Monday, August 31, 2015
Angela Huyue Zhang King's College London – The Dickson Poon School of Law investigates The Faceless Court.
ABSTRACT: This Article is the first to study EU competition law by examining the behavior of judges and their law clerks (officially entitled référendaires) at the Court of Justice of the European Union, against the unique institutional settings in Europe. The study is both quantitative and qualitative. It provides the most comprehensive and up-to-date analysis of the background of judges and advocates general appointed to the Court since 1952. It is also the first to provide a comprehensive statistical analysis on the background of référendaires. As the background of référendaires is not publicly disclosed, the author hand-collected data from LinkedIn and created a dataset of 103 former référendaires and 74 existing référendaires working for the Court. The study also benefits from a field trip the author conducted in May 2014 and extensive interviews with former and existing members and staff at the Court.
The Article has several major findings. First, the quality of EU judges varies significantly, due to a lack of procedural safeguards for appointment and a high salary that attracts political appointees. As a consequence, some judges are dominated by their référendaires. Second, both judges and référendaires, especially those at the General Court, face increasingly heavy caseloads due to a number of inherent institutional defects. This increases the risk for judges and their référendaires to compromise quality for quantity. It also means that more work must be delegated to référendaires. As a consequence, the voices of référendaires are amplified. Third, référendaires come from a relatively homogeneous background and most of them are Francophones trained in the French legal system. Moreover, judicial formalism increases the value of career référendaires, who become powerful conservative forces that resist changes and reform. Furthermore, the revolving door between the Court and the Commission helps the latter exert influence on the Court from the inside and gain a comparative advantage in litigation. Fourth, the French legal tradition, with its emphasis on empowering the State rather than protecting individual liberty, has a dominant influence on the Court. Fifth, the Court’s practice of issuing a single, collegial decision encourages free-riding, increases pressures for judges and référendaires to conform and suppresses dissent, as illustrated in the Microsoft case. Sixth, the division of labor between the lower court and the higher court creates divergent incentive structures for judges and référendaires working at different levels. While a small group of judges and référendaires at the General Court have the incentive to innovate the formalistic case law by introducing more economic analysis, they are unable to do so as its ruling could be struck down by the higher court. At the same time, while the higher court is in a position to innovate, many judges and référendaires there lack the incentive to do so as competition is peripheral to the constitutional law debate.
This Article further sheds light on understanding why the differences between US antitrust law and EU competition law have persisted, despite powerful forces of globalization and convergence. As institutional change is path-dependent, evolution within each of these systems is only gradual. The Article therefore provides a basis for predicting that such divergence might persist in the future. Achieving a sound understanding of the Court is the key to legal reform. The Article concludes by contributing to the ongoing debate about how to reform the Court.
Bogeymen, Lunatics and Fanatics: Collective Actions and the Private Enforcement of European Competition Law
Bruce Wardhaugh, University of Manchester School of Law examines Bogeymen, Lunatics and Fanatics: Collective Actions and the Private Enforcement of European Competition Law.
ABSTRACT: The European desire to ensure that bearers of EU rights are adequately compensated for any infringement of these rights, particularly in cases where the harm is widely diffused, and perhaps not even noticed by those affected by it, collides with another desire: to avoid the perceived excesses of an American-style system of class actions. The excesses of these American class actions are in European discourse presented as a sort of bogeyman, which is a source of irrational fear, often presented by parental or other authority figures. But when looked at critically, the bogeyman disappears.
Some form of collective action is necessary to ensure compensation when large numbers of people each suffer a small amount of harm. As Judge Posner once remarked, “only a lunatic or a fanatic sues for $30.” Authorities in Europe recognise this, yet wish to avoid the perceived American excesses.
In this paper, I examine the European (and UK) proposals for collective action. I compare them to the American regime. The flaws and purported excesses of the American regime, I argue, are exaggerated. A close, objective examination of the American regime shows this.
I conclude that it is not the mythical US class action which is the barrier to effective collective redress, rather the barriers to effective, wide-ranging group actions lie within European legal culture and traditions, particularly those mandating individual control over litigation.
Alan J. Meese, William & Mary Law School offers Antitrust Federalism and State Restraints of Interstate Commerce: An Essay for Professor Hovenkamp.
ABSTRACT: This essay examines and critiques the federal antitrust treatment of state legislation that unreasonably restrains interstate commerce, building upon important work on the subject by Herbert Hovenkamp. Such restraints take three forms: (1) legislation authorizing parties to enter unreasonable restraints; (2) legislation compelling conduct that restrains trade; and (3) legislation banning private, wealth-creating conduct that would be lawful under the Sherman Act. The Sherman Act condemns restraints in the first category, unless states “actively supervise” resulting prices and output. However, beginning with Parker v. Brown, 317 U.S. 341 (1943), which scrutinized state-imposed output restrictions, the Supreme Court has repeatedly and unanimously held that the Sherman Act does not preempt state-imposed restraints in the second and third categories. Invoking principles of federalism and state sovereignty, the Court has held that Congress never intended the Sherman Act to preempt such state regulations of economic activity, including those that destroy wealth and injure consumers in other states.
As Professor Hovenkamp has previously explained, Parker and its progeny rest upon a “fictional reading of the legislative history of the antitrust laws,” given the dual federalism in place in 1890. This essay elaborates on this assertion, showing that the constitutional landscape extant when Congress passed the Sherman Act excluded the sort of overlapping regulatory authority that gives rise to the possibility of preemption. More precisely, the Supreme Court placed strict limits on the affirmative scope of Congress’s commerce power and employed the negative or dormant implication of the Commerce Clause to invalidate state restraints of the relatively small category of interstate commerce. Such restraints also contravened the due process clause of the 14th Amendment, which the Court and state courts read to ban unreasonable state restrictions on economic liberty. Because state and federal regulatory authority over public and private trade restraints was mutually exclusive, Congress could not have contemplating state-imposed restraints.
Of course, the constitutional framework in place in 1890 collapsed in 1937, when the Supreme Court abandoned liberty of contract and ceased placing meaningful limits on the commerce power. At the same time, the Court “unshackled” the states, weakening the Dormant Commerce Clause and empowering states to impose restraints on interstate commerce that pre-1937 case law would have condemned. The Court also expanded the scope of the Sherman Act to reach purely local restraints with tangential connections to interstate commerce. The result was vast overlapping regulatory authority, opening the door to Sherman Act preemption of state restraints of the now-expansive category of interstate commerce.
This overlap raised an interpretive question the Court did not face before 1937, namely, whether the Sherman Act preempts unreasonable state restraints of interstate commerce despite the lack of any conscious decision by Congress regarding the treatment of such restraints. This essay briefly reviews the case for and against such preemption and concludes that the case for such preemption is stronger than many have supposed. Nonetheless, the paper offers a two-part alternative to such preemption. First, the Court should restrict the scope of the Sherman Act to reach only those restraints imposing distinct harm on consumers in more than one state. Reducing the reach of the Sherman Act would minimize the sort of federal-state friction that drives the federalism concerns militating against preemption. Second, the Court should revisit its decisions relaxing dormant commerce clause scrutiny of state-imposed restraints. In particular, the Court should repudiate Parker’s less famous holding that a pro-rate scheme imposing nearly all of its costs on consumers in other states is nonetheless consistent with the Dormant Commerce Clause. Such revitalization of the Dormant Commerce Clause would discourage wealth-destroying regulation and enhance price flexibility, thereby facilitating recovery from macroeconomic downturns. The approach just sketched would largely replicate the institutional framework that Congress believed it was supporting when it passed the Sherman Act in 1890.
Friday, August 28, 2015
J. Zhou, Tilburg Law and Economics Center (TILEC) examines The Rise and Fall of Cartels with Multi-Market Colluders.
Abstract: The majority of cartels discovered by the European Commission (EC) over the last 30 years involved firms that engaged in collusion in more than one product. I investigate the impacts of the EC's cartel enforcement on the hazards that firms join and leave cartels in multiple products. I estimate discrete-time recurrent event hazard models for a set of 126 multi-product colluders prosecuted between 1985 and 2014. EC investigations in a market decrease the rate at which the cartel members join new cartels and increases the rate at which they leave cartels in other markets. My results shed light on enforcement efforts against cartels and other forms of organized crime.
Adam M. Copeland, Federal Reserve Bank of New York and Rodney J. Garratt, Federal Reserve Banks - Federal Reserve Bank of New York examine Nonlinear Pricing with Competition: The Market for Settling Payments.
ABSTRACT: The multiple payments settlement systems available in the United States differ on several dimensions. The Fedwire Funds Service, a utility that operates a U.S. large-value payments-settlement service, offers the fastest speed of settlement. Recognizing that payments differ in the urgency with which they need to be settled, Fedwire offers banks a decreasing block-price schedule. This approach allows Fedwire to price discriminate, charging high fees for urgent payments and low fees for less urgent ones. We analyze banks’ demand for Fedwire Funds given this nonlinear scheme, taking into account competing settlement systems. We show that how banks respond to Fedwire’s pricing depends crucially on the need to settle payments quickly. If the urgency for immediate settlement is great enough, banks will respond to marginal price; otherwise, they will respond to average price. We test whether banks respond to marginal or to average price. Our identification comes from exogenous variation in Fedwire’s pricing, which results in differential changes in marginal and average price for comparable banks. We find that banks respond to average price.
Günter Knieps, Institute of Transport Economics and Regional Policy, Albert-Ludwigs-Universitat Freiburg explores ENTREPRENEURIAL TRAFFIC MANAGEMENT AND THE INTERNET ENGINEERING TASK FORCE.
ABSTRACT: The changing role of the Internet Engineering Task Force (IETF) standard setting process, from designing and implementing the best effort transmission control protocol/Internet Protocol (TCP/IP) as a universal standard towards a platform for dealing with the increasing need for variety in the design of a Quality of Service (QoS) differentiated traffic management architecture, is demonstrated. The IETF's contributions to flexible open transmission architecture, able to provide the required traffic qualities for the different applications, constitute the relevant pillars of a Generalized Differentiated Service (DiffServ) architecture. Further, the role of entrepreneurial traffic management within the Generalized DiffServ architecture, and the division of labor between the IETF and entrepreneurial traffic management, is analyzed. Within the “umbrella” architecture of Generalized DiffServ with the potential to combine basic elements of QoS differentiated traffic architectures, a flexible framework for entrepreneurial traffic quality differentiation strategies is evolving. Its basic characteristic is market-driven network neutrality with all applications bearing the opportunity costs of their required traffic capacities. Consequently, an artificial market split between best effort TCP/IP and managed services would conflict with the integrated service approach of the IETF. Finally, the implementation of Generalized DiffServ via Next Generation Networks is considered.
Thursday, August 27, 2015
Timothy J. Tardiff, Advanced Analytical Consulting Group describes NET NEUTRALITY: ECONOMIC EVALUATION OF MARKET DEVELOPMENTS.
ABSTRACT: On February 26, 2015, the Federal Communications Commission (FCC) issued new regulations for the Internet. A significant stated motivation for these regulations was the protection and promotion of the quality of Internet service. This article provides information about the evolution of the quality of Internet service, providing context for this central stated motivation of Internet regulation, including the merits of rules restricting payments by content providers for priority treatment of certain Internet traffic. The history of the FCC's Internet regulations (or lack thereof) is reviewed, the main arguments for and against imposing ex ante price regulation on Internet Service Providers (ISPs) are outlined, and data on industry performance, particularly subscribership levels in general and at substantially increasing speeds, are described. This experience indicates that apparent insufficiencies in competitive alternatives at the fastest available speeds have been ameliorated in fairly short order by new offerings by multiple ISPs. These findings strongly suggest that basing new restrictions on a putative dearth of competition for recently available service levels and transmission speeds is likely to be overtaken by technological and market developments, rendering such ex ante rules at best superfluous and at worst counterproductive to competition and innovation.
Bronwyn H. Hall, Christian Helmers, and Georg von Graevenitz examine Technology Entry in the Presence of Patent Thickets.
ABSTRACT: We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold-up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to less entry into technologies regardless of a firm’s size.
Conor C. Talbot, European University Institute - Department of Law (LAW); Trinity College (Dublin) - Department of Economics; LK Shields Solicitors explains The Irish Competition and Consumer Protection Commission Revises its Cartel Immunity Program.
ABSTRACT: Given the immense social, economic and personal damage caused by the covering-up of crimes by Irish institutions, there is a remarkable reluctance in Irish society to provide systematic protection to whistle-blowers and persons willing to come forward to ensure offences are investigated by the competent authorities. Nowhere is this more relevant than in the often murky world of white collar crime. However, some recent may be a sign that the tide is turning. This article seeks to explain recent reforms of the immunity program used to encourage self-reporting of information on certain potential breaches of the Competition Act 2002 (as amended).
Andreas Stephan, University of East Anglia offers a Survey of Public Attitudes to Price Fixing in the UK, Germany, Italy and the USA.
ABSTRACT: This paper reports the results of four surveys gauging public attitudes to price fixing and cartel enforcement in the United Kingdom, Germany, Italy and the United States. A previous study was carried out in the UK in 2007. The results show a robust understanding that price fixing is harmful and popular support for enforcement and punishment. In particular, there is an expectation that businesses should calculate their prices independently of each other. Overall there is surprising uniformity in opinion between the four jurisdictions despite significant differences in culture and levels of enforcement. Support for the imprisonment of cartelists has significantly increased in the UK since 2007, but the results suggest price-fixing is still viewed as being less serious than traditional crime and some other forms of corporate wrongdoing.
Wednesday, August 26, 2015
Mohamed Elfar, Queen Mary - University of London explains Enforcement Policy of the Egyptian Competition Law: The Single Economic Criteria.
ABSTRACT: The enforcement policy of the Egyptian Competition Law reveals that there are two varying approaches in relation to the concept of related parties/single economic unit. The first requires for parties to be related, to be active in the same relevant market. This created discrepancies in practice. The second, considers parties to form a single economic unit regardless whether they are engaged in the same market or not. In this respect, this article is intended to explore these policies and to propose recommendations for the way forward.
Gary Biglaiser, University of North Carolina and Andrei Hagiu, Harvard Business School - Strategy Unit Multi-Product review Duopoly with Cross-Product Cost Interdependencies.
ABSTRACT: Many multi-product firms incur a complexity fixed cost when offering different product lines in different quality tiers relative to the case when offering all products lines in the same quality tier (high or low). Such fixed costs create an interdependency between firms’ choices of quality tiers across different product lines, even when demands are independent. We investigate the effects of this interdependency on equilibrium profits in a Stackelberg duopoly game. Both firms’ profits are (weakly) higher when the complexity cost is infinite than when it is 0. The Stackelberg leader’s profits are always (weakly) higher with a positive complexity fixed cost, but its profits can be non-monotonic in the magnitude of this cost. The Stackelberg follower’s profits can be lower when the complexity fixed cost is positive than when it is equal to 0.
I will be in Sao Paolo discussing the new draft Brazilian antitrust guidelines on Friday. In short, they look really well done.
How do I explain the wonders of Brazil to my kids (not coming along for the trip). I began with this Frank Sinatra classic. Hannah and I danced with the girls this morning to the song.
Randy Stutz, American Antitrust Institute (AAI) explores The Proposed Merger of Staples and Office Depot: Lessons from History and New Competitive Concerns.
ABSTRACT: The proposed combination of Staples and Office Depot presents the Federal Trade Commission (FTC) with a host of merger review challenges. The transaction follows closely on the heels of the Office Depot/OfficeMax merger in 2013 and would complete a rapid 3-1 consolidation of the office supply superstore (OSS) market. Both retail and business-to-business customers may be significantly affected by the proposed transaction. The deal puts front and center the question whether evolving alternative business models for the sale of consumable office supplies are a viable substitute for OSSs. It also raises issues that the Commission recently addressed in the successfully enjoined merger of national broadline food service distributors Sysco and U.S. Foods - namely that a merger of the only two rivals in a national market may have adverse unilateral effects in a targeted customer market.
The American Antitrust Institute (AAI) is concerned that the proposed transaction may substantially lessen competition in the market for the sale of consumable office supplies to large multi-regional or national customers on a contract basis (hereinafter “enterprise customer market” or “enterprise market”). In particular, we are concerned that the proposed transaction threatens substantial unilateral anticompetitive effects that alternative supply responses could not ameliorate, and that harm to customers in this market will be passed on to consumers. Some of these harms implicate unique dimensions of quality competition involving cyber security and supply chain stability. We also raise questions as to whether rapid 3-1 consolidation threatens to reverse recent positive competitive developments in the retail office supply market, as well as the competitive significance of merging the only “omnichannel” retailers principally devoted to office supplies.
The analysis in this white paper is based on our review of publicly available information and conversations with industry experts and analysts. Because we do not have access to confidential or proprietary information that the Commission collects in the course of its investigation, we draw no conclusions as to whether the merger violates Section 7 of the Clayton Act. However, our analysis makes clear that the proposed merger warrants very close scrutiny by the Commission.
Major themes that emerge from this analysis include: The Commission should determine whether there is a distinct relevant product market for the sale of consumable office supplies to large “enterprise” office supply customers on a contract basis, and if so, who participates in this market. This is consistent with the Commission’s successful approach to defining targeted customer markets in Sysco v. Fed. Trade Comm’n.
The enterprise contract market likely is a relevant antitrust market because enterprise customers have no viable substitutes for the product and service offerings provided by OSSs. The next largest rivals are distant to Staples and Office Depot and are unable to compete on the scale and scope of the merging parties. Moreover, the merging firms may be the only participants in this market, because potential supply-side responses likely would fail to defeat a post-merger price increase in the market.
The proposed transaction threatens substantial unilateral anticompetitive effects in the enterprise market, and possibly also in the broader market for all contract customers. Potential anticompetitive harm arises not only from the loss of ordinary head-to-head competition between the merging firms, which is substantial, but also from the loss of competition to provide superior cyber security to contract customers and by increased supply chain fragility resulting from elimination of any redundancy in the OSS channel. Potential anticompetitive effects are unlikely to be mitigated by repositioning or new entry.
In its 2013 review of the OfficeDepot/OfficeMax merger, the Commission likely did not go far enough in distinguishing among competitive dynamics within and across the retail distribution channels through which OSSs provide products to end consumers. Although competition in the pure online retail channel is likely disciplined by national competition from Amazon and others, there are competitive concerns in the traditional superstore channel and in the emergence of omnichannel stores that warrant careful attention.
Niklas Horstmann, Karlsruhe Institute of Technology, Jan Kraemer, University of Passau, and Daniel Schnurr, Karlsruhe Institute of Technology examine Wholesale Competition and Open Access Regimes: Experimental Evidence.
ABSTRACT: We investigate the effects of wholesale competition and alternative open access regimes on market performance. By means of an economic laboratory experiment we systematically vary the competitive intensity at the wholesale level and compare market outcomes under no regulation and a margin squeeze regulation, where the retail price of integrated firms must exceed the wholesale price. Our analysis suggests that the introduction of wholesale competition does not necessarily lead to a more competitive outcome compared to a wholesale monopoly. Indeed, whether wholesale competition reduces market prices and benefits consumers hinges critically on the level of competitive intensity at the wholesale level. Moreover, irrespective of the level of wholesale competition, we do not find evidence that a margin squeeze regulation reduces retail market prices. In fact, while margin squeeze regulation may benefit the non-integrated reseller it tends to increase retail prices.
Tuesday, August 25, 2015
Nicole Kalemba, University Rovira and Virgili, Department of Business Administration and Fernando Campa Planas, Rovira i Virgili University explore How Quality is Measured in the Air Transportation Industry.
ABSTRACT: Purpose – In the air transportation industry people are paying an increasing attention to the service quality, which became in recent years an important marketing requirement as a consequence of the highly competitive market among air carriers. The general objective of this paper is to analyze the concept of quality in the air transportation sector and to find out the different approaches of how quality is being measured.
To achieve this objective, the research analyzes both the most common model of measuring quality as well as publicly available secondary data and indexes.
Methodology – For that purpose, a literature review of journals included in the database Scopus has been carried out, considering the period of years from 1997 to 2014, as well as publicly available data.
Findings – Findings indicated that items included in pre-flight, in-flight and equally post-flight services have a fundamental impact on the passenger satisfaction and their perception. The most important parameters corresponding to service quality have been factors such as airline employees, baggage handling and punctuality (on-time performance/on-time arrival), as well as passenger satisfaction.
Contribution – Airline companies are increasing the prominence they place on the quality they provide their customers. This research aims to investigate and examine parameters which have been used by several authors and also publicly available indexes for defining service quality in the air transportation industry.
CPI Competition Policy International AUG-15(2)Summer 2015, Volume 8 Number 2 ASEAN Competition Law: Part II
ASEAN Competition Law: Part II
- R. Ian McEwin, Aug 24, 2015
While there are many differences between the competition laws, increasing regional integration is likely to lead to greater uniformity and the development of institutional mechanisms to deal with cross-border competition disputes—but these developments are highly unlikely to lead to an ASEAN competition law regulator with supranational powers.R. Ian McEwin (University of Malaya)
- Ly Huong LUU, Aug 24, 2015
However, knowing about the existence of the VCL is just one thing, taking it seriously and using it in practice in quite another thing. LUU Huong Ly (Ministry of Justice, Vietnam)
- Kala Anandarajah, Dominique Lombardi, Aug 24, 2015
As such, businesses must familiarize themselves with the legislation in each country and recognize that there is no one-size-fits-all approach. Kala Anandarajah & Dominique Lombardi (Rajah & Tann Singapore LLP)
- Anand Raj, Cynthia Lian, Wen-Ly Chin, Aug 24, 2015
There is still some way for Malaysia to go and the lack of merger control (for the foreseeable future) remains a significant shortcoming in the Malaysian competition law regime at this stage. Anand Raj, Cynthia Lian, & Wen-Ly Chin (Shearn Delamore & Co., Kuala Lumpur)
This scenario has gradually changed over the years as the Philippines has embraced a competitive drive to perform better as a nation. Geronimo L. Sy (Department of Justice, Philippines)
Robert B. Kulick, University of Maryland, College Park has a working paper on Horizontal Mergers, Prices, and Productivity.
Abstract: Despite being an active area of economic research for decades, many fundamental questions about horizontal mergers remain unanswered. In particular, the extent to which horizontal mergers cause price increases by enhancing market power remains subject to intense debate and the nature of the interaction between the price effects and productivity effects of horizontal mergers is not well understood. We address a number of the current literature’s limitations by taking advantage of the rich microeconomic data collected for plants in the ready-mix concrete industry as part of the Census of Manufacturers (CM). Because of the expansive coverage of the industry offered by the CM, we are able to draw conclusions about horizontal mergers based on a broad sample of mergers, while making use of pricing, quantity, and productivity data that is rarely available in the context of horizontal merger research. We find that over the sample period horizontal mergers are responsible for simultaneously increasing both prices and productivity and that both the price and productivity increases are driven by mergers occurring after the promulgation of the 1982 Merger Guidelines.
The Administrative Council for Economic Defense – CADE presented, during the judgment session of 19 August, the preliminary version of the Guidelines for Competition Compliance Programs – a set of internal measures adopted by an economic agent that allows it to prevent or minimize risks of infringements to the statutes related to its activity, or to detect them more quickly if they do take place.
The English version of the document is already available at the authority’s website and CADE is already receiving comments on its content. The Council intends to hold meetings to discuss the subject with lawyers, representatives from companies, academics, etc., and will receive individual contributions from society, that can be sent to email@example.com until 18 October.
The guidelines are directed at the creation of a program internal to companies that is effective in avoiding infringements to the Brazilian Competition Law. The recommendations aim especially at conducts, since the Council already developed and published the Guidelines on Gun Jumping in regards to mergers and acquisitions.
The main objective is to guide companies in implementing compliance directed at Competition Law, covering what a competition compliance program is, how it can be implemented and what are the benefits of its adoption. The guidelines are suggestions that either may or may not be adopted, according to each company’s particularities. The assessment by CADE of the adoption of these suggestions will happen on a case-by-case basis.