate the impact on market power and efficiency of a series of mergers on three Portuguese non-life insurance markets. We specify and estimate, with a panel of firm level data, a structural model which includes: preferences, technology, and a market equilibrium condition. Firms’ demand curves are not very elastic. Firms’ technologies exhibit scale and scope economies and high cost efficiency scores. We find that, for the period following the mergers, there is no evidence of: (i) an increase in market power through coordinated behavior, or (ii) changes in cost efficiency levels. In addition, social welfare increased.
Monday, December 23, 2013
How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange
Keith M Marzilli Ericson (BU) and Amanda Starc (Penn) discuss How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange.
ABSTRACT: Standardization of complex products is touted as improving consumer decisions and intensifying price competition, but evidence on standardization is limited. We examine a natural experiment: the standardization of health insurance plans on the Massachusetts Health Insurance Exchange. Pre-standardization, firms had wide latitude to design plans. A regulatory change then required firms to standardize the cost-sharing parameters of plans and offer seven defined options; plans remained differentiated on network, brand, and price. Standardization led consumers on the HIX to choose more generous health insurance plans and led to substantial shifts in brands' market shares. We decompose the sources of this shift into three effects: price, product availability, and valuation. A discrete choice model shows that standardization changed the weights consumers attach to plan attributes (a valuation effect), increasing the salience of! tier. The availability effect explains the bulk of the brand shifts. Standardization increased consumer welfare in our models, but firms captured some of the surplus by reoptimizing premiums. We use hypothetical choice experiments to replicate the effect of standardization and conduct alternative counterfactuals.
Duarte Brito (Universidade Nova de Lisboa and CEFAGE-UE), Pedro Pereira (Autoridade da Concorrencia and CEFAGE-UE) and Joao Vareda (CEFAGE-UE) analyze Network Neutrality under ISP duopoly: on the ability to assign capacity.
ABSTRACT: We analyze the impact of network neutrality regulation on: (i) competition between CPs, and on (ii) ISPs. incentives to invest. We consider both competition between ISPs and between CPs and show that, if ISPs can offer network services of different quality to CPs, they prefer to sell the highest quality network services to the CP that collects the highest advertising revenues. We further show that the impact of network neutrality regulation on the investment in the quality of network services is potentially ambiguous and depends on: (i) whether ISPs are symmetric, and (ii) the ISPs' ability to assign networks capacity to CPs. If ISPs are symmetric and have full discretion on how to allocate the level of quality of network services among CPs, investment and welfare are higher under the discriminatory regime.