Friday, March 25, 2016
Overlapping Financial Investor Ownership, Market Power, and Antitrust Enforcement: My Qualified Agreement with Professor Elhauge
Jon Baker (American University) has a new paper Overlapping Financial Investor Ownership, Market Power, and Antitrust Enforcement: My Qualified Agreement with Professor Elhauge.
Mariateresa Maggiolino, Bocconi University - Department of Legal Studies; Ask Research Center asks Plausibility, Facts and Economics in Antitrust Law.
ABSTRACT: According to EU competition law, the existence of an anticompetitive agreement can be inferred from a number of coincidences and indicia only in the absence of another plausible explanation of the facts at stake. According to U.S. federal law (antitrust law included), only a complaint that states a plausible claim for relief can survive a motion to dismiss at the pleading stage. What is plausible, however? After explaining the relationship between facts and evidence law, this chapter analyses the general meaning of the notion of plausibility, discusses the degree of discretion that it introduces, how it affects the justifications that judges and fact-finders make for their choices, and remarks on how this concept relates to substantial accuracy. On the other hand, the chapter acknowledges that antitrust law, by relating our understanding of what is plausible to economic models, debunks these concerns and raises another striking issue. Since economics is rooted in various axioms and value-choices, the link that antitrust law establishes among plausibility, standards of proof and economics grants to these axioms and value-choices the possibility of affecting the antitrust decisions about facts, although these decisions (as all factual decisions) should amount to pure descriptions of the concrete facts disputed at trial or during the administrative procedure.
Pierluigi Congedo, European Law Institute - Universite' Libre de Bruxelles; LUISS Guido Carli University - Faculty of Law; Dickson Poon School of Law - King's College London describes The 'Regulatory Authority Dixit' Defence in European Competition Law Enforcement.
ABSTRACT: The European Commission (EC) and the European Courts have being reaffirming in the Deutsche Telekom and Telefónica cases that guide-prices established by sector regulators upon electronic communications incumbents cannot per se exclude that conducts with anticompetitive foreclosure effects, such as margin squeeze, undertaken within the boundaries of those pre-established prices, can be considered abusive under Article 102 TFEU.
The paper aims at showing that the reasoning put forward by the EC and the Courts not only dismantles the defensive reasoning put forward by the incumbents before the EC and on appeal before the Courts but actually reaffirms the centrality of the enforcement activity of the EC. The paper examines the reasoning behind the “regulatory authority’s instructions defence” – the argument of the incumbents stating that their actions were justified because they had set their wholesale access prices and retail prices in line with the guidelines imposed by the sectorial regulators. Recalled in this context were also the principles of proportionality, subsidiarity and fair cooperation between the EC and individual Member States. The affirmation of the “heliocentric” doctrine that puts the EC at the hearth of competition law enforcement vis á vis national regulators and domestic legislation (provided decisions of the regulatory authorities can be considered secondary law sources) should take into consideration the important precedent of Consorzio Industrie Fiammiferi. The latter affirms that competition authorities can automatically put aside legislation that goes against Article 101 TFEU. However, they cannot impose pecuniary fines when certain behaviours are imposed by national legislation (while they can impose fines if those behaviours were suggested or facilitated by national legislation).
Thursday, March 24, 2016
Gianluca Faella, Cleary Gottlieb Steen & Hamilton; University of Siena; University of Naples Federico II discusses The Efficient Abuse: Reflections on the EU, Italian and UK Experience.
ABSTRACT: The role of efficiencies in the assessment of abuse cases is far from satisfactory. The distinction between the finding of anticompetitive foreclosure and the subsequent assessment of possible efficiencies is in many cases artificial. Furthermore, the strict conditions identified by the Commission and the EU Courts do not leave much scope for efficiency arguments in abuse cases. The efficiency defence is more a theoretical possibility than a real option. The Italian and UK experiences seem to confirm that efficiencies may play a real role, and are normally analysed, only within an integrated assessment of the effects of the practice. Unilateral conduct that increases efficiency and benefits consumers should be considered, in principle, a legitimate form of competition on the merits and not an anticompetitive practice, even though it may have some negative effects on competitors, just like any other legitimate competitive initiative does. Ultimately, there is no efficient abuse. From this point of view, the Intel and Post Danmark II rulings are worrying. Apparently, they have reinforced the role of efficiencies in abuse cases. In fact, they have restricted the scope for a more economic and effects-based analysis of rebate systems. Reliance on the efficiency defence, as currently structured under EU law, cannot reduce the risk of erroneous condemnations inherent in a broad and form-based interpretation of the concept of abuse.
Jun Zhou, Zhejiang Wanli University; Tilburg Law and Economics Center (TILEC); Bruegel describes The Dynamics of Leniency Application and Cartel Enforcement Spillovers.
ABSTRACT: We study the timing of leniency applications using a novel application of multi-spell discrete-time survival analysis for a sample of cartels that were prosecuted by the European Commission (EC) between 1996 and 2014. The start of an EC investigation does not affect the rate at which conspirators apply for leniency in the market investigated but increases the rate of application in separate markets in which a conspirator in the investigated market also engaged in collusion. Our results shed light on enforcement efforts against cartels and other forms of conspiracy.
Vadim Marmer, University of British Columbia (UBC) - Department of Economics, Artyom A. Shneyerov, University of British Columbia (UBC) - Department of Economics, and Uma Kaplan, Concordia University, Quebec are Identifying Collusion in English Auctions.
ABSTRACT: We develop a fully nonparametric identification framework and a test of collusion in ascending bid auctions. Assuming efficient collusion, we show that the underlying distributions of values can be identified despite collusive behaviour when there is at least one bidder outside the cartel. We propose a nonparametric estimation procedure for the distributions of values and a bootstrap test of the null hypothesis of competitive behaviour against the alternative of collusion. Our framework allows for asymmetric bidders, and the test can be performed on individual bidders. The test is applied to the Guaranteed Investment Certificate auctions conducted by US municipalities over the Internet. Despite the fact that there have been allegations of collusion in this market, our test does not detect deviations from competition. A plausible explanation of this finding is that the Internet auction design involves very limited information disclosure.
Jose Azar, Charles River Associates (CRA), Sahil Raina, University of Michigan, Ross School of Business, Martin C. Schmalz, University of Michigan, Stephen M. Ross School of Business examine Ultimate Ownership and Bank Competition.
ABSTRACT: We document a secular increase of deposit account maintenance fees and fee thresholds with a new branch-level dataset, as well as substantial cross-sectional variation in these prices and in deposit rate spreads. We then examine whether variation in bank concentration helps explain the variation in prices. The standard measure of concentration, the HHI, is not correlated with any of the outcome variables. A generalized HHI (GHHI) that captures both common ownership (the degree to which banks are commonly owned by the same investors) and cross-ownership (the extent to which banks own shares in each other) is strongly correlated with higher maintenance fees, fee thresholds, and deposit rate spreads. We use the growth of index funds as a source of variation to suggest a causal link from GHHI to higher prices for banking products.
Ben Van Rompuy University of Amsterdam - T.M.C. Asser Institute, Faculty of Law; Free University of Brussels (VUB) - iMinds-SMIT Oskar Van Maren T.M.C. Asser Instituut ask EU Control of State Aid to Professional Sport: Why Now?
ABSTRACT: In the aftermath of the Bosman judgment of the European Court of Justice (1995), the application of the EU free movement and antitrust rules to the sports sector rapidly intensified and deepened. Until very recently, however, the application of the EU State aid rules remained an anomaly in the story of ‘European sports law’.
This paper aims to explain why the public financing of sports infrastructure and professional sports clubs only in recent years started to attract State aid scrutiny.
Considering the general policy dynamics of European State aid control, it is argued that the late appearance of enforcement efforts is not as remarkable as it may appear. The extension of the reach of State aid control to new sectors or new forms of aid has typically been the result of external constraints on the European Commission’s independent agenda-setting abilities. In the case of sport, it was primarily the case law of the EU courts that triggered the sudden surge in formal investigations and decisional practice
Wednesday, March 23, 2016
Friday July 1st – Sunday July 3rd, 2016
I invite you to submit your papers to the 11th International Conference on Advances in the Analysis of Competition Policy and Regulation (CRESSE) that will take place in the island of Rhodes (GREECE), 1st – 3rd of July 2016 at the Venue AMATHUS BEACH HOTEL.
The CRESSE Scientific Committee consists of: Prof. Joseph Harrington (Business Economics and Public Policy Department, The Wharton School, University of Pennsylvania), Prof. Yannis Katsoulacos (Athens University of Economics and Business), Dr. Pierre Régibeau (Charles River Associates), Prof. Patrick Rey (University of Toulouse) Prof. Thomas Ross (Sauder School of Business, University of British Columbia) and Prof. David Ulph (University of St. Andrews).
CRESSE 2016 Keynote Lectures: Conference Competition Policy Keynote Lecture by Prof. Aviv Nevo, Northwestern University JJ Laffont Keynote Lecture by Prof. William Rogerson, Northwestern University
Invited Speakers of the CRESSE 2016 Conference will include: Prof. Gregory Crawford (University of Zurich), Μr. John Davies (Head of the Competition Division, OECD), Prof. William Kovacic (Global Competition Professor of Law and Policy; Professor of Law; Director, Competition Law Center, The George Washington University), Prof. Daniel Sokol (University of Florida Levin College of Law), Prof. Giancarlo Spagnolo (SITE, Stockholm School of Economics), Prof. Gregory Werden (Senior Economic Counsel, Antitrust Division, U.S. Department of Justice) and Prof. Lawrence White (Leonard N. Stern School of Business). Other Confirmed speakers / participants include: Prof. Marcel Boyer, Dr. Cristina Caffara, Prof. Amelia Fletcher, Prof. Joe Harrington, Prof. Frederic Jenny, Prof. Bruno Jullien, Prof. Patrick Legros, Dr. Frank Maier-Rigaud, Prof. Philip Marsden, Prof. Juan-Pablo Montero, Dr. Jorge Padilla, Prof. Martin Peitz, Prof. Patrick Rey, Prof. Tom Ross, Prof. Maarten Pieter Schinkel, Dr. Cristiane Alkmin Junqueira Schmidt, Prof. Ulrich Schwalbe, Prof. Jarig van Sinderen, Prof. Yossi Spiegel and Prof. Frank Verboven. Topics: We welcome submissions of theoretical, policy oriented or empirical papers related to any one of the main aspects of Competition Policy (dominance, collusion or mergers) or Sectoral Regulation or to issues of policy implementation, enforcement and Stade-Aid. Submissions by legal experts are also encouraged.
Deadline for paper submission: 25th March, 2016. Acceptance of papers by 09th May, 2016. Those who wish to present should send their papers electronically to firstname.lastname@example.org.
The Conference registration fee is 400.00 euros. Conference Speakers, Discussants and PhD Students get a 50% discount. CRESSE Summer School Students may participate in the Conference free of charge.
Registration fees cover participation in the Conference, the Conference bags with the articles that will be presented, participation to the coffee breaks, the (three) Conference lunches as well as participation to the Conference dinner (Sunday July 3rd).
Florian Wagner-von Papp, University College London Faculty of Laws explores Access to Evidence and Leniency Materials.
ABSTRACT: This paper discusses the current state of disclosure/discovery in the United States, England & Wales, Germany, and the European Union, and the changes brought about by Directive 2014/104/EU on Actions for Damages for Infringements of Competition Law ("Damages Directive").
The Damages Directive is meant to create a "level playing field" across the Member States of the European Union. The paper describes previous legislative interventions in the United States (with various amendments to FRCP 26) and England (following the Woolf and Jackson reviews) that tried to limit "excessive discovery" with limited success, and legislative intervention in Germany as well as judicial intervention on the EU level that tried to expand disclosure in continental Europe with equally limited success. The paper analyses the Damages Directive's provisions on disclosure and access to evidence in detail, and concludes that they are, in themselves, unlikely to change the legislatures' or courts' attitude in continental Europe, because they only enable courts to order disclosure, but do not require them to do so. If any change towards more disclosure is to happen in Europe, either the Member States will have to gold plate when implementing the Directive, or the Court of Justice of the European Union will have to give clear guidance under the principle of effectiveness. The paper also discusses the Directive's provisions limiting disclosure that could interfere with public enforcement, in particular leniency statements and settlement provisions.
Dimitrios Nomidis, Athens University of Economics and Business; Ministry of Development of Greece has written on The Fallacy of the Perfect Competition Theory.
ABSTRACT: My previous paper "A Reconsideration of the Theory of Perfect Competition" dealt with the fallacy of the Economic Theory regarding the perfectly elastic (horizontal) individual demand curve for the product of a firm; the correction of this fallacy involved a total and dramatic revision of the classic theory of Value, Perfect Competition and the associated theory of Social Welfare. The paper also included a mathematical proof for this fallacy, besides the conceptual validation, as well as the fundamental implications of it on Economics.
The present paper aims to provide further support for the previous one with new arguments and findings and attempts to historically trace the fallacy and detect the reasons and root causes that presumably led to it. Specifically, this fallacy is attributed to a misinterpretation of a related Cournot's phrase regarding the perfect competition, while it is now in this paper completely reasoned that the real individual demand curves for the firms are sloped and distribute evenly the total demand among the (similar) firms for any price and thus they sum up to the total demand curve, in contrast to what the classic theory states. This unavoidably results in the monopolistic character of the market, even under perfect competition. The total profit of the industry is equally distributed among the similar firms, until the share marginally covers the fixed cost of the firm, due to the entry of new firms which are attracted by profit. This is the real reason for the stability of price in perfect competition and not the horizontal individual demand curve for the firms nor the large number of firms and the subsequent small individual production of each; those prerequisites are not valid and have to be retired and the emphasis in perfect competition must be placed on the zero profit and the entry-exit of firms.
This revision of market equilibrium covers all types of market from monopoly to perfect competition and totally negates the classic theory of value and of perfect competition, as well as other fundamental outcomes of Economics, since: it invalidates the infamous principle of price determination by the intersection of total demand and total supply, as well as that of the equality of price to the minimum average cost in the long term, facts that move social welfare away from its optimum, as it is claimed by the classic economic theory; in addition, in the labor market labor is not paid according to the value of its marginal product but according to the marginal product revenue, which implies the monopolistic exploitation of labor and lower wage and employment levels and in fact worsens the previous social welfare's declination.
Mateja Durovic, City University of Hong Kong (CityUHK) - School of Law discusses The Apple Case Today: Factual and Legal Assessment.
ABSTRACT: Enforcement represents the most challenging task of consumer law. In the European Union, consumers are typically faced with numerous problems when it comes to protection of their consumer rights which have been infringed. This Paper examines the Apple case as one of the most successful examples of enforcement of EU consumer law that took place in a dozen of EU Member States. Apple was found to have breached a number of the provisions of EU consumer law that deal with the issues of legal and commercial guarantee and the fairness of commercial practices and contract terms. The Apple case may be used as a model of a successful, pan-European enforcement of consumer law.
Stephen Yelderman, Notre Dame Law School asks Do Patent Challenges Increase Competition?
ABSTRACT: As a general rule, judges and scholars believe settlement is a good thing. But, for nearly a century, the Supreme Court has said that patent litigation is categorically different, since it offers the chance to increase competition by freeing the public from the burdens of a monopoly. Based on this theory, and in the hopes of seeing more patent litigation fought to completion, the Court has overturned longstanding common law doctrines, declined to enforce otherwise valid contracts, and — in the recent case of FTC v. Actavis — subjected patent settlements to scrutiny under the antitrust laws. Similar reasoning has resulted in legislative initiatives to encourage patent disputes, including the regulatory bounty for challenging pharmaceutical patents included in the 1984 Hatch-Waxman Act and the administrative review procedures created by the 2011 America Invents Act. Moreover, scholars continue to call for reforms to provoke additional patent challenges, again asserting their supposed pro-competitive benefits.
This Article is the first to seriously scrutinize the claim that patent challenges lead to increased competition. It identifies a number of conditions that must hold for a patent challenge to provide this particular benefit, and evaluates the reasonableness of assuming that the pro-competitive benefits of patent challenges are generally available. As it turns out, there are a number of ways these conditions can and regularly do fail. This Article synthesizes legal doctrine, recent empirical scholarship, and several novel case studies to identify categories of challenges where the potential benefits for competition are smaller than previously thought or, in some cases, completely unavailable.
This analysis has a number of implications for patent law and policy. First, it provides critical guidance for how the patent office should administer its new review authority under the America Invents Act. Second, it exposes flaws in several judicially created policies intended to encourage more patent challenges. Third, it vindicates the present scope of the regulatory bounties provided under the Hatch-Waxman Act, and cautions against recently proposed expansion of these incentives to other technology areas. Fourth, it sheds new light on the competitive consequences of patent settlements, and thus informs how the Court’s recent FTC v. Actavis decision should be applied in future cases.
Tuesday, March 22, 2016
Gamal Atallah, University of Ottawa - Department of Economics explores Endogenous Efficiency Gains from Mergers with and without Product Differentiation.
ABSTRACT: This paper analyzes endogenous efficiency gains from mergers. It considers oligopolistic homogeneous good markets and duopolistic and triopolistic markets under product differentiation (quantity and price competition). In a two-stage game, firms invest in cost-reducing innovation (with and without mergers) and then compete in output/prices. It is found that in homogeneous good markets, all possible mergers generate efficiency gains, and that these are most significant when spillovers are very low or very high. Efficiency gains increase with the number of insiders and generally decrease with the number of outsiders. With product differentiation, under quantity competition, and under price competition with outsiders to the merger, the merger generates efficiency gains when R&D spillovers and/or product differentiation are sufficiently high. Under price competition with a merger to monopoly, the merger induces efficiency gains except when spillovers are very low. With product differentiation, efficiency gains increase with R&D spillovers, but may increase or decrease with the level of product differentiation. Innovation incentives and the likelihood of efficiency gains are compared between quantity and price competition. The implications of the results for the relationship between competition and innovation outputs and for merger policy are discussed.
Andrew Rhodes, University of Toulouse 1 - Toulouse School of Economics (TSE) and Jidong Zhou, University College London - Department of Economics analyze Consumer Search and Retail Market Structure.
ABSTRACT: This paper proposes a framework for studying how consumer search frictions affect retail market structure. In our model single-product firms which supply different products can merge to form a multiproduct firm. Consumers wish to buy multiple products and value the one-stop shopping convenience associated with a multiproduct firm. We find that when the search friction is relatively large all firms are multiproduct in equilibrium. However when the search friction is smaller the equilibrium market structure is asymmetric, with single-product and multiproduct firms coexisting. This asymmetric market structure often leads to the weakest price competition, and is the worst for consumers among all possible market structures. Due to the endogeneity of market structure, a reduction in the search friction can increase market prices and decrease consumer welfare.
Sinha, Pankaj ; Sharma, Sakshi ; and Ghosh, Sayan offer An empirical analysis of competition in the Indian Banking Sector in dynamic panel framework.
ABSTRACT: Competition has been regarded as a positive phenomenon for banks; it is perceived that competition makes banks more efficient, stimulates financial innovation and open up new markets For empirical assessment of the nature of competitive conditions amongst scheduled Indian commercial banks over a period of 15 years, we use the ‘Panzar-Rosser educed form revenue model’ to compute the so-called H statistic by estimating the factor price elasticities. In this study alternative estimation techniques have been used for comparing the dynamic H-statistic with static H-statistic. The static H-statistic was found to have a downward bias. However, dynamic as well as static H-statistic, both pointed to the presence of monopolistic competition. The hypotheses of perfect collusion as well as of perfect competition can be rejected using dynamic as well as fixed panel-econometric model estimations using micro data of banks’ balance sheets and profit & loss acco! unts for the years 2000-2014. The division of the entire period into two sub-samples, i.e. before and after 2007 revealed a decrease in competition levels across the two periods. Although, empirical analysis supported the assertion that the nature of competition among the Indian Banks is monopolistic.But it showed a decrease in the level of competitionmay be due to consolidation exercises of top few large banks with smaller banks and also because of the shift from traditional financial business to off-balance sheet activities, which might have lead to the convergence of competitive levels in the second sub-sample period, i.e. after 2007.The second sub-period also corresponds to the global financial crisis of 2008, a possible reason for the lower H-statistic values. The low persistence of profit values (in the sub-periods) should be associated with higher competition, It is also found that the values of competitive conduct (H-statistic), does not coincide with the classical ! concentration approach (CR5, CR10), for the Indian Banking Industry. The unit cost of funds, capital, and labour were found to be positive and statistically significant. The unit cost of funds was the highest contributor to the overall H statistic. The control variables, such as size and risk were found to be positively affecting the revenue. The findings arrived in this study; highlight the possible links between Indian banking sector competitiveness, profitability, intermediation and regulatory scenario.
H. Fraisse ; J. Hombert ; and M. Le research The Competitive Effects of a Bank Megamerger on Access to Credit.
ABSTRACT: This paper examines how the merger between two megabanks affects bank concentration and firms' access to credit. We find that in local markets in which the merger leads to a large increase in bank concentration, the merged bank decreases the supply of credit both to existing firms and to new firms. This reduction in credit supply is offset by non-merging banks which expand lending in markets in which the merging banks reduce lending. In some specifications, the substitution effect is strong enough to make the overall effect on credit supply statistically insignificant. Moreover, the substitution effect is at work even for small borrowers, risky borrowers, and new entrants.
Monday, March 21, 2016
Golombek, Rolf (Ragnar Frisch Centre for Economic Research.) ; Irarrazabal, Alfonso A. (BI Norwegian Business School) ; Ma, Lin (School of Economics and Business, Norwegian University of Life Sciences) explore OPEC’s market power: An Empirical Dominant Firm Model for the Oil Market.
ABSTRACT: We estimate a dominant firm-competitive fringe model for the crude oil market using quarterly data on oil prices for the 1986-2009 period. All estimated structural parameters have the expected sign and are significant. We find that OPEC exercised market power during the sample period. Counterfactual experiments indicate that world GDP is the main driver of long-run oil prices, however, supply (depletion) factors have become more important in recent years.
Charistos Konstantinos (Department of Economics, University of Macedonia) examines Leniency Programs under Demand Uncertainty: Cartel Stability and the Duration of Price Wars.
ABSTRACT: Leniency Programs reduce sanctions against cartel members that either report spontaneously the existence of the infringement or cooperate during the investigation and facilitate prosecution. This paper investigates the impact of leniency programs on cartel stability when demand is uncertain and firms cannot perfectly observe their rival’s choices. We show that pre-investigation leniency may or may not be effective in destroying the cartel, but in neither case affects the duration of price wars. Postinvestigation leniency may have ambiguous welfare effects, in affecting both cartel stability and price wars duration. LPs applying in situations where leniency is not urgently needed may be not only ineffective, but also welfare reducing. Hence, in markets where negative demand shocks are sufficiently frequent, leniency policies may produce undesirable effects.
Eskil Ullberg (The Ratio Institute and george Mason University) discusses Trade in Ideas: Performance and Behavioural Properties of Markets in Patents with Two-part Tariff.
ABSTRACT: Performance and behavioural properties of markets in patents are studied using a contract with a two-part tariff (fixed fee and royalty) on patented technology with limited validity and random values, in an economic experiment. Performance doubles when demand side bidding is introduced for both tariffs, resulting in gains from trade, compared with supply side take-it-or-leave-it offers. This departs from the hierarchical view of (Arrow, 1962), where the invention and innovation takes place in the same firm, eliminating any gains from trade in the analysis. An informal theory is proposed, based on insurance of market access, and tested. The sustained prices support the hypothesis that fixed fee = blocking value, thus supports rational expectations according to Muth under conditions of demand-side bidding in both tariffs. Understanding nature then drives demand for science (North, 1981). What made productivity grow in Europe may therefore have been the pate! nt system by increasing growth in economically useful technology through a producer market.