Monday, May 26, 2014
Niamh Dunne, Cambridge discusses Between competition law and regulation: hybridized approaches to market control.
ABSTRACT: Debates abound regarding the relationship between competition law and economic regulation as alternative and/or overlapping mechanisms by which to address market failure. This article focuses on a series of legal powers that demonstrate a ‘hybridised’ nature, pitched between the conventional instruments of competition law and regulation: the market investigation procedure under the UK’s Enterprise Act 2002, the EU’s sector inquiry procedure under Regulation 1/2003, access to infrastructure regulation under Part IIIA of Australia’s Competition and Consumer Act 2010, and the controversial prohibition on ‘unfair methods of competition’ under section 5 of the US’s Federal Trade Commission Act. It is demonstrated that, whilst each of these powers aims to increase the effectiveness of market supervision by incorporation of complementary aspects of each mechanism, the choice to step outside the boundaries of each generates its own risks relating to both rule of law compliance and overall efficiency.
Andreas Stephan (University of East Anglia) asks Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?
ABSTRACT: This paper considers whether the use of individual informant rewards or bounties is a viable cartel detection tool. Rewards have the potential to enhance enforcement by revealing infringements that would otherwise go undetected. In order to be effective they should be made available to individuals directly involved in cartels because they may be the only viable source of information. Mere protection from retaliatory measures of employers does not create an adequate incentive to report misbehaviour. The personal costs and risks associated with whistleblowing are so significant that effective rewards may need to amount to a lottery win in order for reporting to be worthwhile. Reward systems pose some dangers to the enforcement system, but these can be managed.
Nowhere to Hide: Perspectives on Global Cartel Enforcement From the Japanese, Korean, and U.S. Antitrust Authorities and Practitioners
Nowhere to Hide: Perspectives on Global Cartel Enforcement From the Japanese, Korean, and U.S. Antitrust Authorities and Practitioners
Co-sponsored by the Antitrust Section of the New York State Bar Association and the Garden City Group
Hideo Nakajima, Secretary General, Japan Fair Trade Commission Hyungbae Kim, Minister-Counslor for Competition and Consumer Protection Matters and former Director General for the Anti-Monopoly Bureau, Korea Fair Trade Commission Scott Hammond, Partner, Gibson, Dunn & Crutcher, LLP., and former Deputy Assistant Attorney General for Criminal Enforcement, U.S. Department of Justice, Antitrust Division Brent C. Snyder, Deputy Assistant Attorney General for Criminal Enforcement Heather Lamberg Kafele, Partner, Shearman & Sterling LLP Jay L. Himes, Partner, Labaton Sucharow LLP., and former Antitrust Bureau Chief, Office of the N.Y. Attorney General Barbara Hart, Partner, Lowey Dannenberg Cohen & Hart, PC.
Date: Thursday, June 5, 2014 Time: 6 p.m. - 8 p.m. Location: Greenberg Traurig, LLP MetLife Building 200 Park Avenue 14th Floor (Conference Room) New York, NY 10166
2.0 CLE credits in professional practice
The program will discuss Cartel enforcement in a global world, including:
1. Basic cartel law in Japan and Korea, with comparisons to the US. For example:
- Whether JFTC or KFTC can enforce both criminally and non-criminally (civil), and the frequency of criminal enforcement
- Whether the law reaches individuals, as well as companies
- The operation of corporate leniency programs, or other forms of enforcement discretion
- Sanctions available, and the range of sanctions that tend to be imposed
- Compare to US and discuss current US criminal enforcement priorities. How does US DOJ decide whether to proceed criminally or with a civil case
2. The agency investigation and case-filing process, and its resolution. For example:
- Proceedings to develop facts: access to documents and witness statements
- Pre-charging involvement of companies under investigation, internal agency review and the charging decision
- Procedural fairness (notice, opportunity to be heard, and agency independence/impartiality)
- For Japan and Korea, the role of the courts
- The role of the grand jury in US investigation
3. Enforcement relationships around the world
- Interaction with government enforcers in other jurisdictions
- Confidentiality and information sharing with foreign enforcers
- “Hot” topics, such as extradition (US DOJ’s recent extradition of participant in the marine hose conspiracy), “penalty plus” (the U.S. DOJ’s Bridgestone plea), and U.S. jurisdiction under the FTAIA (Seventh Circuit proceedings in the LCD case).
4. Interaction with the civil litigation system seeking to provide victim recovery
Additional funding for this course is provided by the New York Bar Foundation
This program is complimentary for Antitrust members and NYSBA members. Non-members who register at the $50 fee will receive HALF PRICE NYBSA membership. Contact Tiffany Bardwell at [email protected] to join NYSBA today!
For questions about this program, contact Tiffany Bardwell at [email protected].
Achieving European Internal Market in Regulated Sectors by Misuse of Competition Law; The Margin Squeeze 'Disaster'
Fernando Diez, Centro Universitario Villanueva discusses Achieving European Internal Market in Regulated Sectors by Misuse of Competition Law; The Margin Squeeze 'Disaster'.
ABSTRACT: The economic and social advantages of the European internal market good functioning are beyond doubt, and thus neither effort nor means implemented in achieving that goal are worthless. However, pursuing this aim cannot – or should not – be done at the cost of misuse – and abuse – of Competition Law, when other tools fail or simply their implementation is not as effective as the Council or the Commission intend. This seems to be the case in some regulated sectors – namely, telecommunications – where competition law is occasionally serving as a regulatory tool that comes as a complement to the traditional means such as the promulgation of Directives, or the role played by National Regulation Authorities themselves. Accordingly, we show in this paper that the prohibition of the abuse of dominant position – enhanced in article 102 of the Treaty of Functioning of the UE – is currently being used to develop and implement the Commission’s industrial policy agenda, and as mean to avoid market fragmentation. As such, it deviates from what should be its main objective, promoting efficiency and fostering innovation and competitive markets. In particular, given the unsatisfactory results of the regulatory framework and the painful inexistence of a single and efficient internal market in the provision of certain services, both the EC and the European courts are heavily relying on antitrust remedies to impose the economic operators duties that are regulatory in nature, at the expense of legal coherence, lacking the necessary tools and performing a task to which they are ill-suited. This is highlighted by recent high-profile cases, all of them regarding telecom operators – such as Deutsche Telekom, France Telekom, Telefonica, TeliaSonera – sanctioned with astronomic antitrust fines due a recently created form of dominant abuse: margin squeeze. As we shall see, the practical implementation of the prohibition, the contradictory results of application of regulatory and antitrust standards, and the level of legal uncertainty regarding the test of this anticompetitive conduct is far from being satisfactory, in terms of legal consistency and economic analysis. To avoid such pitfalls a simple remedy is proposed in this paper: the merger – as some countries, as Spain, have just recently done with the approval of its new CNMC (Comision Nacional de los Mercados y la Competencia) – of the antitrust and the regulatory authorities, in order to ensure a coherent application of both legal bodies and provide markets – and economic operators – with a higher degree of legal certainty and economic predictability.
Friday, May 23, 2014
Niamh Dunne, Cambridge is Recasting Competition Concurrency Under the Enterprise and Regulatory Reform Act 2013.
ABSTRACT: The concurrent enforcement power granted to certain sector economic regulators is one of the more remarkable features of UK competition law. In practice, regulators have tended to under‐enforce their competition powers, preferring to resolve market difficulties through regulatory interventions. Recent amendments to the concurrency framework, introduced by sections 51 to 53 of the Enterprise and Regulatory Reform Act 2013, seek both to strengthen the priority of competition enforcement and to provide plausible sanctions – including, ultimately, the removal of competition jurisdiction from regulators – for continued underuse. This article assesses these reforms in light of the history and (limited) application of the concurrent competition powers of regulators to date. It argues that the absence of an overarching policy rationale for this curious example of UK antitrust ‘exceptionalism’ complicates the determination of whether the reforms, which ostensibly seek to reinforce but potentially also undermine concurrency, are likely to have a positive market impact in practice.
The Qantas/Emirates Merger Decision: How the Competition Commission of Singapore Used the NEB Exclusion to Regulate the Air Passenger Market
Knut Fournier, Leiden University - Leiden Law School; Shanghai Jiaotong University, KoGuan Law School discusses The Qantas/Emirates Merger Decision: How the Competition Commission of Singapore Used the NEB Exclusion to Regulate the Air Passenger Market.
ABSTRACT: The Competition Commission of Singapore (CCS) did not properly assess the Net Economic Benefits (NEB) created by the cooperation agreement between Qantas and Emirates. In particular, the high market shares of the two companies should have excluded the NEB defense under the Competition Act, even more so as the remedies proposed by the parties are likely to increase their market share further. The CCS appears to have failed to follow the letter of the Competition Act and instead regulated the airlines sector through the use of competition enforcement, undermining the enforcement of competition rules and restricting competition in the airlines sector. The more recent Decision on the Qantas/Jetstar cooperation shows an improvement in the assessment of economic benefits. The CCS must continue to improve its competitive assessment and must restrict the use of the NEB defense, or it will hurt competition and consumers in Singapore.
Mel Marquis, European University Institute; European University Institute - Department of Law (LAW) and Tadashi Shiraishi, University of Tokyo - Graduate Schools for Law and Politics examine Japanese Cartel Control in Transition.
ABSTRACT: This paper has two main objectives. First, we explain the reasons for the renaissance in Japanese competition law enforcement, and second, we provide an overview of Japan’s anti-cartel regime. With regard to the first objective, in Part 1 of the paper we note the significance of the Strategic Impediment Initiative talks between Japan and the U.S. but we characterize those talks as a second-order factor, underlining instead the deeper issue of Japan’s stagnant economy. We observe that the old cultural assumption that economic recovery is possible without a genuine commitment to competitive markets and an effective competition policy has largely been overcome, and that this shifting economic ethos has enabled the JFTC to become a relatively more assertive enforcer. Additional factors highlighted include the leadership (2002-2012) of the former Chairman of the JFTC, and other influences such as the OECD’s evaluations of Japanese regulatory reform. As concerns the second objective of the paper, in Parts 2 and 3 we explain the basics of Japan’s anti-cartel regime. We review, inter alia, the rules on ‘substantial restraints on competition’ and the JFTC’s powers when it investigates and sanctions illegal conduct – either in cartel scenarios or, notoriously in Japan, bidrigging cases. Finally, in Part 4 we highlight recent developments such as the JFTC’s managerial transition under a new Chairman, and we briefly report on the amendments made to the Anti-Monopoly Act in December of 2013.
Thursday, May 22, 2014
David S. Evans, University of Chicago Law School; University College London; Global Economics Group, Vanessa Yanhua Zhang, Global Economics Group, LLC; Renmin University of China and Xinzhu Zhang, Chinese Academy of Social Sciences (CASS) - Research Center for Regulation and Competition are Assessing Unfair Pricing Under China's Anti-Monopoly Law for Innovation-Intensive Industries.
ABSTRACT: China, like a number of other antitrust jurisdictions, has a law concerning unfair pricing. This article develops an economic framework for applying the unfair pricing law in China. The framework draws on the experience of courts and competition authorities in other jurisdictions and the writings of various commentators, particularly economists, on unfair pricing in those jurisdictions. It shows that virtually all jurisdictions have decided to consider unfair pricing claims only in exceptional circumstances, and rarely, if ever, in innovation-intensive industries. For those cases that pass this screen and receive consideration, the courts and competition authorities then, under the leading test, insist on substantial evidence that the price is significantly higher than cost and is unfair given the value provided to the buyer. This article shows that the exceptional circumstances screen and the rigorous unfair pricing test are motivated by a recognition, supported by substantial empirical evidence, that successful firms must have the assurance of receiving significant rewards to induce them to invest time and capital in highly risky innovation that is the source of economic growth and welfare. It concludes by showing that this approach is consistent with modern Chinese economic policy.
The Competition Dimension of the European Regulation of Public Sector Information and the Concept of an Undertaking
Josef Drexl, Max Planck Institute for Innovation and Competition explains The Competition Dimension of the European Regulation of Public Sector Information and the Concept of an Undertaking.
ABSTRACT: In 2013, the European legislature revised the Public Sector Information (PSI) Directive of 2003. The PSI Directive strives to make information collected by public sector bodies in the framework of their public tasks available for commercial re-use by private undertakings for the provision of added-value information services. Whereas, in 2003, the European legislature aimed to set first incentives to overcome resistance of public sector bodies to make data accessible for re-use, ten years later many Member States have developed open-data policies that are designed to make PSI available to the public free of charge. The revision of 2013 takes account of this evolution by integrating the former re-use policy into a larger open-data policy. This article assesses the evolution of the European framework for the regulation of PSI from a competition-oriented perspective. Thereby, it also critically reviews the Compass judgement of 2012 in which the Court of Justice of the EU (CJEU) limited the scope of EU competition law to the re-use of PSI by adopting a narrow approach to the concept of an ‘undertaking’.
Woo-Hyung Hong Department of Economics, University of Washington asks Do Smartphones Spur Competition? Evidence from the Korean Retail Gasoline Market.
ABSTRACT: Limited or costly information generates excess price dispersion across markets causing market inefficiency. In this setting, smartphones, as information-providing devices, can improve market performance. This paper explores the Korean retail gasoline market as a natural experimental field to investigate the impact of smartphones on competition among gas stations. In this particular market, smartphones have provided consumers with direct access to gasoline price information from the pre-existing information channel called OPINET, a government-sponsored Internet website. Our results are consistent with the relevant theory: the adoption of smartphones is associated with dramatic decreases in both price dispersion and average price-cost margins, thereby creating huge consumer gains. In addition, we found a sudden drop in entries along with a slow rise in exits after the introduction of the smartphones.
Nicoletta Rangone, Politecnico of Milan describes New Frontiers for Competition Advocacy and the Potential Role of Competition Impact Assessment.
ABSTRACT: This Chapter will explore the question of how best to increase the effectiveness of advocacy activities in order to improve competition friendly regulation.
In this framework, three tools are compared: the use of competition concepts in rule-making, i.e. hybridisation, traditional advocacy interventions, competition impact assessment. The analysis is intended to highlight the key components of these tools, to assess their effectiveness in improving regulation and sound competition, and to suggest appropriate uses for each.
Then, a more in-depth analysis is dedicated to the role that ex ante and ex post competition impact assessment can play in order to improve good quality regulation (and in so doing enhance competition), and the crucial part that competition authorities might play in this.
This Chapter concludes that competition impact assessment might be considered a new advocacy tool and the most effective among them (being used at a very early stage, using economic analysis and always taking into consideration the option not to intervene through regulation), provided that the analysis is limited to rules which have been correctly selected according to the proportionality principle and that is not used in a ritualistic way. It also underlines that the involvement of competition authorities might increase the effectiveness of competition assessment (by enhancing the robustness of the economic analysis and therefore addressing the above-mentioned ritualistic approach), even though some issues remain unsolved, one of the most important being how best to balance the role of regulators and competition authorities.
Wednesday, May 21, 2014
Alan Devlin (Latham) has a new paper on Antitrust Limits on Targeted Patent Aggregation.
ABSTRACT: Patent-assertion entities, or “PAEs,” are non-technology-practicing companies that aggregate and license patents under threat of suit. Their activities have drawn fire, including Presidential condemnation, and spurred proposed legislation to protect operating firms against them. PAEs leverage flaws in the patent system to extort firms that independently invent and sell technological goods to consumers. Since PAEs tax innovation, and appear not to act not as a conduit for wealth transfer to original patentees but as bottlenecks, their worst rent-seeking practices almost certainly reduce net incentives to innovate, and harm consumers. This is all the more true if, as seems likely, the principal desirable incentive that PAEs create is to file patents rather than to commercialize technology.
The idiosyncratic nature of today’s patent system facilitates PAE activity. Patents’ numerosity, vague scope, widespread invalidity, and sometimes-functional claiming prevent even the most assiduous technology companies’ securing guaranteed clearing positions before building products. These conditions guarantee that, ex post, a universe of potentially infringed patents of dubious validity exists in many industries, especially in information technology. Fortunately, atomized ownership of this intellectual property limits enforcement ex post because the unlikelihood of success in asserting few patents, combined with the risk of countersuit and high litigation costs, make suing a losing value proposition. The result is a public-goods benefit in constrained enforcement that ameliorates hold-up potential. Even ex post, owners of disaggregated patents typically lack market power unless those IPRs are likely valid and infringed.
PAE accumulation changes all of that. By amassing hundreds or even thousands of patents, never building or selling goods, using shell companies to conceal the contents of their portfolios, and asserting patents in waves ex post, PAEs can realize immense hold-up power. Crucially, this conclusion holds true even if the great majority of their patents are invalid or not infringed. This dynamic leaves many operating victims vulnerable to threats of incessant litigation, thus forcing them to part with tens or even hundreds of millions of dollars for licenses that they never needed to engineer successful products. Commentators increasingly — though do not universally — accept that PAEs harm the economy. The solution, though, is less clear. Many propose reforming the patent system, such as requiring losing patentees to pay the other side’s costs and forcing PAEs to disclose their portfolios. Some legislative reforms do appear likely, and the Supreme Court in 2014 will consider whether to invalidate certain computer-implemented inventions. Nevertheless, modest changes are unlikely to remedy PAE hold-up in all its forms.
Lacking other solutions, some policymakers now look to the antitrust laws. To be sure, not everyone believes that competition rules proscribe PAE conduct, or otherwise suitably constrain patent hold-up. Indeed, antitrust rules are not a cure-all. This Article argues, however, that antitrust law can viably limit PAEs’ abuse of the patent system. Section 2 of the Sherman Act proscribes willful monopolization, Section 7 of the Clayton Act prohibits asset acquisitions that tend substantially to eliminate competition or to create monopoly, and the patent-misuse doctrine neutralizes an asserted patent the owner of which has improperly broadened in scope with anticompetitive effect. These provisions have sufficient teeth to catch the most egregious forms of hold-up founded on ex post patent aggregation and assertion. This paper explains how PAE activity can reduce social welfare, and how PAEs’ targeted patent acquisitions and assertion against profitable goods can violate competition rules.
Market Power and Collusion on Interconnection Phone Market in Tunisia : What Lessons from International Experiences
Sami Debbichi (AEDD, Faculty of Economics and Management of Tunis el Manar, Tunisia) and Walid Hichri (Universite de Lyon) explore Market Power and Collusion on Interconnection Phone Market in Tunisia : What Lessons from International Experiences.
ABSTRACT: We try in this paper to characterize the state of mobile phone market in Tunisia. Our study is based on a survey of foreign experience (Europe) in detecting collusive behavior and a comparison of the critical threshold of collusion between operators in developing countries like Tunisia. The market power is estimated based on the work of Parker Roller (1997) and the assumption of "Balanced Calling Pattern". We use then the model of Friedman (1971) to compare the critical threshold of collusion. We show that the “conduct parameter” measuring the intensity of competition is not null during the period 1993-2011. Results show also that collusion is easier on the Tunisian market that on the Algerian, Jordanian, or Moroccan one.
Rodrigo M. S. Moita, Insper BV and Daniel B. M. Silva, Financeira discuss Follow the Leader: Competition in the Auto Financing Sector.
ABSTRACT: This study seeks to understand the competitive pattern and strategy of the firms in the auto financing market. First, we analyzed the strong segmentation observed in this market, determining market niches. We then estimated reaction functions to price changes. The results indicated that the three largest companies in the sector have a strong influence on interest rate setting within the entire segment. This phenomenon characterizes the competition of this sector as the leader-follower type, rather than Bertrand competition, the latter of which is often expected in the banking sector, and it demonstrates the existence of the leading firms’ high market power.
Manthos D Delis, University of Surrey and Sotiris Kokas, University of Cyprus analyze Foreign ownership and market power in banking: Evidence from a world sample.
ABSTRACT: Using a novel global data set with bank-year estimates of market power, we examine the impact of (i) the ownership status (foreign or domestic) of individual banks and (ii) the country-level trends in foreign bank presence on our market power estimates. We find that the ownership status of individual banks does not explain banks’ market power. In contrast, the country-level trends in foreign bank ownership have a positive and significant effect on banks’ market power that is primarily due to the fact that most foreign bank entry occurs through mergers and acquisitions and not through de novo penetration. We also find that the positive nexus between foreign bank presence and market power is considerably weaker in countries with well-capitalized banks.
Tuesday, May 20, 2014
Hecking, Harald (Energiewirtschaftliches Institut an der Universitaet zu Koeln) and Panke, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln) analyze Quantity-setting Oligopolies in Complementary Input Markets - the Case of Iron Ore and Coking Coal.
ABSTRACT: This paper investigates the benefits of a merger when goods are complements and firms behave in a Cournot manner both in a theoretical model as well as in a real-world application. In a setting of two complementary duopolies a merger between two firms each producing one of the goods always increases the firms’ total profit, whereas the remaining firms are worse off. However, allowing for a restriction on one of the merging firms’ output, we proof that there exists a critical capacity constraint (i) below which the merging firms are indifferent to the merger, (ii) above which the merger is always beneficial and (iii) the lower the demand elasticity is the smaller this critical capacity constraint becomes. Using a spatial multi-input equilibrium model of the iron ore and coking coal markets, we investigate whether our theoretical findings may hold true in a real market as well. The chosen industry example is particular! ly well suited since (a) goods are complements in pig iron production, (b) each of the inputs is of little use in alternative applications, (c) international trade of both commodities is highly concentrated and (d) a few (large) firms are active in both input markets. We find that due to limited capacity, these firms gain no substantial extra benefit from optimising their divisions simultaneously.
Klenio Barbosa, Escola de Economia de Sao Paulo - FGV, Bruno Rocha, Departmento de Economia, UFMG and Cedeplar and Fernando Salazar, Escola de Economia de Sao Paulo - FGV are Assessing Competition in Banking Industry: A Multiproduct Approach.
ABSTRACT: This paper aims to investigate the competition aspects of banking multiproduct operation. Based on an extension of Panzar and Rosse (1987)’s test to the case of a multiproduct banking firm, we take advantage of a new dataset constructed to Brazilian banking conglomerates to infer the impact of conglomeration on market power. We find that banks offering classic (i.e., loans and credit cards) and other bank products (i.e., brokerage services, insurance and capitalization bonds) have substantially higher market power than the ones which offer only classic products. Results suggest a positive bias on the traditional estimates of competition in which the multioutput actions are not taken into account.
Mariana Oliveira e Silva, University of Sao Paulo and Claudio Ribeiro de Lucinda, University of Sao Paulo address SWITCHING COSTS AND THE EXTENT OF POTENTIAL COMPETITION IN BRAZILIAN BANKING.
ABSTRACT: Switching costs are the leading cause for customer lock-in in banking, reducing the extent of competition and increasing market power of suppliers. This paper tries to estimate the extent of such costs, using a methodology which does not require microdata about customers. The estimates obtained in this study—by using the banks’ accounting information collected in a quarterly basis from 2009 to 2011—indicate there are substantial switching costs in the deposit market, and these costs tend to be lower for customers of larger banks. Additionally, there is some evidence that much of a bank’s market share is due to its continued relationships with customers over the quarters (lock-in effect). Thus, the extent of potential competition in Brazilian banking could be severely limited by these costs.
Thomas P. Tangeras (Research Institute of Industrial Economics) and Johannes Mauritzen (Dept. of Business and Management Science, Norwegian School of Economics) analyze Real-time versus day-ahead market power in a hydro-based electricity market.
ABSTRACT: We analyse in a theoretical framework the link between real-time and day-ahead market performance in a hydro-based and imperfectly competitive wholesale electricity market. Theoretical predictions of the model are tested on data from the Nordic power exchange, Nord Pool Spot (NPS).We reject the hypothesis that prices at NPS were at their competitive levels throughout the period under examination. The empirical approach uses equilibrium prices and quantities and does not rely on bid data nor on estimation of demand or marginal cost functions.
Monday, May 19, 2014
Federico Etro (Department of Economics, University of Venice Ca' Foscari) and Lorenza Rossi (Department of Economics and Management, University of Pavia) discuss Staggered Price Setting, Bertrand Competition and Optimal Monetary Policy.
ABSTRACT: We reconsider the New-Keynesian model with staggered price setting when each market is characterized by a small number of firms competing in prices à la Bertrand rather than a continuum of isolated monopolists. Price adjusters change their prices less when there are more firms that do not adjust, creating a natural and strong form of real rigidity. In a DSGE model with Calvo pricing and Bertrand competition, we obtain a modified New-Keynesian Phillips Curve with a lower slope. This reduces the level of nominal rigidities needed to obtain the estimated response of inflation to real marginal costs and to generate high reactions of output to monetary shocks. As a consequence, the determinacy region enlarges and the optimal monetary rule under cost push shocks, obtained through the linear quadratic approach, becomes less aggressive. Notably, the welfare gains from commitment decrease in more concentrated markets in reaction to inflationary shocks.