Antitrust & Competition Policy Blog

Coordination of Inventions and Innovations through patent markets with prices

Eskil Ullberg (The Ratio Institute and george Mason University) has written on Coordination of Inventions and Innovations through patent markets with prices.

ABSTRACT: This article examines coordination between inventors and innovators through prices in a market for contracts on patented technology, in a controlled laboratory experiment. Typically, a hierarchical approach is used to analyze such coordination, new technology being exogenous, and risk managed in separate markets. Price signals and search patterns are compared for three institutional mechanisms and two levels of patent validity in a 3 x 2 experimental design. “Willingness to search” in a technology map of 9 “technology areas”, each with private and uncertain values for agents, are used to characterize and differentiate institutional behavior with respect to investment decisions in new technology. The results indicate that coordination and that the willingness to search out the most valuable technology differs sharply between the mechanisms; low patent validity also results in poor coordination. Policy implications suggest facilitating a market in tradable contracts on patents is needed. This may entail lowering risk in using patent “assets” (access to quality patents and enforcements for SMEs) and new forms of legal associations for IP intensive firms.

New Frontiers of Antitrust 2016 - Concurrences Review Monday, June 13, 2016 from 8:30 AM to 6:30 PM (CEST), Paris, France

New Frontiers of Antitrust 2016 - Concurrences Review Monday, June 13, 2016 from 8:30 AM to 6:30 PM (CEST), Paris, France

 

08.30

Registration & Continental breakfast

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08.45

Introductory remarks

Nathalie Homobono | Director general, Directorate-General for competition policy, consumer affairs and fraud control (DGCCRF), Paris

Frédéric Jenny | Chairman, OECD Competition Committee, Paris | President, International Committee Concurrences Review | Professor, Director of International Relations at ESSEC, Co-Director of the European Center for Law and Economics

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09:00

Opening Keynote Speech

Emmanuel Macron | Minister of the Economy, Industry and the Digital Sector, Paris

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09.45

Competition and Trade Policies: TTIP or the return of the UFO?

Johannes Laitenberger | Director General, DG COMP, Brussels

Ignacio Garcia Bercero | Director, DG Trade, Brussels

Simon J. Evenett | Professor, St Gallen University, St Gallen

François-Charles Laprévote | Partner, Cleary Gottlieb Steen & Hamilton, Brussels

Chairperson: Frédéric Jenny | Chairman, OECD Competition Committee, Paris

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Coffee-Break

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11.30

“Free” Goods and Services: Is There such a Thing as a Free Lunch?

Jacques Crémer | Professor, Toulouse School of economics, Toulouse

Alvaro Ramos | Head Global Antitrust, Qualcomm, San Diego*

Laurent Flochel | Vice President, CRA, Paris

Olivier Fréget | Lawyer, Fréget-Tasso de Panafieu, Paris

Chairperson: Bruno Lasserre | Chairman, Autorité de la concurrence, Paris

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13.00

Lunch Keynote Speech

Andreas Mundt | Chairman, International Competition Network (ICN)

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14.45

Is Territoriality Still Meaningful?

Douglas Ginsburg | Judge, US Court of Appeals for the District of Columbia, Washington D.C.

Nils Wahl | Advocate General, Court of Justice of the European Union, Luxembourg

Jorge Padilla | Senior Managing Director & Head, Compass Lexecon Europe, Brussels/Barcelona

Jacques Buhart | Partner, McDermott, Paris/Brussels

Chairperson: Laurence Idot | Professor, University Paris II Panthéon-Assas | Member, Autorité de la concurrence, Paris | President, Scientific Committee Concurrences Review

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Coffee-Break

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16.30

Rebates: to Hell with Customers!

Richard Whish | Emeritus Professor, King’s College, London

Andreas Mundt | President, Bundeskartellamt, Bonn

Trevor Soames | Partner, Shearman & Sterling, Brussels

Chairperson: Nicolas Petit | Professor, Law School of the University of Liege

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18.00

Closing Keynote Speech

Ian Forrester | Judge, General Court of the European Union, Luxembourg

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18.30

Concurrences PhD Awards 2015 and drinks

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Merger Control Enforcement in Spain: An Ongoing Saga of the Assessment of Behavioural Remedies

Jose Luis Azofra Parrondo and Carlos Bobillo, both of Garrigues discuss Merger Control Enforcement in Spain: An Ongoing Saga of the Assessment of Behavioural Remedies.

ABSTRACT: •Behavioural commitments are common in Spain—more than at the European level. •Attached to them is the complex issue of assessing whether and, if so, to what extent such commitments are complied with by parties. •On the basis of such an assessment, the failure to comply with merger-related commitments has been sanctioned in Spain—and in the case discussed here, the several fines, totalling €22,600,000, were imposed by the Spanish competition authority in the context of a single merger.

Greece: Competition Law and the Curious Liberalisation of Professional Services

Agisilaos Karpetas, Lieden Law describes Greece: Competition Law and the Curious Liberalisation of Professional Services.

ABSTRACT: On markets for regulated professional services, measures have sometimes been enacted, by actors and/or authorities, to limit market access and competitive behaviour. In Greece, such measures have been addressed by Law 3919/2011 which represents a potential legal breakthrough towards liberalisation of professional services. In that process, competition law provisions and considerations have been drivers alongside the principle of professional freedom. The Hellenic Competition Commission has been granted an extended and prominent role in all phases of the liberalisation process.

The Application of EU Competition Rules in the Transport Sector

Itai Rabinovici , DG Competition explores The Application of EU Competition Rules in the Transport Sector.

ABSTRACT: The decision attracting most attention in the transport sector in the period under consideration was the State aid decision relating to the Greek tonnage tax, while Estonian Air and Cyprus Airways were under investigation in the State aid area. After blocking several earlier attempts, the Commission cleared the acquisition of Aer Lingus and TNT Express and also approved the acquisition of sole control of Eurostar by SNCF. The Commission imposed fines on subsidiaries of ÖBB and DB for their participation in the block trains cartel, while it conducted an unannounced inspection in the rail passenger sector in Austria and sent a statement of objections on the Lithuanian railway company. Further, the Commission adopted a decision in relation to the SkyTeam air alliance.

Upward Pricing Pressure of Mergers Weakening Vertical Relationships

Gregor Langus, Charles River Associates (CRA) and Vilen Lipatov, Compass Lexecon Brussels explains Upward Pricing Pressure of Mergers Weakening Vertical Relationships.

ABSTRACT: We modify the UPP test of Farrell and Shapiro (2010) to take into account the possibility that a merger weakens (or eliminates) a vertical supply relationship. After deriving a general effect of the merger, we provide an example of simple estimation strategy when only prices, costs and market shares are available as a snapshot.

The Danish Supreme Court Rules on State Action Defense and Refusal to Supply Under Danish Competition Law (Copenhagen Airport Terminal A)

Christian Bergqvist, University of Copenhagen - Faculty of Law Laurits Schmidt Christensen, Accura Advokatpartnerselskab discuss The Danish Supreme Court Rules on State Action Defense and Refusal to Supply Under Danish Competition Law (Copenhagen Airport Terminal A).

ABSTRACT: After a lengthy process the Danish Supreme Court finally closed the curtain in September 2015 on a potential new, and competing, terminal in Copenhagen Airport, the main Danish airport hub. A group of investors had asked the airport to grant access (a lease) to a plot of land in the airport for the purpose of building a new terminal A. Terminal A would compete with the airport in the supply of services to airlines. Copenhagen airport rejected the request which in turn lead the group of investors to complain to the Danish Competition and Consumer Authority ("DCCA"). In its draft decision the DCCA identified an obligation to grant access under EU Article 102 and the Danish equivalent. However, just before a formal decision was to be made on the matter by the DCCA, the Danish Transport and Construction Agency reversed a previous finding now holding air security regulation to be an obstacle to the application of competition law to the matter at hand. Unhappy, not only with the outcome, but also the process, the access seeking party, Terminal A, lodged a case before the judiciary arguing that air security regulation did not prevent the application of competition law and an order for the granting of access. This submission was not accepted by the Danish Supreme Court that moreover held EU Article 106 (2) to be applicable as a defense for Copenhagen Airport’s refusal to lease the land to Terminal A. The case provides guidance on the scope of the state action defense under Danish competition law and, indirectly the application of EU Article 102 and the Danish equivalent to refusal to supply cases.

Settlements and Appeals in the European Commission's Cartel Cases: An Empirical Assessment

Michael Hellwig Centre for European Economic Research (ZEW) - Competition and Regulation Research Group Kai Hüschelrath Centre for European Economic Research (ZEW); WHU - Otto Beisheim School of Management Ulrich Laitenberger Centre for European Economic Research (ZEW); KU Leuven - Department of Managerial Economics, Strategy, and Innovation provide Settlements and Appeals in the European Commission's Cartel Cases: An Empirical Assessment.

ABSTRACT: The introduction of the European Union (EU) Settlement Procedure in 2008 aimed at promoting the procedural efficiency of cartel investigations by the European Commission (EC). We use a data set consisting of 579 firms groups convicted by the EC for cartelization from 2000 to 2015 to investigate the impact of the settlement procedure on the probability to file an appeal. Based on the estimation of a model of the firm’s decision to appeal in the presettlement era, we subsequently run out-of-sample predictions to estimate the number of hypothetical appeals cases in the settlement era absent the settlement procedure. Our findings of a settlement-induced reduction in the number of appeals of up to 55 percent allow the conclusion that the introduction of the settlement procedure generated substantial additional benefits to society beyond its undisputed key contribution of a faster and more efficient handling of cartel investigations by the EC.

Profitable Double Marginalization

Kevin Bryan, University of Toronto - Strategic Management and Erik Hovenkamp, Northwestern University, Department of Economics have an interesting paper on Profitable Double Marginalization.

ABSTRACT: There is a longstanding consensus that, if producers of complementary goods apply markups noncooperatively, their joint profits will fall, suggesting they would benefit from integration. On the contrary, we show that double marginalization inadvertently enhances joint profits in many familiar competitive environments where the firms face third party competition. For example, in a vertical relationship, the upstream markup incidentally engenders credible (albeit imprecise) commitment to less competitive behavior by the downstream firm, and this may elicit an accommodating response from downstream rivals -- e.g. they may raise their own prices or scale back production. The benefit of this indirect "strategic effect" may outweigh the well-understood direct harm from double marginalization, even if the upstream firm sets a monopoly price. In a more game-theoretic discussion, we consider double marginalization as a strategic device, in which case it is intimately related to other practices aimed at distorting a downstream agent's decisions, such as vertical restraints or delegation. In all cases, joint profits are maximized by inducing the downstream firm to act as if it has a so-called "consistent conjecture," meaning it internalizes strategic effects. Interestingly, when upstream competitors do this in parallel, they induce a consistent conjectures equilibrium (CCE), evincing a strong link between ordinary "Nash games" and the CCE concept.

The Smallest Salable Patent-Practicing Unit ('SSPPU') Experiment, General Purpose Technologies and the Coase Theorem

Nicolas Petit, University of Liege - School of Law offers insights on The Smallest Salable Patent-Practicing Unit ('SSPPU') Experiment, General Purpose Technologies and the Coase Theorem.

ABSTRACT: In the last years, some Standard-Setting Organizations (“SSOs”) active in wireless communications have experimented new pricing principles for standard essential patents (“SEPs”). One of those experiments is the “SSPPU” rule. Under SSPPU, the licensing rates paid to owners of SEPs for the use of their technology shall reflect the “value that the functionality of the claimed invention or inventive feature…contributes to the value of the relevant functionality of the smallest saleable Compliant Implementation that practices the Essential Patent Claim”. This paper reviews the SSPPU experiment through the lenses of the Coase theorem. It finds that SSPPU interferes with the efficient operation of the price system, and is likely to reduce investment in socially beneficial activities, including in General Purpose Technologies (“GPTs”) which are key drivers of economic growth.

Poland: Private Enforcement of Antitrust Law – Unfulfilled Dream?

Maciej Gac, Jagiellonian University in Krakow - Faculty of Law and Administration asks Poland: Private Enforcement of Antitrust Law – Unfulfilled Dream?

ABSTRACT: The following article focuses on the issue of private enforcement of antitrust law and the reception of its European model in Poland. Through the analysis of Polish competition authority’s policy, national jurisprudence and recent legal reforms, the article tries to explain whether the current convergence of Polish practice of competition law enforcement towards the European model allowed establishing effective system of private enforcement in Poland. The undertaken analysis is especially important in the current legal context, where the Directive on damages actions was adopted by the EU Parliament and the Council (Directive 2014/104/UE of 26 November 2014), and Member States are required to implement its provisions into the national legal order by the end of 2016.

Federal Trade Commission Privacy Law and Policy (Introduction and Excerpt)

Chris Jay Hoofnagle, University of California, Berkeley - School of Information; University of California, Berkeley - School of Law examines Federal Trade Commission Privacy Law and Policy (Introduction and Excerpt).

ABSTRACT: Federal Trade Commission Privacy Law and Policy is an in-depth history of the FTC’s 100-year-long consumer protection efforts. It explains how decades of false advertising enforcement informs today’s privacy efforts. It contains practical advice for lawyers practicing before the agency, strategy for advocates, and insight for policymakers on the challenge of addressing unfair and deceptive trade practices. Most importantly, the book provides context for the agency’s powers and procedure.

The FTC’s regulation of technology and privacy is not new. The FTC’s first reported case concerned a company that treated cotton so that it could be passed off as silk. Its first privacy case dealt with an early kind of information broker that tricked people into revealing personal information so that debt collectors could locate them. Reviewing the history of these cases and the rationales that gave rise to the FTC helps us understand broader policy problems in consumer protection.

Search Design and Broad Matching

 Kfir Eliaz (Tel Aviv U and U MI) and Ran Spiegler (Tel Aviv U and U College London) have written on Search Design and Broad Matching.

ABSTRACT: We study decentralized mechanisms for allocating firms into search pools. The pools are created in response to noisy preference signals provided by consumers, who then browse the pools via costly random sequential search. Surplus-maximizing search pools are implementable in symmetric Nash equilibrium. Full extraction of the maximal surplus is implementable if and only if the distribution of consumer types satisfies a set of simple inequalities, which involve the relative fractions of consumers who like different products and the Bhattacharyya coefficient of similarity between their conditional signal distributions. The optimal mechanism can be simulated by a keyword auction with broad matching.

Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly

C. Benassi; A. Chirco; and C. Colombo explain Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly.

ABSTRACT: The paper proves the existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ’income share elasticity’ representation of the consumers’ density function, which ensures the analytical tractability of the firms’ optimality conditions at a high level of generality. Some illustrative examples of the solution are offered, in order to assess the impact of distributive shocks on the equilibrium market configuration.

Oligopolistic Competition with Choice-Overloaded Consumers

Georgios Gerasimou and Mauro Papi theorize Oligopolistic Competition with Choice-Overloaded Consumers.

ABSTRACT: A large body of experimental work has suggested the existence of a "choice overload" effect in consumer decision making: Faced with large menus of choice options, decision makers often defer or avoid choice. A suggested reason for the occurrence of this effect is that the agents attempt to avoid the cognitive effort that is associated with choosing from larger menus. Building on this explanation, we propose and analyse a model of duopolistic competition where firms compete in menu design in the presence of a consumer population with heterogeneous preferences and overload menu-size thresholds. The firms' strategic trade-off is between offering a large menu in order to match the preferences of as many consumers as possible, and offering a small menu in order to avoid losing choice-overloaded consumers to their rival. Assuming uniformly distributed preferences, we focus on symmetric pure-strategy equilibria under various assumptions on the overload distribut! ion and product markups. We also propose and analyse a measure of consumer welfare that applies to this environment. Among other things, we provide conditions for "maximum-" and "minimum-variety equilibria" to be possible, whereby both firms either offer the entire set of available products or the same one product, respectively.

Net Neutrality, Pricing Instruments and Incentives

Joshua S. Gans, University of Toronto and Michael L. Katz, Berkeley examine Net Neutrality, Pricing Instruments and Incentives.

ABSTRACT: We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices. 

Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms

David Evans, Global Economics Group, University of Chicago, UCL has a new paper on Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms. Worth reading!

ABSTRACT: Market power on each side of a multisided platform, whether in the form of increasing prices or decreasing quality, is constrained by the risk of losing sales on the other sides. That tends to weaken market power on each side and encourages platforms to keep prices lower and quality higher than they would absent these feedback effects. In some cases the nature of the business model, and competition, result in the platform allowing one type of customers to participate in the platform for free or even to subsidize their participation. Non-price methods of attracting customers are especially important in this case, particularly when the business model adopted by the industry makes it difficult for platforms to move from free participation. To provide a reliable assessment of competitive constraints, market power analysis must consider the interdependencies in demand by the participants on the platform as well as have heightened focus on non-price competition when the participation for one group is free. Market shares should be used cautiously in assessing market power for multi-sided platforms, especially when they reflect only one side of the platform, and therefore do not account for the interdependent customer groups, or concern a free platform side where there is no monetary measure of value. Finally, dynamic competition makes the analysis of market power complex because it results in feature competition, and potentially drastic innovation, on one side of a platform that has feedback effects on the other side of the platform. The courts and authorities have recognized these points in Qihoo 360 v. Tencent, Cartes Bancaires v. European Commission, the Facebook/WhatsApp merger, and the Microsoft/Skype merger. These principals should become part of the standard analysis of multi-sided platforms by courts and competition authorities globally. These concerns are illustrated in the context of multi-sided platforms that offer online services where free services and dynamic competition are especially important.

 

 

 

Hospital Mergers and Economic Efficiency

Roger D. Blair, University of Florida, Department of Economics, Christine Durrance, University of North Carolina (UNC) at Chapel Hill - Department of Public Policy and D. Daniel Sokol, University of Florida - Levin College of Law analyze Hospital Mergers and Economic Efficiency.

ABSTRACT: Consolidation via merger both from hospital-to-hospital mergers and from hospital acquisitions of physician groups is changing the competitive landscape of the provision of health care delivery in the United States. This Article undertakes a legal and economic examination of a recent Ninth Circuit case examining the hospital acquisition of a physician group. This Article explores the Saint Alphonsus Medical Center-Nampa Inc. v. St. Luke’s Health System, Ltd. (St. Luke’s) decision — proposing a type of analysis that the district court and Ninth Circuit should have undertaken and that we hope future courts undertake when analyzing mergers in the health care sector. First, the Article addresses the question of how best to frame the acquisition of a physician group by a hospital — is the merger horizontal, vertical, or potentially both? In undertaking this analysis the Article examines the broader issue of the treatment of Accountable Care Organizations (ACOs) in antitrust law. ACOs are short of full integration and as such, a potential contractual alternative for hospitals and physician groups to an acquisition. A hospital acquisition of a physician practice also has implications for how to view competitive effects in the context of ACOs. Indeed, in St. Luke’s the Ninth Circuit suggests that integration short of full merger was a possible alternative. Second, the Article examines the justification for integration as a way to address countervailing power in health care, the reduction of transaction costs, and potential cost and quality efficiencies. Third, the Article applies the economics of these issues to merger case law generally and specifically to the St. Luke’s decision. Ultimately, the Article finds the economic analysis of the Ninth Circuit lacking. Finally, the Article offers policy implications of the decision and concludes with some suggestions to improve health care antitrust analysis in practice for litigated cases to make such analysis better follow economic principles.

Access to Evidence and Leniency Materials

Florian Wagner-von Papp , University College London Faculty of Laws analyzes 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.

Other Costs, Other Markets: Modernizing Antitrust

Jeffrey Lynch Harrison, University of Florida - Levin College of Law provides insights on Other Costs, Other Markets: Modernizing Antitrust.

ABSTRACT: Today’s antitrust law is characterized by stagnation and indeterminacy. The failure is so thorough that it is not clear that U.S. competition law actually leads to any outcomes that are defendable except at the most superficial level. Moreover, when enforcement does result in a desirable outcome, it not clear that it is the best outcome. The principal reason for this state of affairs is that antitrust scholars and courts cling to misguided goals and theories that have not evolved despite an avalanche of information now available that can modernize the discipline.

This Article has two main sections that necessarily overlap. The first examines the three principal goals of antitrust — consumer surplus, allocative efficiency, and productive efficiency — and explains why they are imperfect, incomplete, and indeterminate guides for policy. The purpose of this section is not to express a nihilistic view of antitrust but to demonstrate that those who protect the status quo approach to antitrust stand on a wobbly foundation and to suggest that if the current rigidity in antitrust economics continues it will be at the expense of the relevancy of the discipline. It includes, sometimes by implication, proposals for improvement.

The second section continues that basic theme but considers two areas in which growth is needed if antitrust is to remain relevant in the next fifty years. They may or may not be addressed but, if they are not, the legitimacy of antitrust economics and its application will surely be called into question. This material stresses the need, if there is to be a coherent antitrust policy, to broaden the scope of factors to consider when assessing the effectiveness of modern competition policy. The concluding section offers specific recommendations for the modernization of antitrust.