Antitrust & Competition Policy Blog

Antitrust Marathon V: When in Rome Public and Private Enforcement of Competition Law

Philip Marsden, The British Institute of International and Comparative Law, Spencer Weber Waller, Loyola University of Chicago, School of Law - Institute for Consumer Antitrust Studies, and Philipp Fabbio, Mediterranea University of Reggio Calabria - School of Law have posted Antitrust Marathon V: When in Rome Public and Private Enforcement of Competition Law.

ABSTRACT: The Antitrust Marathon is a long-running series of roundtable discussions sponsored by the Institute for Consumer Antitrust Studies of Loyola University Chicago School of Law and the Competition Law Forum of the British Institute of International and Comparative Law, focusing on enduring issues of comparative competition law. These discussions always take place the day before or after the great marathon races of the world which some of the participants also endure. However, no running is required for the roundtable discussion itself. Past Antitrust Marathons have focused on Abuse of Dominance, Antitrust and the Rule of Law; Competition and Consumer Protection, and other topics, and have been held in Chicago, London, Boston and Dublin. We are grateful to the Italian Competition Authority and the University of Rome I (Sapienza) for hosting and being co-sponsors of the 2013 Antitrust Marathon. Our topics this year are: • Public-Private Partnerships for Effective Enforcement • Effective Injunctive Relief • Private Actions for Damages • Criminal Enforcement

Upstream Merger in a Successive Oligopoly: Who Pays the Price?

Oivind Anti Nilsen, Norwegian School of Economics (NHH) - Department of Economics; Institute for the Study of Labor (IZA), Lars Sorgard, Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics, and Simen Ulsaker, Norwegian School of Economics (NHH) - Department of Economics ask Upstream Merger in a Successive Oligopoly: Who Pays the Price?

ABSTRACT: This study develops and uses a successive oligopoly model, with an unobservable non-linear tariff between upstream and downstream firms, to analyze the possible anti-competitive effects of an upstream merger. We find that an upstream merger may lead to higher average prices paid by downstream firms, but that there is no change in the prices paid by consumers. The model is tested empirically on data for an upstream merger in the Norwegian food sector (specifically, the market for eggs). Consistent with the theoretical predictions of the model, we find that the merger had no effect on consumer prices, but led to higher average prices from the downstream to the upstream firm.

Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement

Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) and Heiko A. Gerlach, University of Queensland - School of Economics discuss Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement.

ABSTRACT: This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand‐related markets. We show that cartel prosecution can have a knock‐on effect: bringing down a cartel in one market reduces profits and cartel stability and leads to the break‐up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We discuss the impact of dynamic cartel formation on consumer surplus, explore antitrust spillovers, the optimal scope of antitrust interventions and cartel formation with local firms.

Perchance to Dream: Well Integrated Public and Private Antitrust Enforcement in the European Union

Mel Marquis, European University Institute; European University Institute - Department of Law (LAW) describes Perchance to Dream: Well Integrated Public and Private Antitrust Enforcement in the European Union.

ABSTRACT: This chapter, in proof form, introduces an edited collection of papers written by 27 authors concerning the rise of private antitrust enforcement in Europe and its interaction with enforcement by competition authorities. This chapter and the book cover several jurisdictions and provide initial assessments of the European Commission’s proposed Directive on damages actions and its Recommendation on collective redress, each of June 2013. The book, 'Integrating Public and Private Enforcement of Competition Law -- Implications for Courts and Agencies', is edited by Philip Lowe and Mel Marquis and will be published by Hart of Oxford in early 2014.

Antitrust in Distress: Causes and Consequences of the Financial Crisis

Miguel Moura e Silva, University of Lisbon Law School; CIDEEFF; Autoridade da Concorrencia; IDEFF has written on Antitrust in Distress: Causes and Consequences of the Financial Crisis.

ABSTRACT: This article examines the role of antitrust in the causes and consequences of the crisis. If market turmoil and financial upheaval can shatter the groundwork of competitive markets that antitrust seeks to protect, the shockwaves are sure to be felt in the intellectual foundations of competition policy. Section 2 considers whether antitrust contributed to the financial crisis and briefly describes the pre-crisis role of competition policy on both sides of the Atlantic with regard to the transformations that the banking sector underwent in recent decades. Section 3 analyses the crisis response on the antitrust front. Of particular importance are the two areas where the bailouts tend to collide with antitrust: mergers and, in the European context, State aid. Section 4 then looks at the challenges that economic crises have placed on antitrust enforcers. It is submitted that as the crisis deepens and recovery fails to take hold, the risks to antitrust are far more dangerous and less visible today. Although overall, antitrust enforcement does not seem to be seriously weakened in the US and at the EU level, there are troubling signs that as the current sovereign debt crisis deepens, at least some Member States may want to put a lid on antitrust. A global economic slowdown will tend to make it easier for those claiming a less aggressive antitrust policy is necessary to foster growth. Section 5 concludes that the financial crisis may increase the bias toward accepting ever-larger bank mergers. After all, if an orderly takeover is needed, to whom will central banks look to? The recent crisis showed who the usual suspects are.

When an Inefficient Competitor Makes Higher Profit than its Efficient Rival

Debapriya Sen, Ryerson University and Giorgos Stamatopoulos, University of Crete discuss When an Inefficient Competitor Makes Higher Profit than its Efficient Rival.

ABSTRACT: We present examples of cost-asymmetric duopoly games where the inefficient firm can obtain higher payoff than its efficient rival. Firms compete in a Cournot fashion and their quantities are chosen by their managers. We assume that managers are offered two types of incentive contracts, the pure profit or the pure revenue contract. We allow for mixed and correlated strategies in the contract stage and derive the implications of the resulting choices. Surprisingly, we show that in equilibrium the less efficient firm can obtain higher market share and also higher profit than its more efficient rival. This result holds under both pure and mixed Nash equilibria and also under a robust set of correlated equilibria.

GCR Awards 2014 - Vote Now

See http://globalcompetitionreview.com/news/article/35268/gcr-awards-2014-one-week-left/.

The nominees are: 

Team awards

Matter of the Year

AB InBev/Grupo Modelo

Omnicom/Publicis

Thermo Fisher/Life Technologies

Toshiba’s victory against Best Buy in LCD trial

US Airways/American Airlines

Merger Control Matter of the Year – Americas

Aetna/Coventry Health Care, US

Cinemark/Cinemex, Mexico

Office Depot/Office Max, US

Oxiteno/Uruguayan American Chemical, Brazil

Warner Chilcott/Actavis, US

Merger Control Matter of the Year – Asia-Pacific, Middle East & Africa

Marubeni/Gavilon, China

Mediatek/MStar, China

Ultratech Cement/Jaypee Cement, India

Virgin Australia/Tiger Airways, Australia

Merger Control Matter of the Year – Europe

Aegean/Olympic

Aer Lingus/Ryanair

Microsoft/Nokia

Nynas purchase of Shell's Hamburg refinery 

Behavioural Matter of the Year – Americas

Defence of Visa/Mastercard before Competition Tribunal

Defence of Peter Grimm, Dominick Carollo and Steven Goldberg in Municipal Bonds case

Defence of Richard Bai in AUO price fixing trial

Defence of Toronto Real Estate Board before Competition Tribunal

Behavioural Matter of the Year – Asia-Pacific, Middle East & Africa

Defence in mortgage price-fixing case, Australia

Defence in aluminium phosphate tablet case, India

Defence of Daum in abuse of dominance case, Korea

Arcelor Mittal/Cape Gate access to file success, South Africa

Behavioural Matter of the Year – Europe

Eurotunnel CAT appeal

French water investigation

Libor - Defence of Barclays and UBS

OFT’s hotel bookings case

Wabco General Court appeal

Litigation of the Year

TFT-LCD (Flat Panel) antitrust litigation: Best Buy v HannStar Display and Toshiba

In Re Cathode Ray Tube (CRT) antitrust litigation

Freight Fuel Surcharge Antitrust Litigation before the US Court of Appeals for the District of Columbia

AkzoNobel/Metlac before the UK Competition Appeal Tribunal

Cartel Damage Claims v Holcim before the District Court of Düsseldorf

German Rail Cartel - Follow-on Litigation 

Individuals' awards

Lawyer of the Year

Antoine Winckler - Cleary Gottlieb Steen & Hamilton

Christine Varney - Cravath Swaine & Moore

Deirdre Trapp - Freshfields Bruckhaus Deringer 

Ilene Knable Gotts - Wachtell Lipton Rosen & Katz

Michael Egge - Latham & Watkins 

Paul Denis - Dechert

Richard Parker - O'Melveny & Myers

Steven Sunshine - Skadden Arps Slate Meagher & Flom

Lawyer of the Year - 40 and under

Alastair Chapman - Freshfields Bruckhaus Deringer

Amanda Reeves - Latham & Watkins

Ana Paula Martinez - Levy & Salomao

Casey Halladay - McMillan

Claire Jeffs - Slaughter and May

Leonor Cordovil - Grinberg Cordovil

Pierre Zelenko - Linklaters

Warren Rosborough - McDermott Will & Emery

Economist of the Year

Carl Shapiro - Charles River Associates

Christina Caffara - Charles River Associates

David Dranove - Bates White

Dennis Carlton - Compass Lexecon

Helen Jenkins - Oxera

Peter Boberg - Charles River Associates

Corporate Counsel of the Year

Adam Eaton - Visa

Calvin Park - Qualcomm Korea

Christoph Klahold - ThyssenKrupp

Dina Kallay - Ericsson 

Howard Kass - US Airways (American Airlines)

Kent Walker - Google

Academic Excellence Award

Damien Geradin

Daniel Sokol

C Scott Hemphill

Gregory Sidak

John Vickers

Article of the year 

A Paul Victor, Seth C Farber and Brandon Duke, “The Policy Case for Eliminating The Public Identification of Carve-Outs In Antitrust Plea Agreements"

Herbert Hovenkamp, "Anticompetitive Patent Settlements and the Supreme Court's Actavis Decision"

John D Harkrider, "Seeing the Forest through the SEPs"

Joshua D Wright and Judge Douglas H Ginsburg, "The Goals of Antitrust: Welfare Trumps Choice"

Enforcement awards

Agency of the Year – Americas

Brazil’s CADE

Chile's National Economic Prosecutor

Ecuador's Superintendency for the Control of Market Power

US Department of Justice’s antitrust division

US Federal Trade Commission

Agency of the Year – Asia-Pacific, Middle East & Africa

Australian Competition & Consumer Commission

China's National Development & Reform Commission

Competition Commission of India 

Japan’s Fair Trade Commission

Korea's Fair Trade Commission

Agency of the Year – Europe

European Commission’s Directorate General of Competition

France’s Competition Authority

Germany’s Federal Cartel Office

Norway’s Competition Authority

Poland's Office of Competition and Consumer Protection 

Enforcement Matter of the Year

European Commission fines Lundbeck

DoJ Auto Parts

Germany’s investigation of Amazon Marketplace

Supreme Court Actavis decision

United States v Apple

United States v Bazaarvoice

Firm awards 

Regional firm of the year – Europe

Bredin Prat 

Gide Loyrette Nouel

Gleiss Lutz

Hengeler Mueller

Schoenherr

Uría Menéndez 

Regional firm of the year – Asia-Pacific, the Middle East and Africa

Amarchand & Mangaldas & Suresh A Shroff & Co

Anderson Mori & Tomotsune

Edward Nathan Sonnenbergs

Gilbert + Tobin

Kim & Chang

Regional firm of the year - Americas 

Axinn Veltrop & Harkrider

Blake Cassels & Graydon

Grinberg Cordovil 

McMillan 

Robins Kaplan Miller & Ciresi 

Wachtell Lipton Rosen & Katz 

Patents, Antitrust, and the High Cost of Health Care

Tom Cotter (Minnesota) explains Patents, Antitrust, and the High Cost of Health Care.

ABSTRACT: Americans pay much more for health care than do consumers in other countries, but whether the expense is worth it is, to say the least, debatable. This essay discusses the comparative role of patents, antitrust, and other bodies of law in contributing to the high cost of health care in the United States. I argue that, although patents play a part in raising health care costs, that effect is offset to some degree by substantial countervailing benefits. More troubling has been a two-decade-long failure of antitrust law to prevent anticompetitive hospital mergers and other welfare-reducing practices, though in recent years the courts and agencies have begun to correct some of the worst abuses. Arguably more significant than the failures of either of these two bodies of law, however, are the many ways in which hospitals, drug companies, and other health-related industries often have been able to capture Congress and other entities that supposedly regulate their behavior.

The Evolution and Vitality of Merger Presumptions: A Decision-Theoretic Approach

Steve Salop (Georgetown) explores The Evolution and Vitality of Merger Presumptions: A Decision-Theoretic Approach.

ABSTRACT: This article reviews the formulation and evolution of the Philadelphia National Bank anticompetitive presumption through the lens of decision theory and Bayes Law. It explains how the economic theory, empirical evidence and experience are used to determine a presumption and how that presumption interacts with the reliability of relevant evidence to rationally set the appropriate burden of production and burden of persuasion to rebut the presumption. The article applies this reasoning to merger presumptions. It also sketches out a number of non-market share structural factors that might be used to supplement or replace the current legal and enforcement presumptions for mergers. It also discusses the potential for conflicting presumptions and how such conflicts might best be resolved.

Vertical Integration and Market Structure

Timothy Bresnahan Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER) and Jonathan Levin Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER) analyze Vertical Integration and Market Structure.

ABSTRACT: Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization.

‘Essential’ Patents, Frand Royalties and Technological Standards

Mathias Dewatripont, Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) and Patrick Legros, Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) discuss ‘Essential’ Patents, Frand Royalties and Technological Standards.

ABSTRACT: Standard Setting Organizations have developed FRAND agreements in order to prevent firms from holding up other participants once a standard is created. We analyze here the consequences of such agreements - in particular the requirements of fairness and non‐discrimination - for the creation of technological standards that require the participation of existing patent holders. We abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one's patent portfolio, as is implicitly the case in FRAND agreements, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to ‘pad’ by contributing patents that are ‘inessential’ for the given standard, a phenomenon that seems to be widespread. Several results emerge from the analysis: (i) the number of inessential patents co‐varies positively with the number of essential patents; (ii) there is over‐investment relative to the second‐best, that is when padding cannot be avoided and (iii) the threat of disputes reduces incentives to pad but at the cost of lower production of strong patents; (iv) mitigating this undesirable side‐effect calls for a simultaneous increase in the cost of padding, through a better filtering of patent applications.

Rhetoric and Reality: You Protect Competitors, We Protect Competition – Except When We Protect Competitors

Florian Wagner-von Papp, University College London Faculty of Laws has a new paper on Rhetoric and Reality: You Protect Competitors, We Protect Competition – Except When We Protect Competitors. The topic is a great one.

ABSTRACT: The aim of this paper is threefold. First, it seeks to contribute to a more fine-grained comparison between US antitrust and EU competition law by (selectively) including state antitrust laws as well as laws that pursue objectives different from the antitrust laws but interfere with the aims of the antitrust laws ("non-antitrust laws"). Secondly, the paper highlights the degree to which such state antitrust laws and non-antitrust laws may interfere with the error-cost framework employed in antitrust law which finely balances Type I and Type II errors. Thirdly, as a consequence of the first two points, the paper seeks to raise awareness of the importance of clearly defining the relationship between antitrust law on the federal (or EU) level and antitrust laws as well as non-antitrust laws on the (Member) state level.

Federal antitrust law in the United States has come a long way since the 1970s. Interventionism has since been replaced by the use of an error-cost framework. This error-cost framework takes into account that Type I errors (false positives, overenforcement) may actually stifle competition and be counterproductive, for example, where antitrust protection of intrabrand competition has negative effects on interbrand competition, or where the antitrust laws are used to restrict vigorous competition by a firm with monopoly power in order to protect less efficient competitors to the detriment of consumers. When comparing US antitrust law to EU competition law, EU law is usually portrayed as not having made this transition, or at least not being consist in the implementation of the error-cost framework. EU competition law is seen as interventionist and disproportionately concerned with Type II errors (false negatives, underenforcement). This contribution acknowledges that the enforcement of EU competition law is more interventionist than the enforcement of US federal antitrust law. However, the comparison of US antitrust law on the *federal* level with competition rules on the *EU* level is an incomplete one. In comparative law, the focus must be on the "law in action" as it applies to a given factual scenario and must take "functional equivalents" into account. Using these insights from comparative law has the consequence that in the US one has to take into account not only federal antitrust law, but also state antitrust laws and non-antitrust laws. Some state antitrust laws are more interventionist than the federal antitrust laws, for example in the treatment of resale price maintenance, and they may apply concurrently to federal law, undermining the federal law's non-interventionist stance. Alternatively or cumulatively, non-antitrust laws (on the federal or state level) may disturb the fine balance struck by the error-cost framework employed in federal antitrust law. This is, for example, the case where contract law makes resale price maintenance contracts unenforceable even though they would be considered reasonable under federal antitrust law, where franchise or car dealership laws make it difficult for the franchisor or manufacturer to structure or restructure their distribution schemes, undermining the federal law's reluctance to interfere with unilateral decision-making even by the monopolist, or where sales-below-cost statutes in the states undermine the error-cost framework employed in predatory-pricing analysis under the federal antitrust laws. Taking these functional equivalents into account narrows the seemingly wide gap between interventionist EU competition law and the non-interventionist US antitrust law to some degree. In the EU, conversely, one also has to consider the competition laws of the Member States, and the effect of functional equivalents of laws outside competition law. A similar picture emerges: the Member States' competition laws are generally more interventionist than EU competition law (especially where competition laws apply to "economic dependency" scenarios), and non-antitrust laws, such as unfair trade law, prohibit conduct that would pass muster under EU competition law. As most of the laws interfering with the error-cost framework analysis are enacted on the state level (or Member State level), the question of the relationship between federal and state law arises. In the US, the courts have been extremely reluctant to consider federal preemption of state antitrust laws, and state non-antitrust laws generally benefit from the non-interventionist state action doctrine. In the EU, the relationship between the national competition laws and EU competition law has changed in 2004, in a political compromise that I consider unsatisfactory: while restrictions of competition by agreement are, roughly speaking, fully harmonized across the EU, Member States are completely free to be as interventionist as they like as far as unilateral conduct is concerned. While it is arguably unrealistic to draft an error-cost framework that comprises all antitrust and non-antitrust objectives, and at the same time takes account of federalism issues, this paper seeks to raise the awareness of the interactions between the various antitrust/non-antitrust and federal/state laws.

The Industrial Organization of Health Care Markets

Martin S. Gaynor, Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation, Katherine Ho Columbia 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)have a nice overview on The Industrial Organization of Health Care Markets.

ABSTRACT: The US health care sector is large and growing – health care spending in 2011 amounted to $2.7 trillion and 18% of GDP. Approximately half of health care output is allocated via markets. In this paper, we analyze the industrial organization literature on health care markets focusing on the impact of competition on price, quality and treatment decisions for health care providers and health insurers. We conclude with a discussion of research opportunities for industrial organization economists, including opportunities created by the US Patient Protection and Affordable Care Act.

Competition Rules and Regulation in the Telecommunications Sector: Evidence from Recent EU Margin Squeeze Cases

Margherita Colangelo, Roma Tre University - Department of Law explores Competition Rules and Regulation in the Telecommunications Sector: Evidence from Recent EU Margin Squeeze Cases.

ABSTRACT: In recent decades the relationship between competition law and regulation has become a very controversial issue, in particular in respect of the interface between competition rules and sector-specific regulation in liberalized network industries. The paper examines the controversial practice of margin squeeze, engaging in a detailed analysis of the relevant US and EU case-law in regulated industries in order to conduct a tentative critical exploration of these respective approaches and to consider whether a reconciliation between such regimes is possible. Moreover, it aims at examining some relevant open issues related to price squeeze, particularly with regard to the concurrent application of competition rules and sector-specific regulation and the risks connected with the coexistence of different sets of rules and also of different competent authorities.

Rule of Law in China - Legislation Reasoning and Enforcement of Anti-Monopoly Law in China and the West

Tat Chee Tsui, University of Dublin - Trinity College analyzes Rule of Law in China - Legislation Reasoning and Enforcement of Anti-Monopoly Law in China and the West.

ABSTRACT: It is a long debate over whether rule of law is reliable in China, when some Chinese regulations are considered to be decided for political interests rather than the law itself. Furthermore, Chinese court decisions are often criticized for not according with statutes, even though the latter are properly written. The author examines these issues by comparing the legislation reasoning and enforcement of competition law in China, the European Union and the United States, which will not lead to endorsement of or objection to the view that rule of law is properly enforced in China, but it shall be an inevitable responsibility for the Chinese judiciary to demonstrate efforts it has taken.

'Pay for Delay': What Do We Disagree On?

Pierre Marcel Regibeau, Imperial College; Charles River Associates asks 'Pay for Delay': What Do We Disagree On?

ABSTRACT: Antitrust concerns about “Pay For Delay” patent settlements are based on two theory of harms, one that stresses the need for Courts to review the validity of patents and one that emphasises the “probabilistic” nature of patent rights. The main weakness of the first theory of harm is that it fails to explain why some forms of patent settlements would be less desirable than others. The “probabilistic” theory of harm raises fundamental questions about the legal obligations of a patent-holder, the type of uncertainty that should be reflected in the probabilistic nature of the patents and whether the theory can be applied to anything but the simplest PFD settlements. The paper also discusses the likely effect of a PDF ban on innovation and reviews both the European approach to recent and on-going PDF cases and the recent Actavis decision of the US Supreme Court.

A Criminal Perspective on Antitrust Practices

Ioana Curt and Alexandra Pop, Babes-Bolyai University offer A Criminal Perspective on Antitrust Practices.

ABSTRACT: The last ten years have witnessed significant development of competition law in Europe as well as further a field: from the modernisation reforms in the EU, to the adoption of groundbreaking decisions in the US federal courts.The present study has set its aim to clarify the concept and possible interpretation quandaries revolving around antitrust practices, offering a penal perspective on the matter.

The first part of the article deals with the concept of antitrust practices by presenting the reasons why this negative behaviour should be criminalised. Also, the writers discuss whether criminal law is the best solution for overseeing the competition scene and putting an end to these misdemeanors, or should the application of administrative or contraventional fines suffice in contriving this desideratum.The paper can also be seen as mirroring the tension between the ‘old’ and the ‘new’, in the search for innovative responses to the current challenges. Moving on, the authors indicate the pros and cons of our current law system, alongside providing a short glimpse of some analogous european legal provisions, doctrinal views and case-law. After scrutinizing all the basic issues surrounding the concept of antitrust provisions, the analysis of the criminal provision of article 60(1) enters the spotlight. As shown by the authors, the premises of retaining this criminal provision commend the existence of an antitrust practice administered by at least two entities, and which implies an agreement aimed at restricting, impeding or distorting the competition scene. The writers then tally the actual activities encompassed by this criminal provision, alongside presenting it’s elementary components. A series of problems are the pointed-out, many of which originate from the fact that our legal provision was copied mot-à-mot from it’s French omologue. The main problematic issues tackled by the authors regard the author, the actus reus and the mens rea of the crime at hand. Further on, the paper treats the so-called criminal provision stated by article 62, showing that it is in fact nothing other than a warning provision, because it’s area of application is limited by other existing legal provisions from the Penal Code. The authors’ opinion on the matter is bolstered by Law no. 187/2012, regarding the application of the New Penal Code, within which it is expressly stated that the provision at hand shall be revoked. Both during and subsequent to these examinations, the authors are aptly devoted to proposing a series of compulsory changes that would remodel Law no. 21/1996 into a suitable “guardian” of the free competition scene.

‘Essential’ Patents, Frand Royalties and Technological Standards

Mathias Dewatripont Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) and Patrick Legros Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) address ‘Essential’ Patents, Frand Royalties and Technological Standards.

ABSTRACT: Standard Setting Organizations have developed FRAND agreements in order to prevent firms from holding up other participants once a standard is created. We analyze here the consequences of such agreements - in particular the requirements of fairness and non‐discrimination - for the creation of technological standards that require the participation of existing patent holders. We abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one's patent portfolio, as is implicitly the case in FRAND agreements, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to ‘pad’ by contributing patents that are ‘inessential’ for the given standard, a phenomenon that seems to be widespread. Several results emerge from the analysis: (i) the number of inessential patents co‐varies positively with the number of essential patents; (ii) there is over‐investment relative to the second‐best, that is when padding cannot be avoided and (iii) the threat of disputes reduces incentives to pad but at the cost of lower production of strong patents; (iv) mitigating this undesirable side‐effect calls for a simultaneous increase in the cost of padding, through a better filtering of patent applications.

Patent=Monopoly: A Legal Fiction

Sven Bostyn, University of Liverpool - School of Law and Nicolas Petit, University of Liege argue Patent=Monopoly: A Legal Fiction.

ABSTRACT: A patent right is an exclusionary right. With it, the patent holder can exclude third parties from making, using, selling, etc. products or processes protected by his patent. In the past, this right has also been referred to as a 'monopoly right' and this has lead to considerable confusion about the scope of patent rights and the role of the patent system in a modern economy. This paper seeks to provide some clarity on this issue and highlight the distinction between the exclusionary right granted by patent law and the notion of monopoly in economic regulation.

Moving Away from High-Level Theories: A Market-Driven Analysis of FRAND in the Context of Standardization

Damien Geradin, George Mason University School of Law; Tilburg University is Moving Away from High-Level Theories: A Market-Driven Analysis of FRAND in the Context of Standardization.

ABSTRACT: There is a large strand of legal and economic literature suggesting the FRAND regime is broken and that standardization is at risk given “hold-up and “royalty stacking” problems. A variety of proposals have been made to address these alleged problems, most of which seeking to decrease the bargaining power of essential patent holders to the benefit of standard implementers. The hold up and royalty stacking conjectures have been questioned by a number of authors essentially on the ground that these theories contained logical inconsistencies, but also that they were not based on sufficient empirical support to warrant policy reforms. Against this background, this paper explains why hold up and royalty stacking only occur in rare circumstances given the private solutions that are available to standard implementers to avoid paying license fees that are not FRAND or that would aggregate to a level that would render the implementation of the standard more difficult or even impossible. Given the dearth of empirical evidence over hold up and royalty stacking, this paper also looks at the evolution of the mobile communication sector in the past decade to see whether the alleged adverse consequences (in terms of harm to standard implementation, innovation and investment and the continuity of the standardization process) that would be created by hold up and royalty stacking can actually be observed. The available data suggests that the mobile communication device markets are healthy despite the fact that these markets have been said to be harmed by regular SEP-related abuses. Although it could be argued that these markets would be even healthier “but for” SEP abuses, the available data should give pause to those claiming that significant reforms should be made to the FRAND regime. In fact, the high degree of competition in the above markets and the presence of highly successful entrants that do not have a track record in the development of mobile communication technologies strongly suggest that the FRAND regime has largely worked in that it has stimulated the broad licensing of SEPs while maintaining a fair balance between the interests of SEP holders and standard implementers.