Tuesday, November 17, 2015

Market Entry Strategies

Sohvi Leih, University of California, Berkeley - Haas School of Business and David Teece, University of California, Berkeley - Business & Public Policy Group identify Market Entry Strategies.

ABSTRACT: A firm’s business strategies regarding the choice of a market, market entry timing, and entry mode can significantly influence the firm’s performance. A number of factors such as control, experience, and cultural distance can influence the formulation of a firm’s market entry strategy – e.g. whether to choose between licensing and franchising or between joint ventures or wholly owned subsidiaries. Scholars have analyzed the choice of a firm’s market entry strategy from various theoretical perspectives, such as transaction cost economics, the resource-based view, the capabilities perspective and the eclectic framework.

November 17, 2015 | Permalink | Comments (0)

SECTORAL REGULATION AND COMPETITION POLICY: THE U.K.'S CONCURRENCY ARRANGEMENTS—AN ECONOMIC PERSPECTIVE

Jon Stern, City University has written on SECTORAL REGULATION AND COMPETITION POLICY: THE U.K.'S CONCURRENCY ARRANGEMENTS—AN ECONOMIC PERSPECTIVE.

ABSTRACT: This article discusses the U.K.'s concurrency arrangements under which sector regulators can apply aspects of competition law to their industries. It is frequently claimed that concurrency is a unique aspect of U.K. competition policy. However, this article argues that it arose during the 1980s as one aspect of an almost uniquely procompetitive regulatory framework for privatized telecommunications and other U.K. infrastructure industries. The article discusses the origins of these formal concurrency arrangements and their use in the U.K. since the 1980s. It also compares the U.K. with other EU and OECD countries over the role of ex post competition policy relative to ex ante regulation and the interactions between sector regulators and competition authorities. It emphasizes the role of “informal” concurrency as well as “formal” concurrency in the U.K. and other countries. The article concludes with a discussion of the likely prospects for the U.K. under the enhanced concurrency regime established in 2013 and makes some recommendations for the future. Developing and implementing effective methods to evaluate the net welfare benefits of the enhanced concurrency regime will be crucial both in their own right and in establishing a robust deterrence strategy against anticompetitive behavior in industries with sector regulators.

November 17, 2015 | Permalink | Comments (0)

DETERRENCE EFFECTS OF KOREAN ANTITRUST ENFORCEMENT ON PRODUCER PRICES AND PROFIT MARGINS

Robert M. Feinberg, American University and Minsoo Park, Sungkyunkwan University examine DETERRENCE EFFECTS OF KOREAN ANTITRUST ENFORCEMENT ON PRODUCER PRICES AND PROFIT MARGINS.

ABSTRACT: Antitrust enforcement is well established in Korea, yet there has been little study of its effectiveness. John Connor, however, noted that “the Korean [Federal Trade Commission] has the best record of anti-cartel enforcement in Asia.”1 In this article, we examine several datasets to investigate whether antitrust enforcement in Korea, especially anti-cartel activity, has had a price-limiting impact over the past couple of decades. We compare the behavior of firms and industries that have been subject to antitrust investigation to those that have not. We examine the response of the firms and industries under antitrust investigation following the cases. The results presented here are consistent across two very different data sets of indicators for the Korean economy. The results suggest that long-term deterrence is unlikely to be observed from antitrust investigations, although the impact on short-term price and profit margin may be expected. However, the stronger effects observed suggest that firms in Korea have begun to pay more attention to the actions of the Korean Federal Trade Commission (KFTC) over the past decade since the more rigorous enforcement of antitrust.

November 17, 2015 | Permalink | Comments (0)

The Competitive Effects of Parity Clauses on Online Commerce

Ariel Ezrachi explores The Competitive Effects of Parity Clauses on Online Commerce.

ABSTRACT: Parity clauses, also known as most-favoured-nation clauses, are designed to address the hold-up problem in vertical relations and facilitate investment and efficiencies by the downstream platform. However, when designed too broadly, they have the potential of undermining the dynamics of competition and reducing consumer welfare. This paper explores the welfare effects of parity clauses and reflects on the level of intervention they may call for. It reviews the possible theories of harm associated with parity clauses and draws a dividing line between the effects generated by narrow and wide parity.

November 17, 2015 | Permalink | Comments (0)

Monday, November 16, 2015

How Not to Apply the Rule of Reason: The O’Bannon Case

Mike Carrier, Rutgers-Camden discusses How Not to Apply the Rule of Reason: The O’Bannon Case.

ABSTRACT: The case of NCAA v. O’Bannon has received significant attention. Straddling the intersection of antitrust, intellectual property, and sports law, the case presents engaging and complex issues. Much of the complexity, however, is unnecessary. For it stems from a Ninth Circuit ruling that misconstrued antitrust law. In particular, the court applied a version of the Rule of Reason that short-circuited the analysis and insufficiently deferred to a district court judge who presided over an exhaustive trial on amateurism.

Based on my review of more than 700 Rule-of-Reason cases in the modern era, the first section of this essay highlights courts’ analyses based on “less restrictive alternatives” and a four-stage burden-shifting framework. Second, it highlights three errors with the Ninth Circuit’s application of the Rule of Reason: inappropriately holding that the plaintiff’s failure to prove a less restrictive alternative resulted in the plaintiff losing the case, misconstruing the scope of the justification to which the alternative would be applied, and eliminating the balancing stage of the analysis. The final section emphasizes the court’s error in substituting its conception of amateurism for that of the lower court.

The essay concludes that the Ninth Circuit’s ruling striking down the $5,000 payment for the use of student-athletes’ names, images, and likenesses should be overturned for a fuller balancing of anticompetitive and procompetitive effects.

November 16, 2015 | Permalink | Comments (0)

Brother, May I?: The Challenge of Competitor Control Over Market Entry

Maureen K. Ohlhausen, Federal Trade Commission and Gregory P. Luib, U.S. Federal Trade Commission ask Brother, May I?: The Challenge of Competitor Control Over Market Entry.

ABSTRACT:

Those concerned with restrictions on innovative technologies and business models often decry the stultifying effects of a ‘Mother, May I?’ approach, whereby the innovator needs government permission to enter a market. These are worthy concerns that regulators ought to take seriously. This article focuses on a related issue, which the authors call the ‘Brother, May I?’ problem or the challenge of competitor control over market entry. This problem arises when would-be entrants are effectively required to obtain permission from incumbent competitors to enter or expand within a particular market. Whether it is due to a law or regulation, the decision of a financially-interested state board, or conduct by a monopolist looking to maintain its market power, new entrants to a market generally should not have to get their competitors’ permission to compete. That such permission is effectively required in an increasing number of situations is inconsistent with the free-market principles that ought to guide our economic policies. Three recent appellate victories by the Federal Trade Commission — in North Carolina Dental, Phoebe Putney, and McWane — all in some way involved the need to seek the permission of competitors to enter a market, and this article addresses each case in turn.

November 16, 2015 | Permalink | Comments (0)

Whistleblowers on the Board? The Role of Independent Directors in Cartel Prosecutions

Murillo Campello Cornell University; National Bureau of Economic Research (NBER) Daniel Ferres Universidad de Montevideo Gaizka Ormazabal University of Navarra, IESE Business School ask Whistleblowers on the Board? The Role of Independent Directors in Cartel Prosecutions.

ABSTRACT: Stock market reactions to news of cartel prosecutions are muted when indicted firms have a high proportion of independent directors on their boards. This finding is robust to self-selection and is pronounced when independent directors hold more outside directorships and fewer stock options -- when those directors have fewer economic ties to indicted firms. Results are even stronger when independent directors' appointments were attributable to SOX, preceded their CEO's own appointment, or followed class action suits -- when directors have fewer ties to indicted CEOs. Independent directors serving on indicted firms are penalized by losing board seats and vote support in other firms. Firms with more independent directors are more likely to cooperate with antitrust authorities through leniency programs. They are also more likely to dismiss scandal-laden CEOs after public indictments. Our results show that cartel prosecution imposes significant personal costs onto independent directors and that they take actions to mitigate those costs. We argue that understanding these incentive-compatible dynamics is key in designing strategies for cartel detection and prosecution.

November 16, 2015 | Permalink | Comments (0)

The abolition of the group boycott prohibition from New Zealand competition

Rex Ahdar, University of Otago describes The abolition of the group boycott prohibition from New Zealand competition.

ABSTRACT: New Zealand competition law’s per se prohibition upon group boycotts (contracts, arrangements or understandings containing an exclusionary provision), s 29 of the Commerce Act 1986, is destined for the scrap heap. Proponents of its repeal contend that its infrequent use and attenuated reach means its absence will not be missed, that hitherto s 29 has had a damaging chilling effect upon commercial activity and that the apparent ability of other provisions in the Act (especially the enhanced cartel offence) to fill the vacuum will assuage any lingering concerns. The article finds these justifications wanting and concludes that the preservation of the group boycott ban is warranted.

November 16, 2015 | Permalink | Comments (0)

Sunday, November 15, 2015

Startups, HI-Tech industries & Digital Economy… Is CCI promoting them or thwarting progress ?

Hard Work and the Music Business

My ten year old Raquel just received her bat mitzvah date from the synagogue (note to the non Jewish readers: you really do reserve three years ahead to make sure that everyone in the family has a clear schedule as well as the synagogue).  We were discussing how competition/antitrust means hard work (for companies).  We found that many of the top recording artists did not have an easy trip to the top (Maroon Five has discussed this in countless interviews and still is on top after 12 years - and I tell her that Adam Levine's mom is not happy about his permanent tattoos because nice Jewish boys don't get tattoos).  Our newest favorite family song is courtesy of a band out of NYU (Harry First, there is still hope for you as a rock star- and let me note that last Halloween Harry First went trick or treating with us, for which he is loved in our home even more than for his Microsoft book).  We read up recently on how her new favorite band A Great Big World had to work very hard to get to their Grammy success.  She particularly likes the Jew-fro of singer Ian Axel.

 

November 15, 2015 | Permalink | Comments (0)

Friday, November 13, 2015

Assistant Attorney General Bill Baer Delivers Remarks at the New Health Care Industry Conference

Assistant Attorney General Bill Baer Delivers Remarks at the New Health Care Industry Conference
Washington, DC
United States
~
Friday, November 13, 2015

November 13, 2015 | Permalink | Comments (0)

Competition Law as Regulation?

Edited by Josef Drexl, Director, Max Planck Institute for Innovation and Competition, Munich, Germany and Fabiana Di Porto, Associate Professor of Law, University of Salento, Lecce, Italy have a new book that asks Competition Law as Regulation?

BOOK ABSTRACT: To what extent should competition agencies act as market regulators? Competition Law as Regulation provides numerous insights from competition scholars on new trends at the interface of competition law and sector-specific regulation. By relying on the experiences of a considerable number of different jurisdictions, and applying a comparative approach to the topic, this book constitutes an important addition to international research on the interface of competition and regulation. It addresses the fundamental issues of the subject, and contributes to legal theory and practice. Topics discussed include foundations of the complex relationship of competition law and regulation, new forms of advocacy powers of competition agencies, competition law enforcement in regulated industries in general, information and telecommunications markets, and competition law as regulation in IP-related markets.

November 13, 2015 | Permalink | Comments (0)

Telecommunications: Mergers and More, CPI Antitrust Chronicle Autumn 2015, Volume 11 Number 1

Competition authorities have been spending a lot of time on telecommunications, especially in the merger area, tackling such questions as: How to balance two key needs—ensuring enough players to maintain sufficient competition while allowing that innovation requires deep pockets? How to define the appropriate market? How much consideration to give local vs. regional needs? This issue first looks at how the U.S. and EU have tackled these, and other, questions and then finishes with economic insights on how to analyze this ever-changing industry.

Telecommunications: Mergers and More
  1. Jonathan Sallet, Nov 11, 2015

    The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews

      We looked at theory and we looked at facts and we arrived at a series of important conclusions about the nature of the marketplace and competition. Jonathan Sallet (U.S. Federal Communications Commission)

    • Warren Grimes, Nov 11, 2015

      The Ad Hoc Approach to Telecommunications Mergers: The Public Interest Compromised?

        Guidelines, perhaps jointly issued by the FCC and the Justice Department, could also lessen the propensity of government enforcers to compromise away the public’s strong interest in competition. Warren Grimes (Southwestern Law School)

      • Nikolaos Peristerakis, Lodewick Prompers, Mar Garcia, Nov 11, 2015

        The Commission’s Merger Enforcement in Mobile Mergers: Brave New World for Non-coordinated Effects?

          The Commission appears to have significantly lowered the intervention threshold for challenging mergers on the basis of non-coordinated effects well beyond what was originally anticipated back in 2004. Nikolaos Peristerakis, Lodewick Prompers, & Mar Garcia (Linklaters)

        • Pedro Callol, Nov 11, 2015

          Competition in the Spanish Telecommunications Sector: Mergers, Football Rights, and Other Regulatory Issues

            It remains to be seen whether this apparently radical shift in industrial policy from the European Commission will cast its shadow on national markets such as Spain and also influence decisions at the local level. Pedro Callol (Callol, Coca & Asociados)

          • Pranvera Kellezi, Nov 11, 2015

            Magic Numbers and Merger Control in the Telecommunications Sector

              The particularities of national markets call for more involvement of national competition authorities, and highlight the limits of the one-stop-shop merger control in Europe. Pranvera Këllezi (KËLLEZI LEGAL)

            • Aleksander Maziarz, Nov 11, 2015

              Services of General Economic Interest in the Telecommunications Sector

                This means that a SGEI cannot be provided at any cost and that competition limitations have to be proportionate. Aleksander Maziarz (Kozminski University)

              • David Evans, Nov 11, 2015

                The Role of Economic Analysis in the Comcast/Time Warner Cable Merger

                  There is much fodder in this case, including the analysis of two-sided platforms, monopoly bottlenecks, bargaining theory, vertical restraints, and the use of natural experiments to test hypotheses. David S. Evans (Global Economics Group)

                • Fernando Herrera-Gonzalez, Nov 11, 2015

                  Are “Free” Relevant Markets Actually Free?

                    But citizens deserve the same effectiveness of competition policy, regardless of whether they pay with money, with their time, or with their data. Fernando Herrera González (Telefonica, S.A.)

                  November 13, 2015 | Permalink | Comments (0)

                  How Do Antitrust Law Scholars Rate Among the Most Downloaded in SSRN?

                  Someone asked me yesterday why I don't post SSRN download counts anymore (or citation counts). These are imprecise measurements and there are lots of people whose written work or contributions to the field (mentoring of LLM and PhD students, avid readers/reviewers of other people's work) is under-appreciated by such counts.  Nevertheless, since someone asked, here is the list of most downloaded professors of the past year with at least one major antitrust paper in recent memory of the top 200 most cited in law.  At some point in December I will create the most cited based on Westlaw citations based on the last five years worth of citations.

                  3

                  Lemley, Mark A.

                   

                  11

                  Evans, David S.

                   

                  22

                  Hovenkamp, Herbert J.

                   

                  24

                  Wu, Tim

                   

                  25

                  Geradin, Damien

                   

                  34

                  Wils, Wouter P.

                   

                  64

                  Wright, Joshua D.

                   

                  74

                  Chen, James M.

                   

                  76

                  Yoo, Christopher S.

                   

                  85

                  Carrier, Michael A.

                   

                  91

                  Petit, Nicolas

                   

                  100

                  Sokol, D. D.

                   

                  111

                  Stucke, Maurice E.

                   

                  130

                  Feldman, Robin

                   

                  146

                  Contreras, Jorge L.

                   

                  152

                  Elhauge, Einer R.

                   

                   

                  November 13, 2015 | Permalink | Comments (0)

                  Price Competition in Product Variety Networks

                  Philip Ushchev, National Research University Higher School of Economics (Moscow) and Yves Zenou, Stockholm University; Research Institute of Industrial Economics (IUI); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR) examine Price Competition in Product Variety Networks.

                  ABSTRACT: We develop a product-differentiated model where the product space is a network defined as a set of varieties (nodes) linked by their degree of substituabilities (edges). In this network, we also locate consumers so that the location of each consumer (node) corresponds to her "ideal" variety. We show that there exists a unique Nash equilibrium in the price game among firms. Equilibrium prices are determined by firms' weighted Bonacich centralities and the average willingness to pay across consumers. They both hinge on the network structure of the firm-product space. We also investigate how local product differentiation and the spatial discount factor affect the equilibrium prices. We show that these effects non-trivially depend on the network structure. In particular, we find that, in a star-shaped network, the firm located in the star node does not always enjoy higher monopoly power than the peripheral firms.

                  November 13, 2015 | Permalink | Comments (0)

                  Equity Prices and Cartel Activity

                  Dan Richards, Tufts University - Department of Economics, Heng Yuan, Tufts University, and Marcelo Bianconi, Tufts University - Department of Economics have an important new finance paper on Equity Prices and Cartel Activity.

                  ABSTRACT: We use a new data set to examine the equity price impact of announced cartel investigations. Unlike prior research, we estimate normal returns using the Fama-French (1993) three-factor model. We find that cartel investigation announcements have a long-lasting negative share-price effect of two percent, but one near zero for firms receiving leniency. The two percent loss is notably less than the estimated present value of profits lost due to cartel termination, implying that cartel participation is profitable. However, the results also suggest that the no-cheating stability condition for cartels may often not be satisfied, especially given the incentive to seek leniency.

                  November 13, 2015 | Permalink | Comments (0)

                  Thursday, November 12, 2015

                  Antitrust Developments in Food and Pharma

                  John M. Connor, Purdue University; American Antitrust Institute (AAI) describes Antitrust Developments in Food and Pharma.

                  ABSTRACT: Closing the loopholes of downstream application of the Capper-Volstead exemption in the food system and pay for delay in pharmaceuticals is an important advance in US and EU antitrust norms. First, pay-for-delay conduct has been harmful for pharmaceuticals customers. After ten years of litigation that divided circuit courts, the Supreme Court decreed that payments to generic drug sellers by the patent holders of the brand equivalent that are aimed at delaying entry are illegal, but did so under a structured rule-of-reason approach. EU competition authorities treat such payments as per se civil infractions. Second, until court decisions made in 2011–2014, the reach of the Capper-Volstead Act and the legality of pay-for-delay conduct in the drug industry were in doubt. In 2015, most federal circuits now clearly agree that, at a minimum, acreage restrictions by marketing cooperatives are per se illegal. Moreover, any manipulation by farmers’ cooperatives of upstream supply is also likely to be illegal.

                  November 12, 2015 | Permalink | Comments (0)

                  The Competitive Effects of Parity Clauses on Online Commerce

                  Ariel Ezrachi, Oxford analyzes The Competitive Effects of Parity Clauses on Online Commerce.

                  ABSTRACT: Parity clauses, also known as most-favoured-nation clauses, are designed to address the hold-up problem in vertical relations and facilitate investment and efficiencies by the downstream platform. However, when designed too broadly, they have the potential of undermining the dynamics of competition and reducing consumer welfare. This paper explores the welfare effects of parity clauses and reflects on the level of intervention they may call for. It reviews the possible theories of harm associated with parity clauses and draws a dividing line between the effects generated by narrow and wide parity.

                  November 12, 2015 | Permalink | Comments (0)

                  Competition in Motor Racing: A New Formula One Antitrust Case?

                  Oliver Budzinski, Ilmenau University of Technology asks Competition in Motor Racing: A New Formula One Antitrust Case?

                  ABSTRACT: The European Commission appears to be considering to open a new antitrust case against the owners of the FIA Formula One World Championship (F1), which by some accounts represents the second biggest sports business in the world. Specifically, two interrelated concerns are raised: (i) a violation of a former settlement between F1 organizers and the EC’s competition division by re-mixing regulatory authority and commercial rights through the Fédération Internationale l’Automobile (FIA) and (ii) an unfair treatment of smaller teams by excluding them from regulatory decision procedures and by a grossly uneven distribution of revenues among teams. These two concerns, however, do not only point to a violation of the former settlement, they also reveal a major flaw in the 2001 agreement. Instead of restoring competition, the power may just have been leveraged from the FIA to the commercial rights holder.

                  November 12, 2015 | Permalink | Comments (0)

                  Quality provision and reporting when health care services are multi-dimensional and quality signals imperfect

                  Katharina Huesmann (University of Cologne,Germany) and  Wanda Mimra (ETH Zurich, Switzerland) have a paper on Quality provision and reporting when health care services are multi-dimensional and quality signals imperfect.

                  ABSTRACT: We model competition for a multi-attribute health service where patients observe attribute quality imprecisely before deciding on a provider. High quality in one attribute, e.g. medical quality, is more important for ex post utility than high quality in the other attribute. Providers can shift resources to increase expected quality in some attribute. Patients rationally focus on attributes depending on signal precision and beliefs about the providers’ resource allocations. When signal precision is such that patients focus on the less important attribute, any Perfect Bayesian Nash Equilibrium is inefficient. Increasing signal precision can reduce welfare, as the positive effect of better provider selection is overcompensated by the negative effect that a shift in patient focusing has on provider quality choice. We discuss the providers’ strategic reporting incentives and reporting policies. Under optimal reporting, signals about the important attribute! are always published. However, banning reporting on less important attributes might be necessary.

                  November 12, 2015 | Permalink | Comments (0)