Monday, March 31, 2014
Alexei Parakhonyak (National Research University Higher School of Economics, Moscow) and Nick Vikander (University of Copenhagen, Department of Economics) explore Optimal Sales Schemes for Network Goods.
ABSTRACT: This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers’ desire to influence one another’s behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independent-minded consumers who can serve as opinion leaders for those who follow.
Enrico Alemani, Caroline Klein, Isabell Koske, Cristiana Vitale, Isabelle Wanner (all OECD) discuss New Indicators of Competition Law and Policy in 2013 for OECD and non-OECD Countries.
ABSTRACT: This paper presents the new OECD competition law and policies (CLP) indicators which measure the strength and scope of competition regimes in 49 jurisdictions (OECD and non-OECD). The indicators cover areas for which there is a broad consensus among member countries on what constitutes ‘good’ practice for competition regimes. The results suggest that competition regimes are broadly similar across countries in these areas because most countries have adopted all or a large number of the ‘good’ policy settings captured by the indicators. On average, the design of competition laws and policies appears to be closer to best practice in OECD countries than in non-OECD countries. Jurisdictions differ relatively more on the enforcement of competition law than on the competition law itself.
Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy - Fondation universitaire, 24 April 2014
Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy
Fondation universitaire, 24 April 2014
Merger regulation, firms, and the co‐evolutionary process: An empirical study of internationalisation in the UK alcoholic beverages industry 1985‐2005
Julie Bower, Birmingham Business School and Howard Cox, Queen Mary are brewing Merger regulation, firms, and the co‐evolutionary process: An empirical study of internationalisation in the UK alcoholic beverages industry 1985‐2005.
ABSTRACT: We present an historic industry study of the consolidation of the UK alcoholic beverages firms to inform debates in organisation studies relating to co‐evolution and the dynamics of internationalisation. Given the constraints imposed on merger strategies by competition policy, once merger opportunities are exhausted at home firms are motivated to embark on international consolidation in order to continue a growth trajectory. This brings them into contact with unfamiliar and more complex institutional interactions. The ability to interact successfully with key agents in the institutional environment is likely to be an important source of firm competitive advantage. Our article conceptualises this process with reference to co‐evolutionary theory. We distinguish behavioural and structural co‐evolutionary factors in firms’ strategic intent, mirroring the two types of remedies that competition authorities can impose on merging firms. We test this theoretical construct in an empirical investigation of the consolidating UK alcoholic beverages firms between 1985 and 2005. In this era Diageo was formed from the landmark merger of Grand Metropolitan and Guinness. Subsequently Diageo acquired the former international spirits empire of Seagram in partnership with a major competitor. Successful implementation of Diageo’s merger strategy owed much to an ability to navigate the evolving multi‐jurisdictional co‐ordinated oversight of cross‐border mergers and acquisitions. The formation of novel deal structures as well as cooperation with competitors to circumvent policy intervention were significant co‐evolutionary mechanisms that have featured more generally in subsequent international mergers as others have copied these deal structures to achieve similar regulatory outcomes.
Last week Concurrences announced winners of its 2014 writing awards at a gala dinner.
Winning Award Articles
I. ACADEMIC ARTICLES
1. General antitrust
2. Concerted Practices / Cartels
3. Dominance / Monopolization
Snake-Oil with Mathematics is Still Snakeoil: Why Recent Trends in the Application of So-Called “Sophisticated” Economics is Hindering Good Competition Policy Enforcement, Simon Bishop, European Competition Journal, Volume 9, Number 1, May 2013 , pp. 67-77(11).
6. Private Enforcement
7. Intellectual Property
8. Asian Antitrust
Divergence Then and Now: What Does the U.S./EU Experience Tell Us About Convergence With MOFCOM?, George S. Cary, Elaine Ewing, article to be released in “William E. Kovacic – An Antitrust Tribute, Vol. II”, Institute of Competition Law.
II. BUSINESS ARTICLES
1. General Antitrust
2. Concerted Practices / Cartels
Federal Appeals Court Reaffirms Flexible Legal Standard for Restraints in Competitor Collaborations, Thomas Demitrack, Michelle K. Fischer, Brian K. Grube, and Paula W. Render, Jones Day Antitrust Alert, January 2013.
3. Dominance / Monopolization
6. Private Enforcement
European Commission adopts a package on private damages actions in antitrust cases, Ian S. Forrester QC, LLD, James R.M. Killick, Pontus Lindfelt, Jacquelyn F. MacLennan, Mark D. Powell, Axel P. Schulz, Dr. Assimakis Komninos, and Kai Struckmann, White & Case Antitrust Alert, June 13, 2013.
7. Intellectual Property
8. Asian Antitrust
James Albrecht (Georgetown University), Pieter Gautier (Free University of Amsterdam - VU) and Susan Vroman (Georgetown University) address Efficient Entry in Competitive Search with Nonrival Meetings and Asymmetric Information.
ABSTRACT: In this paper, we consider the efficiency of entry in a model of compet- itive search. By competitive searchwe mean that we analyze a large market in which buyers (or sellers) can direct their search based on the terms of trade that are posted (with commitment) by their counter- parts on the other side of the market. We consider in particular entry on the side of the market on which the terms of trade are advertised. We generalize this literature on efficiency entry on competitive search in two directions. First, we allow for many-on-one meetings; e.g., a seller may interact with two or more buyers at the same time. Second, we allow for asymmetric information; e.g., a seller may not know how much the buyers she is interacting with value her good.
Sunday, March 30, 2014
See full coverage for the Global Competition Review winners here including links to award photos (spoiler: Bruce McDonald of Jones Day looks good in a tuxedo).
Full list of winners
Matter of the Year
US Airways/American Airlines
Counsel to American Airlines
Partners John Majoras, Joe Sims and J Bruce McDonald in Washington, DC
Partner MJ Moltenbrey in Washington, DC, assisted by Timothy Longman
Counsel to US Airways
O’Melveny & Myers LLP
Partner Richard G Parker in Washington, DC
Cadwalader, Wickersham & Taft LLP
Partners Charles F Rule and Andrew Forman in Washington, DC
Partner Paul T Denis in Washington, DC
Latham & Watkins LLP
Partners John Kallaugher and Jean Paul Poitras in Brussels
Counsel to American Airlines and US Airways
Partners Dennis Carlton, Janusz Ordover, Daniel Kasper, and Rajiv Gokhale
Merger Control Matter of the Year – Americas
Office Depot/Office Max - US
Counsel to Office Max
Partners Paul T Denis and James Fishkin in Washington, DC, assisted by David Stanoch and Rani Habash
Partners Jonathan Orszag, Eugene Orlov, Daniel Stone, Neal Lenhoff, Joseph Goodman and Jonathan Williams
Counsel to Office Depot
Simpson Thacher & Bartlett LLP
Partners Kevin J Arquit in New York and Matthew J Reilly in Washington, DC, are assisted by Andy Lacy
Charles River Associates
Vice-presidents Peter Boberg and Andrew Dick, associate principals Courtney Stoddard and Josh Lustig and principal Spencer Graf
Merger Control Matter of the Year – Asia-Pacific, Middle East & Africa
Virgin Australia/Tiger Airways - Australia
Counsel to Virgin Australia and Tiger Airways
Gilbert + Tobin
Partner Luke Woodward and Senior Lawyers Charles Coorey and Louise Klamka.
Merger Control Matter of the Year – Europe
Counsel to Aer Lingus
Cadwalader, Wickersham & Taft
Partner Alec J Burnside and counsel Anne MacGregor in Brussels, assisted by Marjolein De Backer, Christian Lorenz, David Boyle and Evan Flowers
Charles River Associates
Vice president Cristina Caffarra
Brick Court Chambers
James Flynn QC and Daniel Piccinin
Behavioural Matter of the Year – Americas
Defence of Visa/Mastercard before Competition Tribunal
Counsel to Visa Canada
Blake, Cassels & Graydon LLP
Counsel to MasterCard
Counsel to Visa and Mastercard
University of Calgary
Behavioural Matter of the Year – Asia-Pacific, Middle East & Africa
ArcelorMittal/Cape Gate access to file success - South Africa
Counsel to Arcelor Mittal
Fasken Martineau DuMoulin
Partner Stephen Langbridge in Sandton
Counsel to Cape Gate
Robert Legh & Lucinda Verster
Behavioural Matter of the Year – Europe
Libor - Defence of Barclays and UBS
Libor - Defence of Barclays
Libor - Defence of UBS
Gibson, Dunn & Crutcher LLP
Litigation of the Year
German Rail Cartel - Follow-on Damages Litigation
Counsel to Deutsche Bahn
Wilmer Cutler Pickering Hale and Dorr
Partners Ulrich Quack, Stefan Ohlhoff and Jan Heithecker, assisted by Oliver Fleischmann, Julia Schwalm, Patrick Späth, Natalie Achenbach, Regina Klostermann and Johannes Ylinen.
Charles River Associates
Matthias Pflanz Agency awards
Regional Firm of the Year – Europe
Regional Firm of the Year – Asia-Pacific, Middle East & Africa
Kim & Chang
Regional Firm of the Year - Americas
Wachtell, Lipton, Rosen & Katz
Agency of the Year – Americas
The United States Department of Justice - Antitrust Division
Agency of the Year – Asia-Pacific, Middle East & Africa
Australian Competition & Consumer Commission
Agency of the Year – Europe
European Commission - Directorate General of Competition
Lawyer of the Year
Cravath, Swaine & Moore LLP
Lawyer of the Year - 40 and under
Levy & Salomão Advogados
Economist of the Year
Corporate Counsel of the Year
US Airways (American Airlines)
Academic Excellence Award
University of Florida Levin College of Law
Article of the Year
Joshua D. Wright
"The Goals of Antitrust: Welfare Trumps Choice"
Judge Douglas H. Ginsburg
"The Goals of Antitrust: Welfare Trumps Choice"
Saturday, March 29, 2014
Friday, March 28, 2014
Paulo Arvate (School of Business - FGV), Klenio Barbosa, Sao Paulo School of Economics - FGV and Dante Gambardella, Samaritano Hospital discuss Generic-branded drug competition and the price for pharmaceuticals in procurement auctions.
ABSTRACT: This paper studies the effects of generic drug’s entry on bidding behavior and participation of drug suppliers in procurement auctions for pharmaceuticals, and the consequences on procurers’ price paid for drugs. Using an unique data set on procurement auctions for off-patent drugs organized by Brazilian public bodies, we find that some branded drug suppliers leave the auctions in which there exists a supplier of generics. However, the remaining ones lower their bidding price in a presence of generics in an auction. Due to a fierce price competition between generic and branded suppliers, the price paid for pharmaceuticals reduces by 7 percent in auctions in which a generic’s supplier participates vis-à-vis auctions without generics. As a result of such generic-branded competition, we find no statistical difference between bids and prices paid for generic and branded drugs. To overcome potential estimation bias due to generic’s entry endogeneity, we exploit variation in the number of days between drug’s patent expiration date and the tendering session. The two-stage estimations document the same pattern as the generalized least square estimations find. This evidence indicates that generic competition affects branded supplier’s behavior in procurement auctions differently from other markets.
Tobias Wenzel, Dusseldorf Institute for Competition Economics (DICE) explains Consumer Myopia, Competition and the Incentives to Unshroud Add-on Information.
ABSTRACT: This paper studies unshrouding decisions in a framework similar to Gabaix and Laibson (2006), but considers an alternative unshrouding mechanism where the impact of advertising add-on information depends on the number of unshrouding firms. We show that shrouding becomes less prevalent as the number of competing firms increases. With unshrouding costs a non-monotonic relationship between the number of firms and unshrouding may arise.
Bipasa Datta (University of York) and Yu-Shan Lo (xChung-Hua Institute for Economic Research) ask To Block or not to Block? Network Competition when Skype enters the Mobile Market.
ABSTRACT: Voice over Internet Protocol (VoIP) such as Skype that enables users to make free internet-based calls to other users has been seen as a threat to voice revenues by traditional network operators. While some mobile network operators (MNOs) attempt to block Skype's entry on their networks, some actually welcome it even if it apparently conflicts with their interests in making calling profits. In this paper we develop a Hotelling-style model of network competition between two MNOs to analyse their incentives to accommodate or block Skype. We find that accommodation is the dominant strategy of an MNO whenever its equilibrium voice market share is at least 29%. Furthermore, the overall Nash equilibrium of the game can be either symmetric (where Skype's entry is either accommodated or blocked by both MNOs) or asymmetric (where only one has the incentive to accommodate) depending upon the consumers' preference for a certain network and the quality of Skype-based interconnection. In a symmetric accommodation equilibrium, the MNO with a lower (higher) customer valuation is better-off (worse-off) relative to the one where entry is blocked.
Thursday, March 27, 2014
Marc-Andreas Muendler (UCSD) asks EXPORT OR MERGE? PROXIMITY VS. CONCENTRATION IN PRODUCT SPACE.
ABSTRACT: This paper proposes a proximity-concentration tradeoff in product space as a determinant of horizontal foreign direct investment (FDI). Firms that enter a foreign market by exporting are able to capture consumer surplus from introducing a differentiated product with characteristics that the incumbent cannot match. In relatively globalized product space, in contrast, consumers perceive an entrant's difference to existing products as less pronounced, so a consumer's virtual distance costs in product space are lower and a merger with an incumbent (horizontal FDI) offers pricing power that allows the entrant to extract consumer rent. Lower physical trade costs of shipping make Bertrand price competition fiercer in differentiated product space and can provide an additional incentive for a merger. A basic product space model with a linear Hotelling setup can therefore explain why FDI has become more frequent in recent periods in the presence of falling trade costs. Cross-border merger and acquisitions data support the model's prediction that horizontal FDI grows relatively faster than exports in differentiated goods industries, compared to homogeneous-goods industries.
Dmitry Lubensky (Department of Business Economics and Public Policy, Indiana University Kelley School of Business) offers A Model of Recommended Retail Prices.
ABSTRACT: Consumers rely on a manufacturer's recommended price to help determine whether to accept a retailer's price or continue to search. This paper demonstrates that doing so can be rational even if the manufacturer's price recommendation is cheap talk. By incentivizing search, a manufacturer trades off reducing double marginalization and losing consumers to competitors. When the manufacturer's cost is low he induces low retail prices and benefits when consumers search more. When the manufacturer's cost is high he induces high retail prices and benefits when consumers search less. Since consumers prefer to search more when lower prices are available, their incentives are aligned with the manufacturer's and this allows informative cheap talk communication. Aside from costs, the manufacturer can inform consumers of other market parameters such as product quality.
Yongmin Chen, University of Colorado at Boulder and Tianle Zhang, Lingnan University address Entry and Welfare in Search Markets.
ABSTRACT: The effects of entry on consumer and total welfare are studied in a model of consumer search. Potential entrants differ in quality, with high-quality sellers being more likely to meet consumer needs. Contrary to the standard view in economics that more entry bene ts consumers, we nd that consumer welfare has an inverted-U relationship with entry cost, and free entry is excessive for both consumer and total welfare when entry cost is relatively low. We explain why these results may arise naturally in search markets due to the variety and quality e¤ects of entry, and discuss their business and policy implications.
Jonathan Faull and Ali Nikpay have published a new third edition of The EU Law of Competition. This is a massive expansion over the previous version, coming in at over 1.2 million words. If there is only one book you buy on EU law, it should be this one.
BOOK ABSTRACT: Offers uniquely in-depth working knowledge of EU competition law, written by current and former members of the Directorate General for Competition
- A practical reference tool that puts particular emphasis upon how law and policy apply in practice
- New chapter on pharmaceuticals, covering dominance in abusive conduct cases, restrictive practices, competition between manufacturers of generic medicines, case law, and parallel trade in pharmaceuticals
- New separate chapters on communications (telecoms and Internet) and media
- Greatly expanded chapters on mergers and cartels
Fully updated in this third edition, the work includes full coverage of the latest legislation, case law and guidance, giving competition lawyers a comprehensive commentary on recent developments. It includes new material on industries of growing importance in the competition field, including Pharma and High Tech. It also analyses the R&D and Specialisation Block Exemption Regulations, the revised Verticals Block Exemption Regulation, and the Technology Transfer Block Exemption. Key cases covered in this edition include Telefonica, Microsoft, Intel, Rambus, RWE, and GdF.
Nicolas Le Pape, CREM, Universite de Caen and Kai Zhao, Huaqiao University, Xiemen, China explore Horizontal mergers and uncertainty.
ABSTRACT: Some path-breaking work on mergers takes efficiency gains for granted, or assumes that firms have perfect knowledge when taking merger decisions. In practice, firms and competition authorities cannot know exact future efficiency gains, prior to merger consummation. This paper analyzes horizontal mergers when the output decision-making process is sequential. A key assumption is that mergers create uncertainty on productivity and informational asymmetry between firms. The paper also studies whether the merged firm has interest to reveal the information about its own cost to competing firms. In terms of "Merger Approval", the paper emphasizes the timing of regulatory intervention and distinguishes two different merger control interventions (ex ante or ex post enforcement). Since prudent competition authorities (using ex ante intervention) should take the restrictive policy, the framework illustrates why US Horizontal Merger Guidelines and EC Merger Regulation are biased in favor of the consumers’ interests.
Wednesday, March 26, 2014
Dieter Pennerstorfer (WIFO) and Franz Sinabell (WIFO) discuss Spatial Price Differentiation and Regional Market Power. The Case of Food-Retailing in Austria.
ABSTRACT: A small number of firms have a large market share in the Austrian food retailing market. Market concentration has been growing over the last years which has raised concerns about market power. Previous studies on price setting behaviour in the food retailing market were at the national level and regional price setting has not yet been analysed. We use a panel data set of over 2,000 households with monthly food purchasing data and the number of outlets of the nine biggest food retailers in 120 districts to explore regional price setting behaviour. The analysis shows that only a small number of retailers seem to regionally differentiate prices extensively. It cannot be confirmed that spatial price differentiation is a way to exert market power in the Austrian food retailing market.
Mariana Mazzucato (SPRU, University of Sussex, UK) and Stuart Parris (Faculty of Economics, Open University, UK) examine High growth firms, innovation and competition: the case of the US pharmaceutical industry.
Juliano Assuncao, Pontificia Universidade Catolica do Rio de Janeiro, Joao Paulo Pessoa, LSE and Leonardo Rezende, Pontificia Universidade Catolica do Rio de Janeiro discuss Flex Cars and Competition in Ethanol and Gasoline Retail Markets.
ABSTRACT: In Brazil, gasoline and ethanol coexist as automotive fuels and are becoming closer substitutes as flex cars become more widely adopted. We employ this source of variation in a large panel of weekly prices at the station level to show that fuel prices have fallen in response to this change. This finding is evidence of market power in fuel retail and indicates that innovations that increase consumer choice benefit even those who choose not to adopt them. We also propose a model of price competition in this market and use it to estimate demand from price response functions.