Friday, August 29, 2014
Dennis W. Carlton, University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) and Allan Shampine, Compass Lexecon are Identifying Benchmarks for Applying Non-Discrimination in Frand.
ABSTRACT: Standard setting organizations have for many years asked members to commit to license patents essential to use of standards on Fair, Reasonable and Non-discriminatory, or FRAND, terms. Previous work has shown how standard setting that incorporates patents can lead to complicated situations in which the patent owner, sometimes in collaboration with rival firms, can exploit the market power that is created by being designated a standard essential patent, but that the non-discriminatory provision of FRAND can be interpreted so as to mitigate the inefficiencies that can result when patent owners try to exploit their market power conferred by the standard setting process. This paper discusses the availability of appropriate benchmarks for implementing the non-discriminatory provision and shows how even when license terms for patents are not set in advance, FRAND terms can protect members of an SSO and that this protection can be implemented by using various benchmarks.
The CR4 Index and the Interval Estimation of the Herfindahl-Hirschman Index: An Empirical Comparison
Maurizio Naldi, University of Rome II and Marta Flamini, Universita Telematica Internazionale (UNINETTUNO) provide The CR4 Index and the Interval Estimation of the Herfindahl-Hirschman Index: An Empirical Comparison.
ABSTRACT: Concentration indices are employed to measure the level of competition within an industry. Among the several indices proposed in the literature, the Herfindahl-Hirschman Index (HHI) and the Four-firm concentration ratio (CR4) are among the most established. However, the HHI requires the market shares of all market players to be known, while the CR4 requires just the top four. In order to investigate whether we can always use the CR4 in place of the HHI, we have compared the indices resulting from a selected group of datasets. This preliminary analysis shows that the relationship between the CR4 and the HHI may not be monotonic, so that the CR4 does not preserve the order relationship established through the HHI.
Stephen P. King, Monash University - Department of Economics; Centre for International Finance and Regulation (CIFR); Economic Regulation Authority of Western Australia (ERA) and Demitra Patras, Monash University - Department of Economics have a new paper on Posted Prices and Bargaining: The Case of Monopoly.
ABSTRACT: If buyers can choose to initiate bargaining with a seller, how does this alter the price that the seller 'posts' in the market? And does the option of bargaining raise or lower expected welfare?
This paper develops a simple model to answer these questions. With a single seller, the potential for bargaining raises the profit maximising posted price. In part, as has been noted in related literature, this reflects the role of the posted price as a fall-back option if bargaining fails. However, our model highlights a separate effect. When the choice to bargain is endogenous, a seller will raise the posted price to encourage buyers to bargain. The posted price not only exceeds the monopoly price, it can be higher than the price a seller would set if he knew in advance that all buyers would bargain. Further, the posted price can change discontinuously in exogenous parameters such as the buyers' distribution of bargaining costs. While we assume efficient bargaining, the welfare consequences are ambiguous.
Thursday, August 28, 2014
BARRY J RODGER (University of Strathclyde) and and ANGUS MACCULLOCH (University of Lancaster) have published Competition Law and Policy in the EU and UK (5th Edition).
Competition Law and Policy in the EU and UK provides a focused guide to the main provisions and policies at issue in the EU and UK, including topics such as enforcement, abuse of dominance, anti-competitive agreements, cartels, mergers, and market investigations.
The book’s contents are tailored to cover all major topics in competition law teaching, and the authors’ clear and accessible writing style offers an engaging and easy to follow overview of the subject for course use. The fifth edition provides a full update for this well-established title, presenting and contextualising the impact of key cases, as well as changes to enforcement practice, and at a legislative and institutional level. There are new, separate chapters in this edition on private enforcement and UK market investigations to reflect the increasing significance of these key areas of competition law practice.
Competition Law and Policy in the EU and UK
integrates useful pedagogical features to help clarify topics and reinforce important points:
chapter overviews and summaries highlight the key points to take away from each chapter to structure student learning
discussion questions facilitate self-testing and seminar discussions of the major issues covered in each chapter, to help reinforce understanding of these topics
further reading lists additional resources in order to guide research and develop subject knowledge
a new glossary provides succinct explanations of competition law terminology, ideal for those studying the topic for the first time
Clear, focused and student-friendly, this title offers a comprehensive resource for students taking competition law courses, and is supported online by updates to the law offered on Angus MacCulloch’s blog, Who’s Competing: whoscompeting. wordpress.com
The OECD has published Ex-officio cartel investigations and the use of screens to detect cartels.
Fighting cartels remains a top priority for competition authorities since cartels are secretive in nature and cartelists take good care in concealing their illegal activities.
Cartel enforcement can therefore be extremely challenging for competition authorities who most of the times can only react after receiving complaints by competitors and customers or applications by participants to a cartel for leniency or amnesty.
More rarely, competition authorities take proactive actions to identify firms which are potentially involved in a cartel conspiracy, or markets which may be affected by cartelisation. These proactive cartel detection tools involve the analysis of observable economic data and firm behaviour, systematic monitoring of media, tracking of firms & individuals to detect behaviour which is inconsistent with a healthy competitive process. Discussing the balance between proactive and reactive detection and particular detection methods may benefit competition authorities evaluating their anti-cartel detection and enforcement policies.
The OECD Competition Committee discussed Ex officio cartel investigations and the use of screens to detect cartels in October 2013 so as to explore the various screening methods used by agencies and their successful experiences with the implementation of such screens in case enforcement.
DOWNLOADS - MEETING DOCUMENTS
Key papers and presentations
David Gilo Israel Antitrust Authority PPT
Miguel Gonzalez‐Maestre, University of Murcia, Faculty of Business and Economics, Department of Economic Analysis and Luis M. Granero, Universitat de Valencia explore Competition with Targeted Product Design: Price, Variety, and Welfare
ABSTRACT: We consider the price and welfare effects of competition in targeted product design, in the context of the Salop circle model. With an exogenous number of firms, we show that under reasonable conditions price-increasing competition takes place, for intermediate levels of the number of firms. In turn, this effect is associated with the possibility of lower consumer welfare, as a result of increased competition. With endogenous firm entry, an interesting insight from our analysis is that an increase in market size or a technological progress that reduces entry costs both might reduce consumers’ welfare.
David Marques-Ibanez, European Central Bank (ECB), Yener Altunbas, University of Wales, Bangor, and Michiel Van Leuvensteijn, APG Asset Management analyze Competition and Bank Risk: The Effect of Securitization and Bank Capital.
ABSTRACT: We find that the increased use of securitisation activity in the banking sector prior to the 2007-2009 crisis augmented the effect of competition on realised bank risk (i.e. more intense competition and greater use of securitisation is correlated with higher levels of realised risk) during the crisis. In contrast, higher levels of capital did not buffer the impact of competition on realised risk. It follows that cooperation between supervisory and competition authorities is warranted to account for the stability implications of financial innovation and capital regulation.
Fernando Cachafeiro, University of Coruna discusses Damages Claims for Breach of Competition Law in Spain.
ABSTRACT: The paper analyses current case law on antitrust damages claims in Spain. It compares existing national rules with draft rules enacted by the European Commission. The study of Spanish jurisprudence shows that there is substantial agreement on a number of relevant issues, such as the effects of final decisions by the national competition authority; the right to full compensation which includes actual loss and loss of profit; the availability of and requirements for the passing-on defence; the dates that determine the start of the limitation periods; or consumer associations’ standing to sue.
There are also major discrepancies: there is no rebuttable presumption of damages in cartel cases; some inconsistencies in determining the value of the loss of profit may arise; interest is paid from the date of the claim; joint and several liability is difficult to find; and the limitation period is one year, among others.
The alignment of Spanish Tort Law with the European Commission proposals can be accomplished by the mere action of Spanish courts when given the opportunity to resolve damages claims for the breach of Competition Law. The Ebro Foods judgement, where the Supreme Court substantially endorsed the European Commission’s doctrine on the passing-on defence, is a good example of this way of thinking. On other occasions, however, Spanish particularities have a solid legal base and thus significant legal amendments will be required.
Wednesday, August 27, 2014
Michael Ristaniemi University of Turku - Faculty of Law describes What Extraterritorial Application of Competition Law Means for MNCs.
ABSTRACT: Several competition law regimes around the world, including the EU and the USA, have adopted rules allowing their respective authorities to apply domestic competition law to activities occurring outside of their territory’s borders. This paradigm presents a clear challenge especially to multinational corporations ("MNCs") that operate on an international scale and which consequently must concurrently adhere to the rules and regulations of several – and potentially conflicting – jurisdictions in their business operations. Moreover, competition law can be and frequently is used as a tool for furthering a single region’s goals in international trade and politics. One visible avenue of doing so is by applying competition laws on an extraterritorial basis. Last, the coherence of jurisprudence itself is damaged by allowing competing legal doctrines to apply simultaneously within a single jurisdiction as they would, should a foreign nation’s competition laws be applied extraterritorially. All of this effectively constitutes a barrier to trade, which hits MNCs hardest in the form of legal uncertainty, increased costs and added administrative burden.
The author studies the legitimacy and breadth of extraterritorial application of competition law and discusses its main implications for MNCs as well as suggests a potential way forward in the form of increased regional cooperation between competition authorities and legislators.
The Authority for Consumers and Markets has conducted a study into entry barriers of the Dutch retail banking sector. The entry of new players or even merely the threat thereof will increase competition in the Dutch banking sector. This is important because the Dutch retail banking sector has become less competitive since the financial crisis. ACM does the following nine recommendations to the Dutch Minister of Finance and the Dutch Cabinet to lower entry barriers for new players.
- Advocate for the improvement of the European resolution mechanism.
- In addition to a more effective European resolution mechanism, advocate for a European deposit-guarantee scheme.
- At the national and European level, strive for simplicity in laws and regulations.
- Evaluate the Dutch system for obtaining a banking licence.
- Strive for prudential laws and regulations that are geared to the risks a bank engenders to the financial stability and the real economy.
- Develop a less stringent supervisory regime for credit unions.
- Minimise the uncertainty about the law and regulations in the mortgage market.
- Provide banks with maximum latitude in informing consumers in a factual manner about the guarantee scheme for savings.
- Take measures to reduce consumer inertia in the market for current accounts.
Frank P. Maier-Rigaud, IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods; NERA Economic Consulting describes Behavioural versus Structural Remedies in EU Competition Law.
ABSTRACT: This paper discusses the asymmetric use of structural remedies in merger control and antitrust in EU competition law. This asymmetry is explained by what is considered an erroneous legal perception concerning the subsidiarity of structural remedies over behavioural ones under Article 7 of Regulation 1/2003. This paper sets out to contribute to the clarification of the role of structural remedies from a competition policy perspective but also from the perspective of the concerned companies on which such measures would be imposed. In addition to the economic arguments that would speak in favour of rehabilitating structural remedies in abuse of dominance cases, it is argued that the Commission clearly has the legal means of following such a more economic approach in the choice of remedies. In light of the original Commission proposal for a new Regulation and on the basis of the finally adopted text that seemingly professes the impression of a priority of behavioural remedies over structural ones, a content preserving reformulation of Article 7 of Regulation 1/2003 is proposed.
Alexandr Svetlicinii, Tallinn University of Technology addresses Enforcement of EU Competition Rules in Estonia: Substantive Convergence and Procedural Divergence.
ABSTRACT: A decade of decentralized enforcement of EU competition rules under the procedural framework of Regulation 1/2003 has produced a diverse enforcement record that varies among Member States. While the numbers of notified investigations and infringement decisions based on Articles 101 & 102 TFEU are impressive, some EU jurisdictions have demonstrated an only negligible participation in the direct enforcement of EU competition rules. After joining the EU in 2004, Estonia has harmonized its competition legislation with EU standards and pursued active criminal enforcement of antitrust rules. At the same time, EU competition rules are absent from the enforcement practice of the Estonian competition authority and national courts. The present paper provides an overview of the specifics of the Estonian legal system including its substantive, procedural and institutional components. This overview demonstrates how the diversity and complexity of the procedural framework for the enforcement of competition rules (administrative, misdemeanour and criminal proceedings) effectively prevented EU competition rules from penetrating the national legal system.
'Financial Fair Play' or 'Oligopoleague' of Football Clubs?: A Preliminary Review Under European Union Competition
Nicolas Petit, University of Liege discusses 'Financial Fair Play' or 'Oligopoleague' of Football Clubs?: A Preliminary Review Under European Union Competition.
ABSTRACT: This short paper offers a first analysis of the UEFA's "break even requirement" under the EU competition rules. It shows that there are good reasons to believe that the UEFA Financial Fair Play regulation violates Article 101 of the Treaty on the Functioning of the EU, in particular because it limits investments in the sense of Article 101(1) b) TFEU and in turn risks ossifying the market structure to the benefit of a tight oligopoly of football clubs.
Tuesday, August 26, 2014
Every two years, the ABA Section of Antitrust Law puts on the highly-regarded Masters Course—a conference directed at young but experienced associates, partners, and government and in-house attorneys to provide deeper insight into key antitrust principles. This is an unmatched training opportunity featuring a stellar line-up of senior antitrust practitioners in the public and private sectors. This year, the conference will take place on October 9-11 at the Colonial Williamsburg Lodge in Historic Williamsburg, VA.
This program features a series of interactive sessions including breakout sessions on topics such as merger clearance, cartel practice, monopolization, class action litigation, antitrust economics, distribution issues, and non-U.S. competition law.
After participating in this program, attendees will have gained invaluable insights into the latest and most important antitrust developments, learned the practice tools that are used by some of the most experienced antitrust practitioners in the field, and become personally acquainted with many distinguished leaders of the antitrust bar. So be sure to register early as space is limited for this outstanding program!
Visit www.ambar.org/atmasters to register, view faculty listing, download the full conference brochure/agenda and learn more today!
Lead Jurisdiction Concepts: Towards Rationalizing Multiple Competition Policy Enforcement Procedures
Oliver Budzinski, Ilmenau University of Technology discusses Lead Jurisdiction Concepts: Towards Rationalizing Multiple Competition Policy Enforcement Procedures.
ABSTRACT: Lead jurisdiction models represent one option how to extend and enhance contemporary interagency cooperation among competition policy regimes. They constitute a multilateral, case-related form of cooperation that is suited to effectively create a one-stop-shop for the prosecution of international cartels, the handling of cross-border mergers and acquisitions and the governance of international antitrust cases. Thus, lead jurisdiction models offer considerable economic benefits. However, they also entail several caveats. Three possible working problems and downside effects of lead jurisdiction models in international competition policy enforcement are discussed in this paper.
Alberto Galasso, University of Toronto and Mark Schankerman, London School of Economics provide Patents and Cumulative Innovation: Causal Evidence from the Courts.
ABSTRACT: Cumulative innovation is central to economic growth. Do patent rights facilitate or impede follow-on innovation? We study the causal effect of removing patent rights by court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeals for the Federal Circuit to control for endogeneity of patent invalidation. Patent invalidation leads to a 50 percent increase in citations to the focal patent, on average, but the impact is heterogeneous and depends on characteristics of the bargaining environment. Patent rights block downstream innovation in computers, electronics and medical instruments, but not in drugs, chemicals or mechanical technologies. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.
In this issue:
We're ending the summer with a departure from our usual focus on a single topic, rather presenting a diverse and topical assortment of articles. First up is Judge Ding Wenlian from the Shanghai Higher People's Court who discusses how Chinese authorities look at minimum RPM agreements. Then Michael Carrier continues our ongoing discussion of SEP issues with a comprehensive primer. Staying with technology issues are Shyam Khemani on how to best appraise the internet search market for competition violations and Mario Todino who finds a surprising convergence in the U.S. and EU approach to IP Rights. Finally, Jim Nieberding focuses on the potential anticompetitive aspects of MFNs. Enjoy!
- Antitrust Antipasto
- Ding Wenlian, Aug 22, 2014
In the absence of sufficient empirical evidence indicating that most minimum resale price maintenance behaviors harm competition, for China it is not a wise choice to adopt either a “per se illegal” or "principle of prohibition + exceptions exemption" for minimum resale price maintenance behavior. Ding Wenlian (Shanghai Higher People’s Court)Tags:
- Michael Carrier, Aug 22, 2014
SEPs present complex issues that are constantly changing and bear watching. Michael Carrier (Rutgers Law School)Tags:
- R. Shyam Khemani, Aug 22, 2014
Competition authorities need to ascertain if a firm’s alleged dominant market position stems from “superior competitive performance” over rivals. R. Shyam Khemani (MiCRA)Tags:
- Mario Todino, Aug 22, 2014
There is much more convergence between the U.S. and the EU systems than what has been conventionally thought. Mario Todino (Gianni, Origoni, Grippo, Cappelli & Partners)Tags:
- Ding Wenlian, Aug 22, 2014
Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay?
ABSTRACT: Brand and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer along with a specified date at which the generic would enter the market. The Federal Trade Commission contends that these agreements extend the brand’s market exclusivity and amount to anticompetitive divisions of the market. The parties involved defend the settlements as normal business agreements that reduce business risk associated with litigation. The anticompetitive hypothesis implies brand stock prices should rise with announcement of the settlement. We classify 68 brand-generic settlements from 1993 to the present into those with and without an indication of a “reverse payment” from the brand to the generic, and conduct an event study of the announcement of the patent settlements on the stock price of the brand. For settlements with an indication of a reverse payment, brand stock prices rise on average 6% at the announcement. A “control group” of brand-generic settlements without indication of a reverse payment had no significant effect on the brands’ stock prices. Our results support the hypothesis that settlements with a reverse payment increase the expected profits of the brand manufacturer and are anticompetitive.
Zuzana Brokesova (University of Economics in Bratislava), Cary Deck (Sam M. Walton College of Business, University of Arkansas and Economic Science Institute, Chapman University), Jana Peliova (University of Economics in Bratislava) are Experimenting with Behavior Based Pricing.
ABSTRACT: Many purchases of differentiated goods are repeated, giving sellers the opportunity to engage in price discrimination based upon the shopper’s previous behavior by either offering loyalty discounts to repeat buyers or introductory rates to new customers. Recent theoretical work suggests that loyalty discounts are likely to be implemented when customer preferences are not stationary and sellers can pre-commit to prices for repeat buyers, but otherwise repeat buyers can be expected to pay the same or more than new buyers. This paper reports the results of a series of controlled laboratory experiments designed to empirically test the impact of these factors on pricing strategies, seller profit and total cost to consumers. Absent price pre-commitments, sellers in the lab engage in poaching when it is optimal to do so, but the ability to pre-commit leads to prices being relatively more favorable to loyal customers. Customer! poaching increases seller profit and increases total consumer costs in the case of stable consumer preferences without price pre-commitment.