Antitrust & Competition Policy Blog

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

Friday, May 29, 2015

Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare

Hinnerk Gnutzmann (Universita Cattolica del Sacro Cuore) discusses Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare.

ABSTRACT: Price discrimination by consumer's purchase history is widely used in regulated industries, such as communication or utilities, both by incumbents and entrants. I show that such discrimination can have surprisingly negative welfare effects even though prices and industry profits fall, so does consumer surplus. Earlier studies that did not allow entrants to discriminate or assumed symmetric firms yielded sharply different results, the pro{competitive effect of price discrimination are stronger in these settings. Imposing a pricing constraint on incumbent's discrimination leads the entrant to discriminate more heavily, but still improves both consumer and producer welfare.

May 29, 2015 | Permalink | Comments (0) | TrackBack (0)

EUROPEAN UNIVERSITY INSTITUTE Workshop 5-6 JUNE 2015 Florence, Italy

20th Annual EU Competition Law and Policy Workshop

What is a uniform application of EU competition law?

 

ORGANIZED BY PHILIP LOWE, MEL MARQUIS and GIORGIO MONTI

 

EUROPEAN UNIVERSITY INSTITUTE

DEPARTMENT OF LAW

5-6 JUNE 2015

Florence, Italy

 

PROGRAMME

Session I: Uniformity and diversity: what standards for a federal system?  

Chair:

Eleanor Fox

 

Speakers:

Andreas Mundt, Jim Venit, Bill Kovacic, Bruce Lyons, Simon Bishop, Patrick Rey

 

Session II: Uniformity and control of restrictive agreements

Chair:

Allan Fels

 

Speakers:

Damien Gerard, John Ratliff, Rafael Allendesalazar, Lorenzo Coppi, Thomas Cheng

 

Session III: Uniformity and control of unilateral conduct

Chair:

Mel Marquis

 

Speakers:

Ian Forrester, Heike Schweitzer, Cristina Caffarra, Paul Lugard, Adrian Emch, Allan Fels

 

Session IV: Uniformity and diversity in damages actions   

Chair:

Bruno Lasserre

 

Speakers:

Alexander Italianer, Jochen Burrichter, Alf-Henrik Bischke, Sven Völcker, Rachael Mulheron, Dan Rubinfeld

 

Session V: Uniformity and diversity – Judicial perspectives  

Chair:

Claus-Dieter Ehlermann

 

Speakers:

Marc van der Woude, Christopher Vajda, Rein Wesseling, Eleanor Fox

 

Session VI: Lessons and conclusions  

Chair:

Philip Lowe

 

Speakers:

Alberto Heimler, Mario Siragusa, Philip Lowe

 

[Please note – This event is not a conference with an audience but a series of discussions among the speakers.]

 

May 29, 2015 | Permalink | Comments (0)

Product Hopping: Can Patent Non-Use Be an Abuse of Dominant Market Position in Canada

James B. Musgrove, McMillan Peter E.J. Wells, C.S., McMillan Joshua Chad. McMillan and Devin Anderson, Freshfields ask Product Hopping: Can Patent Non-Use Be an Abuse of Dominant Market Position in Canada?

ABSTRACT: In Europe and the United States, attempts to switch demand from a non-patent protected product to one enjoying continuing patent protection have attracted antitrust scrutiny (pharma industry). At this stage, it is not certain whether Canada will follow suit as the rules of competition applicable in that country may provide arguments to those seeking to justify such practices.

May 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Germany: Challenges from New Online Practices to Established Competition Law Principles

Alexander Israel and Moritz Jakobs, both Noerr LLP discuss Germany: Challenges from New Online Practices to Established Competition Law Principles.

ABSTRACT: Online distribution and new business models such as hotel reservation portals are not only a challenge for companies but also for competition law practitioners to apply established principles or develop novel competition law principles. These new practices are investigated by the German Federal Cartel Office and German courts—including issues relating to price parity clauses, restrictions imposed by suppliers, and retail price maintenance. The trend appears to oppose clear-cut prohibitions, but also more clandestine restrictions, imposed to these new forms of distribution—with still an uncertainty as Courts have not ruled yet on the merits of these cases.

May 29, 2015 | Permalink | Comments (0) | TrackBack (0)

Thursday, May 28, 2015

ARE RESTRICTIONS OF COMPETITION BY SPORTS ASSOCIATIONS HORIZONTAL OR VERTICAL IN NATURE?

Oliver Budzinski, Ilmenau University of Technology and Stefan Szymanski, University of Michigan ask ARE RESTRICTIONS OF COMPETITION BY SPORTS ASSOCIATIONS HORIZONTAL OR VERTICAL IN NATURE?

ABSTRACT: In this article, we discuss, from an economic perspective, two alternative views of restrictions of competition by sports associations. The horizontal approach views such restrictions as an agreement among the participants of a sports league with the sports association merely representing an organization executing the horizontal cooperation. In contrast, the vertical approach views the sports association as being a dominant upstream firm enjoying a monopoly position on the market stage for competition organizing services, an important input for the actual product—the sports game. Taking the recent Financial Fair Play (FFP) initiative by UEFA (the Union of European Football Associations) as an example, we demonstrate that the different views lead to different assessments of restrictive effects and, thus, matter for competition policy decisions. The economic story of the potential restrictive effect of FFP on players' and player agents' income may fit more plausibly to the horizontal approach, whereas the potentially anticompetitive foreclosure and deterrence effects of FFP may be economically more soundly reasoned by taking the vertical approach.

May 28, 2015 | Permalink | Comments (0) | TrackBack (0)

AN ECONOMIC APPROACH TOWARDS FINE VALUE OPTIMIZATION FOR ANTIMONOPOLY VIOLATIONS

Sergey Petrov, Novosibirsk State Technical University and Aleksandr Shmakov, Novosibirsk State Technical University offer AN ECONOMIC APPROACH TOWARDS FINE VALUE OPTIMIZATION FOR ANTIMONOPOLY VIOLATIONS.

ABSTRACT: The article proposes an approach to the identification of optimal fine value for the Antitrust Law violation based on the analysis of incentives of economic entities to violate the law. This approach was tested on the example of oil industry and coal industry entities of Russian economy.

May 28, 2015 | Permalink | Comments (0) | TrackBack (0)

CMA releases UK businesses' awareness and understanding of the requirements of Competition Law

CMA releases UK businesses' awareness and understanding of the requirements of Competition Law. , the UK Competition and Markets Authority (CMA) published a study on UK businesses’ awareness and understanding of competition law. See here. The slides that summarize the study are here. The study is based on a survey of 1,200 private sector businesses in the UK.

May 28, 2015 | Permalink | Comments (0) | TrackBack (0)

STICKY REBATES: LOYALTY REBATES IMPEDE RATIONAL SWITCHING OF CONSUMERS

Alexander Morell, Max Planck, Andreas Glockner, University of Gottengen and Emanuel V. Towfigh, understand STICKY REBATES: LOYALTY REBATES IMPEDE RATIONAL SWITCHING OF CONSUMERS.

ABSTRACT: Competition policy often relies on the assumption of a rational consumer, although other models may better account for people's decision-making behavior. In three experiments, we investigate the influence of loyalty rebates on consumers based on the alternative Cumulative Prospect Theory (CPT). CPT predicts that loyalty rebates could harm consumers by impeding rational switching from an incumbent to an outside option (for example, a market entrant). In a repeated trading task, participants decided whether or not to enter a loyalty rebate scheme and to continue buying within that scheme. Meeting the condition triggering the rebate was uncertain. Loyalty rebates considerably reduced the likelihood that participants switched to a higher-payoff outside option later. We conclude that loyalty rebates may inflict substantial harm on consumers and may have an underestimated potential to foreclose consumer markets. Our findings therefore provide additional arguments why a dominant firm using target rebates may monopolize a market or abuse its market power. They also provide arguments why target rebates may raise consumer protection concerns.

May 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Network neutrality: Insights gained by juxtaposing the US and Korea

Shin, Dong-Hee; Lee, Jaegil; Kim, Nam Cheol; Jung, Jaeyoel imagine Network neutrality: Insights gained by juxtaposing the US and Korea.

ABSTRACT: In this study, we compare and contrast the U.S. and Korea in the context of network neutrality, focusing on debates among stakeholders and regulatory approaches. Interesting similarities and differences are highlighted by comparisons within the broadband ecosystem framework: government functions, histories, people's perceptions, regulatory approaches, legislative initiatives, and implementation. In Korea, there is an existing regulatory framework with suggestive guidelines that can be used to address net neutrality in a case-by-case fashion. The U.S. follows a regulatory approach by creating enforceable non-discrimination rules. Our findings suggest that the issue is not only complicated, but also as complex and vague as the parties' diverse interests are. We conclude that a careful combination of government coordination and market forces is an effective way to govern net neutrality.

May 28, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 27, 2015

Empirical analysis of mobile broadband adoption in major six countries from the view of competition policy

Sobee Shinohara, University of Tokyo, Hiroyuki Morikawa, University of Tokyo and Masatsugu Tsuji, University of Hyogo offer an Empirical analysis of mobile broadband adoption in major six countries from the view of competition policy.

ABSTRACT: The purpose of this paper is to study competition policy on mobile broadband, consisting of 3G and 4G (LTE).Currently mobile broadband has been developing rapidly and its access speed amounts to 150Mbps for the latest 4G, which is similar to fixed broadband. This paper analyzes the factors affect the mobile broadband adoption in major six countries, such as the U.S., UK, France, Germany, Japan, and Korea, those cover more than fifty percent of total population and adoption ratio of OECD 34 member countries. The factors examined here include HHI and frequency auction as completion policy, FTTH adoption, FMC (Fixed mobile convergence), and launching Android and iPhone, in addition to economic variables such as price and income. Panel data analysis showed that smartphone, competition among telecommunication carriers observed by HHI and FTTH affect mobile broadband adoption. This result provides important basis for competition policy on mobile broadband in each country.

May 27, 2015 | Permalink | Comments (0) | TrackBack (0)

When Banks Strategically React to Regulation: Market Concentration as a Moderator for Stability

Eva Schliephakea, Institute for Financial Economics and Statistics University of Bonn has written on When Banks Strategically React to Regulation: Market Concentration as a Moderator for Stability.

ABSTRACT: Minimum capital requirement regulation forces banks to refund a substantial amount of their investments with equity. This creates a buffer against losses, but also in- creases the cost of funding. If higher refunding costs translate into higher loan interest rates, then borrowers are likely to become more risky, which may destabilize the lending bank. This paper argues that, in addition to the buffer and cost effect of capital regulation, there is a strategic effect. A binding capital requirement regulation restricts the lending capacity of banks, and therefore reduces the intensity of loan interest rate competition and increases the banks price setting power as shown in Schliephake and Kirstein (2013). This paper discusses the impact of this indirect effect from capital regulation on the stability of the banking sector. It is shown that the enhanced price setting power can reverse the net effect that capital requirements have under perfect competition.

May 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Has the Financial Crisis had an Adverse Effect on Bank Competition?

Ali Mirzaei and  Tomoe Moore ask Has the Financial Crisis had an Adverse Effect on Bank Competition?

ABSTRACT: This article investigates whether the recent financial crisis has had any adverse impact on bank competition for 24 emerging and 25 advanced countries with large and small-size banks over the sample period 2001-2010. The H-statistic advocated by Panzar and Rosse (1987) is employed as the measure of competition. We find that the adverse effect of the financial crisis on bank competition seems to be trivial and on the contrary, competition is marginally boosted during the crisis period. This applies to both types of economies, irrespective of bank size. This suggests that currently ongoing policies to avert further crises in the banking sector have not exerted so great an adverse effect on competition. In the individual countries’ study, the recent global financial crisis, however, led to a significant decline in competition in some countries.

May 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Bank Competition and Financial Stability: Much Ado About! Nothing?

Diana Zigraiova, Czech National Bank and Tomas Havraneka, Charles University ask Bank Competition and Financial Stability: Much Ado About! Nothing?

ABSTRACT: The theoretical literature gives conflicting predictions on how bank competition should affect financial stability, and dozens of researchers have attempted to evaluate the relationship empirically. We collect 598 estimates of the competition-stability nexus reported in 31 studies and analyze the literature using meta-analysis methods. We control for 35 aspects of study design and employ Bayesian model averaging to tackle the resulting model uncertainty. Our findings suggest that the definition of financial stability and bank competition used! by researchers influences their results in a systematic way. The choice of data, estimation methodology, and control variables also affects the reported coefficient. We find evidence for moderate publication bias. Taken together, the estimates reported in the literature suggest little interplay between competition and stability, especially in developing and transition countries, even when corrected for publication bias and potential misspecifications.

May 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 26, 2015

1 Small Provision For Barclays, 1 Big Step For Compliance

Mark Rosman (Wilson Sonsini), Danny Sokol (University of Florida and Wilson Sonsini) and Jeff VanHooreweghe (Wilson Sonsini) have a Law 360 article (subscription required) on 1 Small Provision For Barclays, 1 Big Step For Compliance.  The article begins

For the first time, the Antitrust Division of the U.S. Department of Justice has awarded a company sentencing credit for implementing an effective compliance program after the start of an investigation. Getting credit for compliance efforts should not be as hard as space travel, but up until last week, a company’s chances for getting any credit (short of being the winner-takes-all leniency applicant) were no better than landing on the moon.

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Competition and consumer protection in the cyberspace marketplace

Joseph A. Klein, Global Technology Attorney and P.M. Rao, Long Island University offer Competition and consumer protection in the cyberspace marketplace.

ABSTRACT: This paper will examine legal and marketing implications of certain Internet technological developments impacting competition and consumer protection in cyberspace. The paper will explore to what extent antitrust and consumer protection laws are adequate to deal with the challenges to a competitive marketplace and consumer privacy posed by the development of cyberspace technologies and markets, for example, Internet search engines, social networks and wearable devices. The paper concludes that legal tools for protecting a competitive cyberspace marketplace are fairly robust, while the legal tools to protect consumers from being tracked and profiled by marketers and from the potential intrusions of individual privacy made possible by even more advanced Internet connected sensor and related data-based technologies are still a work in progress. At the same time, the extent of further government regulation in this area must be carefully balanced so as not to unduly restrict data dependent innovation.

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Professor Li Yu of Tianjin University of Finance & Economics at the University of Florida today

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Professor Lin Yu, Director of the Center for Economic Analysis of Law & Policy Evaluation at Tianjin University of Finance & Economics presented on “Effects of SBWP Jump-Dealing on China’s Book Market from the Perspectives of Competition and Antimonopoly.”  Professor Yu is a member of the AML Expert Advisory Committee of China.

Above is a picture of Professor Yu, his family (including recent PhD graduate daughter Grace who will be starting at CRA in July), myself and my friend, colleague and co-author Professor Wentong Zheng of the University of Florida. 

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Brand Loyalty, Volume of Trade and Leapfrogging: Consumer Behavior for Durable Experience Goods

Martin Paredes (Universidad de Piura) has written on Brand Loyalty, Volume of Trade and Leapfrogging: Consumer Behavior for Durable Experience Goods.

ABSTRACT: We present a dynamic model that addresses how the interaction between durability and experience consumers’ replacement decisions. Despite obsolescence, consumers keep used goods because of quality uncertainty of new goods. Contrary to adverse selection articles, incomplete trade in secondary markets can be efficient provided experience involves idiosyncratic tastes. As some consumers decide which vintage to buy depending on past experiences, brand loyalty can be higher for new goods. When consumers’ expected experience differs across brands, the best brand exhibits higher loyalty, larger sales, longer ownership spells, and higher resale prices, results consistent with evidence from the U.S. automobile industry.

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Heterogeneous Beliefs and Imperfect Competition in Sequential Auction Markets

Fabrice Rousseau (Department of Economics, Finance and Accounting, National University of Ireland, Maynooth) ; Herve Boco (Toulouse University, Toulouse Business School, France); and Laurent Germain (Toulouse University, Toulouse Business School, France) examine Heterogeneous Beliefs and Imperfect Competition in Sequential Auction Markets.

ABSTRACT: This paper analyzes a multi-auction setting in which informed strategic agents are endowed with heterogeneous noisy signals about the liquidation value of a risky asset. One result is that when the variance of the noise is small the competition between traders takes the form of a rat race during all the periods of trading. As we increase the level of the noise in the traders’ signals, a waiting game phase appears and the intensity of the rat race, observed only at the last auctions, decreases. In sharp contrast with the previous literature, when the variance of the noise is very large, we only observe a waiting game.

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Israeli Antitrust Authority Head David Gilo resigns

Israeli Antitrust head David Gilo has resigned over a disagreement with other parts of government about the gas industry. See here for details.

With a slot opening in August, why not get someone who made a name for themselves outside of Israel (akin to former Israeli Central Bank heads Jacob Frankel and Stanley Fischer) and go with an international choice?

Some thoughts for possible IAA heads might include: Bill Blumenthal (Sidley), Alec Burnside (Cadwalader), Dennis Carlton (University of Chicago), Gina Cass-Gottlieb (Gilbert & Tobin), Harry First (NYU), Ilene Gotts (Wachtell), Jason Gudofsky (Blakes), Alberto Heimler (Italian School of Public Administration), Nick Levy (Cleary), Barbara Rosenberg (Barbosa), Dan Rubinfeld (Berkeley/NYU),  Scott Sher (Wilson Sonsini), Valerie Suslow (University of Michigan), and Will Tom (Morgan Lewis).

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)

Markets with Technological Progress: Pricing, Quality and Novelty

Ludwig von Auera,Universitat Trier and Mark Tredeb, Universitat Munster explore Markets with Technological Progress: Pricing, Quality and Novelty.

ABSTRACT: New and old products differ in two respects: quality and newness. Whereas a higher quality of a new product always benefits consumers, the newness itself benefits some consumers, but not others, and for some, it is even a disadvantage. We capture these features in a Hotelling model of Over- Lapping Innovators (HOLI model), entailing a sequence of static Hotelling games of horizontal product differentiation (newness), that we extend by vertical product differentiation (quality). In this model the firms compete on quality and price. Using advanced dynamic hedonic regression methods, we empirically investigate the actual pricing of firms in the German laser printer market. We show that their pricing corresponds to our model with the entrant acting as the Stackelberg follower.

May 26, 2015 | Permalink | Comments (0) | TrackBack (0)