Antitrust & Competition Policy Blog

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

Wednesday, March 26, 2014

Airline Pricing Behaviour under Limited Intermodal Competition

Angela Stefania Bergantino and Claudia Capozza (University of Bari) examine Airline Pricing Behaviour under Limited Intermodal Competition.

ABSTRACT: This paper empirically analyses airline pricing for short-haul flights in contexts with no credible threat of inter-modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air-related competition. We show, in fact, that market power matters, depending on the level of intra-modal competition, and that airlines apply differentiated mark-ups. Besides, consistent with the implementation of inter-temporal price discrimination (IPD), we find a non-monotonic inter-temporal profile of fares with a turning point included in the interval of the 43th to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD.

March 26, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 25, 2014

Exclusivity Clauses: Enhancing Competition, Raising Prices

Marc Blatter (University of Bern) and Silvio Sticher (University of Bern) examine Exclusivity Clauses: Enhancing Competition, Raising Prices.

ABSTRACT: In a setting where retailers and suppliers compete for each other by offering binding contracts, exclusivity clauses serve as a competitive device. As a result of these clauses, firms addressed by contracts only accept the most favorable deal. Thus the contract-issuing parties have to squeeze their final customers and transfer the surplus within the vertical supply chain. We elaborate to what extent the resulting allocation depends on the sequence of play and discuss the implications of a ban on exclusivity clauses.

March 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Open Source Software Subsidies and Network Compatibility in a Mixed Duopoly

Thierry Penard (University of Rennes 1, CREM CNRS UMR 6211 and IDEC) and Mourad
Zeroukhi (Foundation of the University of Rennes 1, CREM CNRS UMR 6211 and IDEC) explore Open Source Software Subsidies and Network Compatibility in a Mixed Duopoly.

ABSTRACT: For many applications, open source software (OSS) can offer a high-quality alternative to proprietary software (e.g. Linux, Apache, Android,...). But even if OSS is usually free of charge, its installation and use require some skills. Should the government intervene to promote the diffusion of OSS and provide some learning or financial support to potential adopters? This paper examines whether public subsidies towards open source software is socially desirable and how the extent of compatibility between open source software and proprietary software can influence the amount of subsidies. We consider a mixed duopoly model in which a proprietary software (PS) company competes with an open source software (OSS) community. Users are heterogeneous in their ability to use OSS, and their utility depends on the number of users who have adopted the same software or a compatible software (existence of network externalities). Four situations are distinguished: full compatibility between OSS and PS, full incompatibility, and one-way compatibility (either only OSS or PS is compatible). We show that if the government only takes care of consumer surplus, public subsidies are welfare-enhancing. But the optimal level of subsidies is larger with full compatibility and PS compatibility than full incompatibility and OSS compatibility. These results suggest that government policy towards OSS must be conditional to the degree of compatibility between PS and OSS.

March 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Measuring Consumer Preferences for Video Content Provision via Cord-Cutting Behavior

Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business) and Shane Greenstein (Department of Management and Strategy, Kellogg School of Management, Northwestern University) are Measuring Consumer Preferences for Video Content Provision via Cord-Cutting Behavior.

ABSTRACT: The television industry is undergoing a generational shift in structure; however, many demand-side determinants are still not well understood. We model how consumers choose video content provision among: over-the-air (OTA), paid subscription to cable or satellite, and online streaming (also known as over-the-top, or OTT). We apply our model to a U.S. dataset encompassing both the digital switchover for OTA and the emergence of OTT, along with a recession, and use it to analyze cord-cutting behavior (i.e., dropping of cable/satellite subscriptions). We find high levels of cord cutting during this time, and evidence that it became relatively more prevalent among low-income and younger households – suggesting this group responded to changes in OTA and streaming options. We find little evidence of households weighing relative content offerings/quality when choosing their means of video provision during the timespan of our ! data. This last finding has important ramifications for strategic interaction between content providers.

March 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Competitive Market Segmentation

Silvio Sticher, University of Bern explains Competitive Market Segmentation.

Abstract: In a two-firm model where each firm sells a high-quality and a lowquality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers’ valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firmspecific surplus. For either case, we provide second-order approximations of the equilibrium prices.

March 25, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, March 24, 2014

The Evolution of U.S. Cartel Enforcement

Vivek Ghosal (Georgia Tech) and D. Daniel Sokol (University of Florida) explore The Evolution of U.S. Cartel Enforcement.

ABSTRACT: Antitrust as a whole was transformed due in large part to the influential writings of Bork in The Antitrust Paradox (1978). This paper examines what Bork said and did not say about cartel enforcement and offers an examination of how actual the structure of cartel enforcement played out relative to what Bork advocated. To provide some perspective on Bork’s view of cartel enforcement, we compare his views to those of the other major influential antitrust book of the time by Posner (1976). We identify three distinctive stages of cartel enforcement. Stage one is characterized by low number of cartels prosecuted along with low fines and jail terms. Consistent with Bork’s vision, Stage two demonstrates a significant increase in cartels prosecuted, although fines and jail terms remain low. Stage three (the current stage) exemplifies a decline in the number of cartels prosecuted relative to stage two, but with dramatic increases in monetary fines and jail terms.

March 24, 2014 | Permalink | Comments (0) | TrackBack (0)

The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings

Joseph E. Harrington, Jr (Dept of Business Economics & Public Policy, The Wharton School, University of Pennsylvania), Roberto Hernan-Gonzalez (Dept of Economic Theory and History, Universidad de Granada) and Praveen Kujal (Middlesex University) have an interesting paper on The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings.

ABSTRACT: Collusion is when firms coordinate on suppressing competition, and coordination typically requires that firms communicate in some manner. This study conducts experiments to determine what modes of communications are able to produce and sustain collusion and how the efficacy of communication depends on firm heterogeneity and the number of firms. We consider two different communication treatments: non-binding price announcements and unrestricted written communication. Our main findings are that price announcements allow subjects to coordinate on a high price but only under duopoly and when firms are symmetric. While price announcements do result in higher prices when subjects are asymmetric, there is little evidence that they are coordinating their behavior. When subjects are allowed to engage in unrestricted communication, coordination on high prices occurs whether they are symmetric or asymmetric. We find that the increm! ental value to express communication (compared to price announcements) is greater when firms are asymmetric and there are more firms.

March 24, 2014 | Permalink | Comments (0) | TrackBack (0)

Do MSRPs Decrease Prices?

Babur De los Santos (Department of Business Economics and Public Policy, Indiana
University Kelley School of Business), In Kyung Kim (Department of Economics,
Indiana University), Dmitry Lubensky (Department of Business Economics and
Public Policy, Indiana University Kelley School of Business) ask Do MSRPs Decrease Prices?

ABSTRACT: The nature of manufacturer’s suggested retail prices (MSRP) and whether their effect is pro or anticompetitive is not well understood. Opposing theories suggest that manufacturers may attempt to reduce retail prices to deter double marginalization or increase retail prices to foster upstream or downstream collusion. We exploit a policy experiment in South Korea in which MSRPs were banned and then reinstated one year later to estimate their impact on prices. The ban increased prices by 2.3 percent and the reinstatement decreased prices by 2.6 percent, demonstrating the pro-competitive effect of MSRPs. Based on a lack of evidence that recommendations act as binding price ceilings, we offer an alternative explanation in which MSRPs provide information to searching consumers. We demonstrate that the removal of recommendations can reduce search and increase prices.

March 24, 2014 | Permalink | Comments (0) | TrackBack (0)

An Experimental Approach to Merger Evaluation

Christopher T. Conlon (Columbia) and Julie Holland Mortimer (Boston College) offer An Experimental Approach to Merger Evaluation.

ABSTRACT: The 2010 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines lay out a new standard for assessing proposed mergers in markets with differentiated products. This new standard is based on a measure of ``upward pricing pressure,'' (UPP) and the calculation of a ``gross upward pricing pressure index'' (GUPPI) in turn relies on a ``diversion ratio,'' which measures the fraction of consumers of one product that switch to another product when the price of the first product increases. One way to calculate a diversion ratio is to estimate own- and cross-price elasticities. An alternative (and more direct) way to gain insight into diversion is to exogenously remove a product from the market and observe the set of products to which consumers actually switch. In the past, economists have rarely had the ability to experiment in this way, but more recently, the growth of digital and online markets, combined! with enhanced IT, has improved our ability to conduct such experiments. In this paper, we analyze the snack food market, in which mergers and acquisitions have been especially active in recent years. We exogenously remove six top-selling products (either singly or in pairs) from vending machines and analyze subsequent changes in consumers' purchasing patterns, firm profits, diversion ratios, and upward pricing pressure. Using both nonparametric analyses and structural demand estimation, we find significant diversion to remaining products. Both diversion and the implied upward pricing pressure differ significantly across manufacturers, and we identify cases in which the GUPPI would imply increased regulatory scrutiny of a proposed merger.

March 24, 2014 | Permalink | Comments (0) | TrackBack (0)

One more lie: the ‘Monday effect’ in Spain’s retail petrol market

Juan Luis Jimenez (Universidad de Las Palmas de Gran Canaria) and Jordi Perdiguero (Universitat Autonoma de Barcelona) explore One more lie: the ‘Monday effect’ in Spain’s retail petrol market.

ABSTRACT: Empirical evidence drawn from the economic literature points to a low level of competition in the retail petrol market. Similar evidence can be found for the Spanish market. In fact, both Spain’s antitrust authority (Comision Nacional de la Competencia) and its energy regulator (Comision Nacional de la Energía) have recently initiated disciplinary proceedings against the majors on the grounds of suspected price manipulation in the retail petrol market. They are accused of cutting retail prices on Mondays so as to distort the rank position of Spain in European Union statistics in a practice that has received the name of the ‘Monday effect’. Here, we analyze this effect by constructing a database that includes daily retail prices for all petrol stations in Spain in the period 2009-2012, and a more detailed database for the city of Barcelona in 2013. Our estimations confirm that: i) in 2011 and 2012 prices fell on ! Mondays at retailers branded by majors; ii) prices were unchanged at stations in our two control groups; iii) prices were also seen to fall when a more detailed analysis was conducted, and this price cut was also found in 2013. In short, one more indicator of collusion in this sector and … one more lie.

March 24, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, March 21, 2014

Global Antitrust and Compliance Handbook

Global Antitrust and Compliance Handbook

Edited by D. Daniel Sokol, Daniel Crane, and Ariel Ezrachi

  • Written with the specific  aim of assisting firms in their global compliance efforts
  • Covers 43 jurisdictions across Europe, the Western Hemisphere, Asia and Pacific and Africa
  • Edited by three leading scholars, with contributions from experienced competition law practitioners around the globe
  • Consistent chapter structure allows for easy comparison


BOOK ABSTRACT: This multi-jurisdictional compliance guide offers a comprehensive and detailed multi-country review of critical antitrust compliance issues. The book outlines the laws and practice in forty three of the most important antitrust jurisdictions around the world - focusing on anticompetitive agreements, market power and monopolization, enforcement, arbitration and remedies. With compliance requirements in mind, the book provides law firms and in-house lawyers with the necessary information to explore the changing global antitrust landscape. Chapters in this guide follow a clear division to sections and include discussion of the enforcement priorities in each jurisdiction. Contributions to this book have been authored by leading competition law practitioners from their respective jurisdictions.

March 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition Law

Alison Jones, King's College London – The Dickson Poon School of Law and Christopher Townley, King's College London – The Dickson Poon School of Law provide an overview of Competition Law.

ABSTRACT: An introduction to Articles 101 and 102 TFEU. The paper discusses the key provisions and looks at some of the major themes that cut across EU competition law, investigating how they play out from a wider EU perspective.

March 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Avoiding Business and Antitrust Pitfalls in IP Licensing Program

The ABA-IPL Section Antitrust Interface with Intellectual Property Committee is sponsoring a free seminar program on Tuesday, April 8th at  9:00 A.M. -10:30 A.M. Pacific Time.

(Note your time zone below.)

Avoiding Business and Antitrust Pitfalls in IP Licensing Program

In-house and outside counsel panelists will share their perspectives on the business and antitrust challenges in drafting and negotiating an IP agreement. Common contracting pitfalls and antitrust sensitivities including those arising from royalty provisions, duration, grantbacks, exclusivity and other restrictions, will be covered.

Ausra Deluard - Antitrust, Jones Day


Gil Ohana -- Senior Director, Antitrust & Competition, Cisco Systems

Michele Lee - Counsel, Global Litigation and Competition, Visa Inc.

Craig Waldman - Antitrust, Jones Day

Joe Melnik - Intellectual Property, Jones Day

To attend this program in-person or to participate via phone, please register by end of day April 4, 2014.

Open the attached flier to register.


Download 2014_8_ip_program 


CLE Credit

The ABA is not seeking CLE accreditation for this program.

Feel free to share this email with any colleagues whom you think might be interested.

(Program times by Time Zone: 12:00 P.M. - 1:30 P.M. ET/ 11:00 A.M. - 12:30 P.M. CT/ 10:00 A.M. - 11:30 A.M. MT/ 9:00 A.M. 10:30 A.M. PT)


March 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Private Enforcement of EU (Competition) Law – Remarks and Outlooks Regarding the Intertwinement of EU and National Law

Katri Havu, University of Helsinki provides Private Enforcement of EU (Competition) Law – Remarks and Outlooks Regarding the Intertwinement of EU and National Law.

ABSTRACT: This article discusses private enforcement of EU competition and other EU law. The focus is on the intertwinement of EU and national legal orders and on so-called procedural autonomy, especially in the context of damages claims presented before national courts on the basis of EU law. The article sketches how the material rules and principle-type requirements of EU law are appropriately taken into account by a national court and what kind of ambiguities arise in this connection, especially in the context of competition law infringement-based damages claims. The implications of the potential competition damages claims Directive are briefly explored on the basis of a proposal published in June 2013. Additionally, problems such as the “correct intensity” of safeguarding the full effect of EU law are touched upon. Moreover, the article discusses recent Finnish case law including private enforcement of EU law.

March 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Anti-Monopoly Cases in Chinese Courts: The Need for Further Reforms

Knut Fournier, Leiden University - Leiden Law School; Shanghai Jiaotong University, KoGuan Law School argues for Anti-Monopoly Cases in Chinese Courts: The Need for Further Reforms.

ABSTRACT: In the context of Chinese courts under constant pressure for increased governance, the Chinese judicial system has proven able to deliver substantial results in anti-monopoly cases. The recent Supreme People’s court guidelines on anti-monopoly cases in civil courts provide a much-needed switch in the burden of proof from the plaintiff to the defendant, although in a limited number of cases. The Supreme People’s Court is set to hear its first anti-monopoly case at the beginning of 2014, another opportunity to accelerate the reforms of a court system that may become the preferred route for parties in anti-monopoly cases.

March 21, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, March 20, 2014

Proactive or Reactive? An Empirical Assessment of IPR Policy Revisions in the Wake of Antitrust Actions

Anne Layne-Farrar, Charles River Associates asks Proactive or Reactive? An Empirical Assessment of IPR Policy Revisions in the Wake of Antitrust Actions.

ABSTRACT: The debate over potential antitrust concerns for the use of protected intellectual property within standard setting often centers on the rules and regulations in place at Standard Setting Organizations (SSOs). While the typical focus is on whether or not particular rules should be mandated for SSOs, this debate begs a broader question: what are SSOs doing, of their members’ own volition, to address apparent antitrust gaps or weaknesses within their IPR rules? This paper systematically assesses what SSOs have actually done (or failed to do) in relation to antitrust concerns, as those concerns emerge over time.


March 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Market Structure and the Competitive Effects of Vertical Integration

Simon Loertscher, University of Melbourne - Department of Economics and Markus Reisinger, WHU - Otto Beisheim School of Management; CESifo (Center for Economic Studies and Ifo Institute) analyze Market Structure and the Competitive Effects of Vertical Integration.

ABSTRACT: We analyze the competitive effects of backward vertical integration when firms exert market power upstream and compete à la Cournot downstream. Contrasting with previous literature, a small degree of vertical integration is always procompetitive because efficiency gains dominate foreclosure effects, and vertical integration even to full foreclosure can be procompetitive. Surprisingly, vertical integration is more likely to be procompetitive if the industry is otherwise more concentrated. Extensions analyze incentives to integrate and differentiated Bertrand competition downstream. Our analysis suggests that antitrust authorities should be wary of vertical integration when the integrating firm faces many competitors and should be permissive otherwise.

March 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Activating Actavis with a More Complete Model

Michael G. Baumann Economists Incorporated John Payne Bigelow Compass Lexecon Barry C Harris, Economists Incorporated, Kevin M. Murphy, University of Chicago; National Bureau of Economic Research (NBER), Janusz A. Ordover, New York University (NYU) - Department of Economics, Robert Willig, Princeton University - Woodrow Wilson School of Public and International Affairs, and Matthew B. Wright, Economists Incorporated explore Activating Actavis with a More Complete Model.

ABSTRACT: In FTC v. Actavis, Inc. the Supreme Court asked whether a patent settlement agreement involving a so-called “reverse payment” from a patent holder to an alleged infringer of a pharmaceutical patent “can sometimes unreasonably diminish competition in violation of the antitrust laws.” Edlin, Hemphill, Hovenkamp, and Shapiro (2013) propose a method of evaluating the competitive effects of reverse payment settlement agreements that compares the magnitude of the reverse payment to the sum of the patent holder’s prospective litigation costs and the value of services provided by the alleged infringer to the patent holder. This paper shows that the method proposed by Edlin et al. holds only under limited conditions. This paper also identifies conditions where a reverse payment in excess of litigation costs may lead to earlier generic entry and would be procompetitive. In addition to avoided litigation costs, relevant factors in evaluating patent settlements involving a reverse payment may include inter alia the risk-tolerance of the parties, the level of the drug’s sales, the parties’ expectations and information asymmetries related to future competition for the drug, the parties’ subjective views of the likely outcome of the litigation, the parties' differences in time-values of money, the applicability of Hatch-Waxman first-filer exclusivity, the relative size of the alleged net reverse payment, and the extent of the alleged delay and associated diminution of competition.

March 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Combating Cartels in India

Vishakha Singh Deshwal, National Law Institute University (NLIU), Bhopal discusses Combating Cartels in India.

ABSTRACT: While the Competition Law is still evolving in India, we often come across Cartelisation across all market sectors - oil, gas, potash, cement and so on. Cartelisation refers to the process of forming Cartels which is a group of independent companies engaged in similar business that join together to fix prices, limit production or share consumers. The Competition Act, 2002, a part of which came into effect in 2009 prohibits “Cartels”. However, this prohibition is not sufficed to put deal with the problems that such cartels pose for the economy and ultimately, the consumers. The paper studies the reasons why the present competition law in India is not adequately competent in dealing with prohibition of cartels and penalising the corporations involved in such unfair trade practices. It further discusses plausible amendments that can be made to the current legislation so as to ensure effective application of the same by way of comparing the competition laws across different nations.

March 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 19, 2014


Dan Crane has a new book on Antitrust.

BOOK ABSTRACT: A concise student treatise on antitrust that includes the basics of the microeconomic foundations on which modern antitrust doctrine is built.  Many students stumble trying to disentangle economic theory from doctrine, and this treatise expertly blends the two, clearly and concisely defining the terms and basic concepts that all antitrust students need to know. Author Daniel Crane is well regarded for his antitrust scholarship.

  • Comprehensive overview of the major antitrust statutes, including Sherman, Clayton, FTC, Robinson-Patman, and Hart-Scott-Rodino Acts, including substantive operation, antitrust immunities, and questions of standing and jurisdiction.
  • Nontechnical explanations of economic theories for students without economics background.
  • Orientation on how to triage and analyze antitrust problems, such as distinctions between unilateral and coordinated behavior and vertical and horizontal arrangements.
  • Systematic examination of 2010 Horizontal Merger Guidelines with illustrations from litigated cases.

March 19, 2014 | Permalink | Comments (0) | TrackBack (0)