Tuesday, February 23, 2016

Buyer Power from Joint Listing Decision

Stephane Caprice, University of Toulouse 1 - Toulouse School of Economics (TSE) and Rey Patrick, Toulouse School of Economics; Centre for Economic Policy Research (CEPR) explore Buyer Power from Joint Listing Decision.

ABSTRACT: We consider a model of vertically related markets, in which an upstream firm faces a competitive fringe of less efficient suppliers and negotiates with customers that compete in a downstream market. We allow downstream firms to form a buyer group which selects suppliers on behalf of its members. We show that transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member, which in turn enhances the group members’ bargaining position at the expense of the upstream firm. We also discuss the implication for upstream investment incentives.

February 23, 2016 | Permalink | Comments (0)

Stop Chug-a-Lug-a-Lugin 5 Miles an Hour on Your International Harvester: How Modern Economics Brings the FTC's Unfairness Analysis Up to Speed with Digital Platforms

Joshua D. Wright, George Mason University School of Law and John M. Yun, Federal Trade Commission - Bureau of Economics have written on Stop Chug-a-Lug-a-Lugin 5 Miles an Hour on Your International Harvester: How Modern Economics Brings the FTC's Unfairness Analysis Up to Speed with Digital Platforms.

ABSTRACT: In this Essay, the authors argue that in cases involving digital platforms, the Federal Trade Commission — when alleging unfair acts or practices in violation of section 5 of the Federal Trade Commission Act — must adopt the insights from platform economics and apply them within the legal framework of section 5(n), as informed by the Commission’s Policy Statement on Unfairness. After outlining the development and rise of digital platforms and discussing of the importance of digital platforms to consumers and the marketplace, this Essay sets forth a brief overview of the basic economics of multisided platform markets and points out the key differences between these markets and traditional markets as well as their corresponding implications for consumer welfare. The Essay then describes the evolution of the Commission’s unfairness authority in consumer protection cases — including the statutory requirement that the agency conduct cost-benefit analysis — and examines how the Commission has performed such cost-benefit analyses in recent cases. The Essay critiques the Commission’s decision in the recent Apple case as an example of the potential pitfalls for consumer protection in multisided markets when the Commission conducts a cost-benefit analysis without arming itself with the basic economic insights from platform economics. Untethered from the appropriate economic framework, the Commission’s logic allows it to condemn product design decisions whenever it can imagine an alternative design it believes survives a cost-benefit test. As the number of consumer protection cases involving digital platforms inevitably rise, the authors recommend that the Commission instead apply insights from platform economics within the well-established legal framework of section 5(n) and the FTC Policy Statement on Unfairness.

February 23, 2016 | Permalink | Comments (0)

Monday, February 22, 2016

Competition Law for a Post-Scarcity World

Salil K. Mehra, Temple University - James E. Beasley School of Law has an interesting paper on Competition Law for a Post-Scarcity World.

ABSTRACT: Writers, economists and IP scholars have hailed signs of an incipient shift to a post-scarcity world. According to these accounts, this change is driven by rapid decreases not only in marginal cost, but also in the fixed or first unit costs of production. Whether these changes become economy-wide, or remain confined to a subset of industries, they have dramatic implications for competition law and policy. This Article is the first to address these implications. In particular, because of the incentive for incumbent firms to engage in “anti-disruption” – as examples such as the Apple/e-books antitrust case and the regulatory responses to Uber show – competition law must play an active role in assisting the transition to a post-scarcity world. How to play this role will not be simple, but the potential social welfare gains of this possible societal shift make it impossible to ignore.

February 22, 2016 | Permalink | Comments (0)

Merging Innovation into Antitrust Agency Enforcement of the Clayton Act

Richard Gilbert, University of California, Berkeley and Hillary Greene, University of Connecticut School of Law examine Merging Innovation into Antitrust Agency Enforcement of the Clayton Act.

ABSTRACT: The treatment of innovation within the merger context by U.S. Antitrust Agencies continues to evolve, with regard to both general statements of enforcement policy and specific enforcement decisions. The respective merger guidelines issued by the Department of Justice and the Federal Trade Commission did not consider potential impacts on innovation or research and development until 1982, and then only in passing. By contrast, their joint 2010 Horizontal Merger Guidelines devote an entire section to innovation issues. This Essay examines both the frequency and manner with which the Antitrust Agencies invoke innovation-based concerns within their respective merger challenges from 2004-2014. It finds that both the DOJ and FTC allege adverse innovation effects in a very large fraction of their respective merger challenges in high-R&D-intensity industries. After exploring possible explanations, the Essay recommends that the Agencies describe their innovation concerns with greater specificity when merger challenges allege harm to innovation.

February 22, 2016 | Permalink | Comments (0)

Does Competition Solve the Hold‐Up Problem?

Leonardo Felli, London School of Economics - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR) Kevin W.S. Roberts, Nuffield College, Oxford ask Does Competition Solve the Hold‐Up Problem?

ABSTRACT: In an environment in which heterogeneous buyers and sellers undertake ex ante investments, the presence of market competition for matches provides incentives for investment but may leave inefficiencies, namely hold‐up and coordination problems. This paper shows, using an explicitly non‐cooperative model, that when matching is assortative and investments precede market competition, buyers' investments are constrained efficient while sellers marginally underinvest with respect to what would be constrained efficient. However, the overall extent of this inefficiency may be large. Multiple equilibria may arise; one equilibrium is characterized by efficient matches, but there can be additional equilibria with coordination failures.

February 22, 2016 | Permalink | Comments (0)

Multiproduct Pricing Made Simple

Mark Armstrong (Oxford) and John Vickers (Oxford) explore Multiproduct Pricing Made Simple.

ABSTRACT: We study pricing by multiproduct firms in the context of unregulated monopoly, regulated monopoly and Cournot oligopoly. Using the concept of consumer surplus as a function of quantities (rather than prices), we present simple formulas for optimal prices and show that Cournot equilibrium exists and corresponds to a Ramsey optimum. We then present a tractable class of demand systems that involve a generalized form of homothetic preferences. As well as standard homothetic preferences, this class includes linear and logit demand. Within the class, profit-maximizing quantities are proportional to efficient quantities. We discuss cost-passthrough, including cases where optimal prices do not depend on other products' costs. Finally, we discuss optimal monopoly regulation when the firm has private information about its vector of marginal costs, and show that if the probability distribution over costs satisfies an independence property, then optimal regulation le! aves relative price decisions to the firm.

February 22, 2016 | Permalink | Comments (0)

Saturday, February 20, 2016

University of Florida Law students win George Mason Antitrust Institute Moot Court Competition

What is better than winning second place last year?  Wining first place this year!  Congrats to my spectacular University of Florida Levin College of Law school students Andrew Fuller, Kevin Paul, and Samantha Vloedman for their success in winning the George Mason Antitrust Institute Moot Court competition held at the DC Circuit.  Special thanks go to all of our practice round judges who gave their time to improve the quality of the students' analytical reasoning and trial abilities.  I could not be more proud of the students.  Also, we beat the team from NYU in the final round.

February 20, 2016 | Permalink | Comments (0)

Friday, February 19, 2016

Brent Snyder Delivers Remarks at the Yale Global Antitrust Enforcement Conference - Speech on DOJ website

Deputy Assistant Attorney General Brent Snyder Delivers Remarks at the Yale Global Antitrust Enforcement Conference, Friday, February 19, 2016

February 19, 2016 | Permalink | Comments (0)

Stop Chug-a-Lug-a-Lugin 5 Miles an Hour on Your International Harvester: How Modern Economics Brings the FTC's Unfairness Analysis Up to Speed with Digital Platforms

Joshua D. Wright, George Mason University School of Law and John M. Yun, Federal Trade Commission - Bureau of Economics explore Stop Chug-a-Lug-a-Lugin 5 Miles an Hour on Your International Harvester: How Modern Economics Brings the FTC's Unfairness Analysis Up to Speed with Digital Platforms.

ABSTRACT: In this Essay, the authors argue that in cases involving digital platforms, the Federal Trade Commission — when alleging unfair acts or practices in violation of section 5 of the Federal Trade Commission Act — must adopt the insights from platform economics and apply them within the legal framework of section 5(n), as informed by the Commission’s Policy Statement on Unfairness. After outlining the development and rise of digital platforms and discussing of the importance of digital platforms to consumers and the marketplace, this Essay sets forth a brief overview of the basic economics of multisided platform markets and points out the key differences between these markets and traditional markets as well as their corresponding implications for consumer welfare. The Essay then describes the evolution of the Commission’s unfairness authority in consumer protection cases — including the statutory requirement that the agency conduct cost-benefit analysis — and examines how the Commission has performed such cost-benefit analyses in recent cases. The Essay critiques the Commission’s decision in the recent Apple case as an example of the potential pitfalls for consumer protection in multisided markets when the Commission conducts a cost-benefit analysis without arming itself with the basic economic insights from platform economics. Untethered from the appropriate economic framework, the Commission’s logic allows it to condemn product design decisions whenever it can imagine an alternative design it believes survives a cost-benefit test. As the number of consumer protection cases involving digital platforms inevitably rise, the authors recommend that the Commission instead apply insights from platform economics within the well-established legal framework of section 5(n) and the FTC Policy Statement on Unfairness.

February 19, 2016 | Permalink | Comments (0)

Resale Price Maintenance after Leegin: The Curious Case of Contact Lenses

Gregory T. Gundlach, University of North Florida & American Antitrust Institute and Riley T. Krotz, University of North Florida - Department of Management, Marketing, and Logistics discuss Resale Price Maintenance after Leegin: The Curious Case of Contact Lenses.

ABSTRACT: Resale price maintenance (RPM) is a controversial pricing practice for managing retail distribution channels. In Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007), the Supreme Court abolished a nearly century-old per se rule against RPM established in Dr. Miles Medicine Co. v. John D. Park & Sons (1911). Henceforth, RPM will be judged under federal antitrust law by the rule of reason – a less restrictive standard that requires courts to weigh all the relevant circumstances of a case to assess whether a practice unreasonably restrains trade. Despite that the decision in Leegin leaves many unanswered questions, the decision has prompted an increasing number of consumer goods manufacturers to adopt RPM in the management of their retailer relationships. Recently, the widespread use of restrictive pricing practices in the retail distribution of contact lenses have drawn attention and elevated debate over the practice. Pending lawsuits in the industry have been identified as an important “test case” for antitrust’s new vertical pricing regime following Leegin. Drawing upon relevant literatures from law, economics, and business, together with publically available information, important questions in the debate and related cases that share significance for scholarship and practice are elaborated upon and examined. This examination reveals insights helpful to understanding the antitrust implications of contact lens manufacturers’ pricing practices and for advancing academic knowledge, marketing practice, and competition policy involving RPM.

February 19, 2016 | Permalink | Comments (0)

Buying Competition: Developing Competition Regimes Through a WTO-Compliant Generalised System of Preferences

Bruce Wardhaugh, University of Manchester School of Law is Buying Competition: Developing Competition Regimes Through a WTO-Compliant Generalised System of Preferences.

ABSTRACT: There is a well-recognised link among trade, trade liberalisation, an effective competition regime and development. A common view to the promotion of development of Least Developed Countries is to assist their economic growth through trade-facilitating measures. The trade liberalisation regime of the WTO is a prime example of this. An effective competition regime can also help a country’s development. However, the implementation of a competition regime is costly, and there are significant opportunity costs associated with expenditure on such a regime: the choice may be between competition and public health or education.

This article considers a trade related means which can assist developing countries with the financial burdens of a competition regime. The article’s insight is the use of a generalised system of preferences (GSP) to extend tariff concessions to developing countries in exchange for their undertaking to develop such a competition regimes. Under certain circumstances, WTO law permits GSP regimes as exceptions to the Most Favoured Nations cornerstone of the GATT. The first part of the article considers the links among trade, trade liberalisation, development and the need for an effective competition regime to ensure that gains from trade are appropriately distributed in a society. The second part considers the conditions under which a GSP system is legal under WTO law. The third part demonstrates how a WTO-legal, competition-focused GSP system can be developed. This article does not advocate for a particular regime. Rather the article noted that designing a regime to the specific circumstances of a beneficiary country is not only a requirement for WTO-legality, but is also prudent given the need for an effective regime to garner popular acceptance.

February 19, 2016 | Permalink | Comments (0)

Thursday, February 18, 2016

The Rise of Anti-Cartel Enforcement in Africa, Asia, and Latin America

John M. Connor, Purdue University; American Antitrust Institute (AAI) tracks The Rise of Anti-Cartel Enforcement in Africa, Asia, and Latin America.

ABSTRACT: This paper examines the rise of cartel enforcement in Europe, North America, and the Rest of the World (ROW) over the past 25 years in greater detail and with more indicators than previous publications. I find that in the past decade the ROW antitrust authorities have made extraordinarily rapid progress in punishing international price-fixing.

The growing share of global fines imposed on cartels by authorities in Africa, Asia, and Latin America (the “ROW”) shows no signs of slowing down. Japan, and most of the Asian Tigers seem increasingly able and willing to impose record fines on cartels. In Latin America, Brazil, Mexico, and Chile are in the vanguard of the anti-cartel bandwagon. Except for South Africa, Israel, and a handful of other small authorities, African and West Asian nations by and large have failed to make the important leap into dealing with international cartels. In the past 15 years, the DOJ has accounted for less than 20% of cartel fines. Moreover, despite spectacular cartel fines, the EC itself has been supplanted by the EU’s NCAs and the ROW authorities.

Building in part on legal innovations made by the DOJ and EC, many of these newer authorities are close to matching the effectiveness of the two crucibles of anti-cartel enforcement. In a sense, in the past decade, the last geographic piece of the cartel-enforcement puzzle is now in place. With cartel detection and penalization very largely globalized now, deterrence of global cartels has marginally improved.

February 18, 2016 | Permalink | Comments (0)

Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework

Yannis Katsoulacos, Athens University of Economics and Business, Evgenia Motchenkova, VU University Amsterdam - Department of Economics; TILEC, David Ulph, University of St. Andrews - School of Economics and Finance are Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework.

ABSTRACT: This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalising cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analysed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioural Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions.

February 18, 2016 | Permalink | Comments (0)

Implementing Effective Competition Law in the Pharmaceutical Industry in Mexico

Carlos Mena-Labarthe, Government of Mexico - Comision Federal de Competencia; Instituto Tecnologico Autónomo de Mexico (ITAM) discusses Implementing Effective Competition Law in the Pharmaceutical Industry in Mexico.

ABSTRACT: This paper analyses how governments can introduce more competition in the pharmaceutical sector.

Considering it involves harmonizing issues such as incentives to innovate and perform research and development (R&D), Intellectual Property (IP) rights, healthcare policy and public budget concerns, the task of analysing competition in this industry is difficult for academic purposes and even more for public policy.

During the past years, competition law enforcement has proven to be an essential tool to increase access to pharmaceutical products and technologies around the world. Its importance arises especially from the fact that it allows authorities to impose broader remedies than IP law does.

Additionally, the paper shows how advocacy efforts can be very successful in removing regulatory barriers to entry that may be impeding new entrants and market efficiencies. Consumers and the industry as a whole can benefit from more competition in these markets but it is not easy to strike a correct balance.

The paper analyses the case of Mexico in relation to many other jurisdictions around the world, especially developing countries, to understand the main issues related to competition policy in this industry.

February 18, 2016 | Permalink | Comments (0)

Supplier Competition and Cost Improvement

Cuihong Li, University of Connecticut and Zhixi Wan, University of Oregon - Department of Operations and Business Analytics examine Supplier Competition and Cost Improvement.

ABSTRACT: Buyers have two levers to enhance their supply base performance: fostering supplier competition and inducing suppliers to improve. The competition-improvement relation between the two levers has important implications for supply base design. We study a buyer facing two potential suppliers that can exert cost-reduction efforts, examining the interplay of supplier competition and supplier cost improvement under various information structures (i.e., the supplier effort is observable or unobservable) and commitment capabilities (i.e., the buyer may not commit, or may commit to a full or partial procurement mechanism, before suppliers exert efforts). We find that the two identical suppliers may choose unequal efforts, resulting in an asymmetric equilibrium outcome that enhances the performance of dual sourcing. Moreover, the competition-improvement relation depends on the effort observability. Whereas supplier competition always leads to lower improvement effort when the effort is unobservable, it may induce higher effort when the effort is observable. Thus, a tradeoff between supplier competition and supplier effort is not always necessary in supply base design. Comparing the observable- and unobservable-effort cases, we demonstrate a detrimental effect of supplier effort observability on the buyer profits. Finally, we show that more commitment expands the presence of asymmetric equilibria, enhancing dual sourcing, and the partial commitment strengthens the positive effect of competition on observable efforts while maintaining the detrimental effect of effort observability.

February 18, 2016 | Permalink | Comments (0)

Wednesday, February 17, 2016

Targeted Transparency Control of Competitively Significant Links: Heading Towards Regulatory Overkill?

Catalin S. Rusu, International and European Law Department, Radboud University asks Targeted Transparency Control of Competitively Significant Links: Heading Towards Regulatory Overkill?

ABSTRACT: The minority shareholdings problem in the EU has been headlining the Commission’s agenda for some time now. The matter of an enforcement/regulatory gap in handling minority stakes transactions at EU level proves to be disconcerting not only for competition law enforcers, but also for the market players that are likely to deal with the system. The 2014 White Paper on more effective EU merger control has taken the debate to the point of putting forward a clearer method of tackling minority shareholdings: a targeted transparency control system of competitively significant links. While this development is to be appreciated, questions relating this proposed system’s proportionality may be raised. Going beyond the discussion of whether antitrust intervention is warranted at all for minority shareholdings, this contribution highlights some elements of the targeted transparency control system of competitively significant links, which may allow for proportionality concerns to creep in. Specifically, the contribution addresses the problems that may result from relying on the transaction parties’ self-assessment, the burdens embedded in the short information notice, the costs and delays brought about by the waiting period, and the risks of ex-post intervention. The conclusion is drawn that proportionality is indeed a concern difficult to settle. Yet, the control system’s proportionality is key to its correct functioning, and at the end of the day, to the attractiveness of the EU Internal Market’s legal ambit. In this respect, some of the White Paper’s proposals seem to require more thought on the proportionality end.

 

February 17, 2016 | Permalink | Comments (0)

Justifications and Limitations for Adopting Divergent Competition Policy and Law in Emerging Economies

Andy C.M. Chen, Chung Yuan Christian University has written on Justifications and Limitations for Adopting Divergent Competition Policy and Law in Emerging Economies.

ABSTRACT: Various approaches have been suggested in the literature for incorporating developmental variances into the design of competition policy for emerging economies. For example, unlike developed economies, emerging economies must prioritize the industries for investigations and continue to emphasize competition advocacy to activate popular interest in competition issues. We address this topic and elaborate on the likely responses to the challenges of accounting for developmental variances when constructing competition policies and rules tailored for the needs of emerging economies. We categorize the features that might prompt emerging economies to follow regulatory paths distinct from those of developed economies into economic (e.g., a smaller market scale) and noneconomic (e.g., corruption or cronyism) features. Based on this categorization, we show how the study of developmental variances can contribute to the formulation of competition policy that meets the needs of emerging economies. Furthermore, unique economic and noneconomic features could also influence how specific reviewing standards are developed. For example, the lack of sufficient enforcement expertise and resources in emerging economies could cause enforcement agencies to favor the per se rule over the rule of reason. We conclude this paper by discussing certain limitations for the preliminary findings and by proposing the likely implications for the studies of this topic.

 

 

February 17, 2016 | Permalink | Comments (0)

Is Full Transatlantic Competition Law Convergence Realistic, or Even Desirable?

Kent Bernard, Fordham University School of Law asks Is Full Transatlantic Competition Law Convergence Realistic, or Even Desirable?

ABSTRACT: Commentators tend to assume that competition law convergence between the United States and the European Union is both attainable and desirable. This article explores whether that assumption is valid, and what it would entail. The conclusion is that in some areas competition law reflects deeper social differences between societies and that competition law convergence is not only unrealistic, it may even be undesirable.

February 17, 2016 | Permalink | Comments (0)

16th ANNUAL LOYOLA ANTITRUST COLLOQUIUM April 15, 2016

16th ANNUAL LOYOLA ANTITRUST COLLOQUIUM

April 15, 2016

INSTITUTE FOR CONSUMER ANTITRUST STUDIES
LOYOLA UNIVERSITY CHICAGO
SCHOOL OF LAW

 

8:45 AM

Continental Breakfast and Registration
Loyola University Chicago School of Law
10th Floor Power Rogers & Smith Ceremonial Courtroom
25 E. Pearson
Chicago, IL. 60611

9:10 AM

Welcome Professor Spencer Weber Waller
Professor and Director
Institute for Consumer Antitrust Studies
Loyola University Chicago School of Law

9:15 AM

Maurice Stucke, University of Tennessee College of Law
Allen Grunes, Konkurrenz Group

Big Data and Competition Policy

Commentators:
Douglas C. Ross, Tremaine Davis & Wright, Seattle WA
TBA

10:30 AM

Coffee Break

10:45 AM

Ariel Ezrachi
Pembroke College, University of Oxford

Sponge

Commentators
Avishalom Tor, Notre Dame Law School
Steven Cernak, Schiff Hardin LLP, Ann Arbor, MI

12:00 PM

Lunch

Kasbeer Hall
15th Floor
25 E. Pearson

12:30 PM

Lunch Address

Commissioner Terrell McSweeny
United States Federal Trade Commission

1:30 PM

David Gerber
IIT/Chicago-Kent College of Law

A Global Guide to Antitrust: Why? What? For Whom?

Open Discussion (A Colloquium First!)

2:45 PM

Ice Cream Sundae Break

3:30 PM

Matthew Jennejohn
J. Reuben Clark Law School, Brigham Young University

Informal Networks and Antitrust Enforcement: Preliminary Evidence from US Merger Control.

Commentators
Michael Sennett, Jones Day, Chicago, IL
Christine Chabot, Loyola University Chicago School of Law

Readers can request an invitation on a space available basis at antitrust@luc.edu.

February 17, 2016 | Permalink | Comments (0)

University of Melbourne 2016 Annual Baxt Lecture

2016 Annual Baxt Lecture

Dear Colleagues,  It is with pleasure that we invite you to attend our seventh Annual Baxt Lecture, to be held on Thursday 4th August this year. Our eminent guest speaker will be Professor Eleanor Fox, the Walter J Derenberg Professor of Trade Regulation at New York University. Professor Fox will address the topic of "The Regional Imperative for Competition Law and Policy: The Promise and Limits of Regional Agreements". A pre-lecture reception will occur at 5.00pm - 6.00pm, followed by the lecture at 6.00pm - 7.00pm. The Annual Baxt Lecture is a significant event on the Competition Law and Economic Network's calender. It has proven to be very popular and registrations are essential. To learn more about Professor Fox's discussion topic, and to register please go to our website.

February 17, 2016 | Permalink | Comments (0)