Wednesday, January 25, 2017

Investigating market power in the Belgian pork production chain

Maes, Dries; Vancauteren, Mark and Van Passel, Steven are Investigating market power in the Belgian pork production chain.

ABSTRACT: The Belgian pig production has been confronted with stagnating prices since the start of the century. While several studies have investigated the financial structure of the pork production chain, it remains unclear whether excessive market power from slaughterhouses, or meat retailers plays a role. Market power studies can reveal some of the market dynamics in this setting, but this type of research has not yet been applied to the Belgian pork market. This paper looks at potential oligopolies and oligopsonies in the pork production sector. A new model is build to focus on market power dynamics in the market for live pigs. This model distinguishes horizontal and vertical market power parameters both for pig farmers and for slaughterhouses. The results follow from an empirical application using slaughterhouses data for the period 2002-2011. The potential reasons and consequences of these market powers are discussed.

January 25, 2017 | Permalink | Comments (0)

Estimating Auctions with Externalities: The Case of USFS Timber Auctions

Joseph Kuehn is Estimating Auctions with Externalities: The Case of USFS Timber Auctions.

ABSTRACT: This paper studies how bidding strategies and auction outcomes are affected by downstream competition, particularly for USFS timber auctions. This is done by extending the auction estimation literature to a model where outside competition affects bidding behavior in that bidders are then not only concerned with whether they win the auction, but also the identity of the winner if it is not them. Applying the estimation technique to the case of timber auctions, I find that downstream competition in the lumber industry affects the bidding behavior of mill bidders, sometimes leading to the misallocation of timber tracts.

January 25, 2017 | Permalink | Comments (0)

Tuesday, January 24, 2017

Strategic use of external benefits for entry deterrence: the case of a mobile telephony market

Mikolaj Czajkowski (Faculty of Economic Sciences, University of Warsaw) and Maciej Sobolewski (Faculty of Economic Sciences, University of Warsaw) model the Strategic use of external benefits for entry deterrence: the case of a mobile telephony market.

ABSTRACT: Recent models of network competition demonstrate the incentives of incumbents to reduce receiver benefits in rival networks through excessive off-net pricing. Theoretical reasoning behind strategic use of call externalities assumes that receiving calls contributes to consumer utility. This paper tests this critical assumption with choice data elicited from users of mobile telephones. We find that receiver benefits are a significant driver of subscription choices and assess customer base stealing effect encountered by the late entrant. Our findings confirm that call externalities can be used to limit late entrants’ growth as has been observed in many European mobile telephony markets.

January 24, 2017 | Permalink | Comments (0)

Strategic Technology Adoption and Entry Deterrence in the US Local Broadband Markets

Tedi Skiti (Department of Economics, Duke University) determines Strategic Technology Adoption and Entry Deterrence in the US Local Broadband Markets.

ABSTRACT: How does strategic investment affect entry of new technologies and market structure? This article investigates the role of competition in firms’ technology adoption decisions in the U.S. wireline broadband industry. I present a model of strategic entry deterrence and study how internet service providers’ interactions affect their technology deployment at local markets. The goal is to capture an important trade-off: cable firms adopt a new cable system to provide higher speeds, but the adoption has a preemptive effect on fiber firms’ entry. I collect and combine unique firm-level data on broadband technology deployment and markets under entry threat for New York State. I provide evidence of strategic investment by cable incumbents to deter fiber entry. Counterfactual scenarios suggest that the industry has experienced 16% excessive investment in cable adoption and 12% underinvestment in fiber entry both of which are explained by these deterrence strategies. In addition, subsidies to cable incumbents in small markets reduce fiber entry rate by 50%. I also find that policies that promote statewide entry mitigate the effects from these deterrence strategies and increase fiber entry rate by 30%. These results have wide implications for technology diffusion, quality provision and optimal subsidy policy in markets with strategic technology adoption and entry threat.

January 24, 2017 | Permalink | Comments (0)

Patent Rights in a Climate of Intellectual Property Rights Skepticism

Commission Maureen Ohlhausen (FTC) has a new article on Patent Rights in a Climate of Intellectual Property Rights Skepticism.  Given interesting developments over the past few weeks on antitrust-patent interface cases, this paper makes for an important read.

January 24, 2017 | Permalink | Comments (0)

Facilitating collusion by exchanging non-verifiable sales reports

David Spector (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - Ecole des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - Ecole des Ponts ParisTech (ENPC), PSE - Paris School of Economics) has an interesting paper on Facilitating collusion by exchanging non-verifiable sales reports.

ABSTRACT: A number of collusive agreements involve the exchange of self-reported sales data between firms, which use them to monitor compliance with a target market share allocation. This paper shows that such communication between competitors may facilitate collusion even if all private information becomes public after a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars as a tool for mutual disciplining. In some cases, efficient collusion cannot occur unless firms are able to engage in such communication.

January 24, 2017 | Permalink | Comments (0)

Market Power and Heterogeneous Pass-through in German Electricity Retail

Tomaso Duso and Florian Szücsidentify Market Power and Heterogeneous Pass-through in German Electricity Retail.

ABSTRACT: We analyze the pass-through of cost changes to retail tariffs in the German electricity market over the 2007 to 2014 period. We find an average pass-through rate of around 60%, which significantly varies with demand factors: while the pass-through rate to baseline tariffs, where firms have higher market power, is only 50%, it increases to 70% in the competitive segment of the market. Although the pass-through rate of independent firms is significantly higher than that of other firms in the competitive market segment, the extent of supply-side heterogeneity is limited. Thus, the firms’ ability to exercise market power appears to be constrained by competition and largely determined by demand side factors. Finally, we find that the pass-through rate in the competitive market segment has been approaching unity over the past years, indicating a rise in competitive pressure.

January 24, 2017 | Permalink | Comments (0)

Monday, January 23, 2017

Contract contingency in vertically related markets

Bacchiega, Emanuele ; Bonroy, Olivier and Petrakis, Emmanuel theorize about Contract contingency in vertically related markets.

ABSTRACT: We study the optimal contract choice of an upstream monopolist producing an essential input that may sell to two vertically differentiated downstream firms. The upstream supplier can offer an exclusive contract to one of the firms or non-exclusive contracts to both firms. Each of the latter can be made contingent or not on the breakdown of the negotiations between the upstream supplier and the rival downstream firm. The distribution of bargaining power during the contract terms negotiations is the main driving force of the monopolist's choices. A powerful supplier always opts for an exclusive contract. By contrast, a weaker supplier offers non-exclusive contracts and makes each of them contingent or non-contingent such as to guarantee the most favorable outside option in its negotiations. Our main results hold under an horizontally differentiated downstream market too.

January 23, 2017 | Permalink | Comments (0)

Grantbacks, Territorial Restraints, and the Type of Follow-On Innovation: The "But for..." Defense

Ambashi, Masahito; Regibeau, Pierre; and Rockett, Katharine examine Grantbacks, Territorial Restraints, and the Type of Follow-On Innovation: The "But for..." Defense.

ABSTRACT: We analyse the effect of grantback clauses in licensing contracts. While competition authorities fear that grantback clauses might decrease the licensee's ex post incentives to innovate, a standard defence is that grantback clauses are required for the patent-owner to agree to license its technology in the first place. We examine the validity of this "but for" defense and the equilibrium effect of grantback clauses on the innovation incentives of the licensee for both non-severable and severable innovations. Under the 2004 EU Technology Transfer Guidelines, and the guidelines for some other jurisdictions, grantback clauses that apply to "non-severable" (read "infringing") innovations are considered to be less controversial than clauses that apply to "severable" innovations.. We show, to the contrary, that grantback clauses do not increase the patent-holder's incentives to license when non-severable innovations are at stake but they do when severable innovations are concerned - suggesting that the "but for" defense might be valid for severable innovations but not for non-severable ones. Moreover we show that, for severable innovations, grantback clauses can increase the range of parameters for which follow-on innovation by the licensee occurs.

January 23, 2017 | Permalink | Comments (0)

Evidence for the Effects of Mergers on Market Power and Efficiency

Bruce A. Blonigen and Justin R. Pierce look for Evidence for the Effects of Mergers on Market Power and Efficiency.

ABSTRACT: Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using detailed plant-level data. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to address the endogeneity of firms’ merger decisions.

January 23, 2017 | Permalink | Comments (0)

Sunday, January 22, 2017

A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare

Onur A. Koska (Department of Economics, METU) offers A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare.

ABSTRACT: This study scrutinizes the ramifications of a consumer-surplus standard in approvals of mergers & acquisitions (i) on an investor's choice between acquiring a firm's existing assets (via negotiations or auctions) and investing in new assets under both complete and incomplete information; and (ii) on welfare. Any firm acquisition fulfilling the consumer-surplus standard is in the best interest of the investor, who prefers to be well informed on acquisition gains and prefers sequential offers. A local firm appropriates a bigger share from acquisition gains in an auction, and prefers generating information asymmetries. Welfare improves with a larger scope for ex-post firm heterogeneity.

January 22, 2017 | Permalink | Comments (0)

Troubled Waters Between US and European Antitrust

Daniel Sokol explains the Troubled Waters Between US and European Antitrust

ABSTRACT: Antitrust is an important area of law and policy for most companies in the world. Having divergent rules across antitrust systems means that the same economic behavior may be treated differently depending on the jurisdiction, leading to disparate outcomes in which one jurisdiction finds illegal behavior (but the other does not) when the underlying behavior may be pro-competitive. This disparate set of outcomes creates a world in which the most stringent antitrust system may produce the global standard. As a result, if the antitrust rules applied are too rigid, they threaten to hurt consumers not merely in the jurisdiction where they are applied but globally as well. The stakes are high, not merely in the tech sector but more generally. Other jurisdictions look to both the United States and Europe for guidance for antitrust jurisprudence.

In their book The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy, Daniel Gifford and Robert Kudrle analyze a distinct set of cases across a number of different substantive areas in the two jurisdictions. In doing so, they also discuss the potential for both convergence and divergence Their comparative analysis makes an important and well informed contribution to the literature, even if parts of the book might have limitations.

This Review first explores the developments of the goals of antitrust (and how these goals shape enforcement) and the particular insights and shortcomings of Gifford and Kudrle’s investigation into comparative antitrust — in particular, the area of greatest cross-Atlantic discord: cases involving single firm conduct, especially in markets characterized by high tech and innovation. Second, this Review explores cartel law and policy — a topic that Gifford and Kudrle overlook entirely. This is a surprising omission given that cartel activity is the highest enforcement priority both the United States and Europe (at the EC level). Moreover, it is an area in which the law and policy is in flux in both.

January 22, 2017 | Permalink | Comments (0)

Friday, January 20, 2017

Canada's International Cartel Enforcement: Keeping Score

John M. Connor, Purdue University; American Antitrust Institute (AAI) describes Canada's International Cartel Enforcement: Keeping Score.

ABSTRACT: Canada’s Competition Bureau has been a highly rated competition-law enforcer. Previously published assessments of its anti-cartel efforts tend to heap praise on the authority. Yet its antitrust performance in the past decade or so has flagged. A quantitative assessment of several dimensions of outcomes made of the Bureau’s anti-cartel enforcement activities shows an agency unable to live up to its earlier promise.

 

January 20, 2017 | Permalink | Comments (0)

American Antitrust Institute (AAI) hosts its first International Antitrust Roundtable, February 8, 2017

On February 8, 2017, the American Antitrust Institute (AAI) will host its first International Antitrust Roundtable where experts from business, academia, law, and government in the U.S. and abroad will gather to discuss major competition enforcement and policy issues on the global antitrust agenda.

As competition enforcement agencies in the U.S. and abroad revise their international and/or intellectual property (IP) guidelines, and a new administration takes over in Washington, the Roundtable will survey a number of hot issues and controversies. These include the extraterritorial and overlapping application of U.S. and foreign competition law, as well as some of the critical IP/competition issues facing antitrust authorities around the globe. In the process, the Roundtable will take stock of growing concerns over foreign jurisdictions’ due process standards (or lack thereof). These not only raise independent “good governance” issues but also may influence the debate over comity and substantive international antitrust and IP standards. 

Speakers include:  Eduardo Perez Motta (keynote), Steve Calkins, John DeQ. Briggs, Eleanor Fox, Kristen Limarzi, Henri Piffaut, Jorge Contreras, Lisa Kimmel,  Daryl Lim, Suzanne Munck, Don Baker, Maurits Dolmans, Liz Kraus, Dina Kallay, and Greg Slater.

Information about the program is available here. http://www.antitrustinstitute.org/international2017

January 20, 2017 | Permalink | Comments (0)

Apple, Antitrust, and Irony

Chris Sagers, Cleveland-Marshall College of Law, Cleveland State University analyzes Apple, Antitrust, and Irony.

ABSTRACT: Considers the broader social and political context of the Justice Department's closely watched 2012 antitrust action against Apple and several trade publishing firms, alleging price-fixing in electronic books.

 

January 20, 2017 | Permalink | Comments (0)

A Rule of Reason for Inward FDI: Integrating Canadian Foreign Investment Review and Competition Policy

Grant Bishop, University of Toronto - Faculty of Law imagines A Rule of Reason for Inward FDI: Integrating Canadian Foreign Investment Review and Competition Policy.

ABSTRACT: The Investment Canada Act (ICA) needs an overhaul. This reform must include a paradigm shift in thinking to a much less restrictive view about the benefits of foreign direct investment in Canada. Currently, the ICA operates under the presumption that foreign firms behave detrimentally to the Canadian economy: foreign acquirers are required to show “net benefit” to Canada and may need to make onerous commitments for maintaining output or employment. This attitude, a holdover from the ICA’s predecessor, the Foreign Investment Review Agency, has created an atmosphere which fosters protectionism and relies on economically incoherent factors to assess the merit of proposed transactions. It is time to shed that archaic attitude and adopt a more reasoned perspective.

Rather than requiring each proposed transaction to provide proof for the specific benefit to Canada, the ICA should assume that foreign acquisitions benefit Canada unless there is proof to the contrary. A more welcoming, balanced and rational perspective would be that foreign acquisitions actually improve the productivity of Canadian companies and contribute to the well-being of Canada’s economy.

January 20, 2017 | Permalink | Comments (0)

The Circular Logic of Actavis

Joshua B. Fischman, University of Virginia School of Law discusses The Circular Logic of Actavis.

ABSTRACT: Assessing the fairness of settlements is an inherently difficult task. Because settlements foreclose the judicial determination of litigants’ entitlements, courts can only compare settlements to speculative predictions about what would have occurred in litigation. Courts can conduct full-blown inquiries into the merits after the fact, but doing so undermines the cost-saving rationale of settlement. In FTC v. Actavis, Inc., a case involving an antitrust challenge to a pharmaceutical patent settlement, the United States Supreme Court adopted a novel solution to this problem. The Court held that the terms of a patent settlement do not need to be compared to a judicial assessment of the parties’ underlying rights as determined by patent law. Rather, the fairness of a settlement could be inferred using economic analysis of the settlement terms themselves; the magnitude of a payment from the patentee to the challenger could serve as a surrogate for the weakness of the patent. In this Article, I argue that this inference is problematic on both jurisprudential and economic grounds. The jurisprudential critique is that Actavis implicitly relies on the prediction theory of law — the widely disparaged conception of law as consisting merely of predictions about what courts will do. To the extent that the settlement terms are probative of the merits of the patent infringement case, they reflect the parties’ expectations about the outcome of the litigation. In using the settlement terms as a surrogate for a legal conclusion, Actavis displaces legal reasons with predictions about court decisions. The economic critique is that the Actavis inference fails to account for “feedback effects” between the court and litigants. In settling the initial patent dispute, rational litigants will anticipate the inference that a subsequent court may draw from their settlement, which will distort the terms of their bargain. In drawing an inference from the settlement, a court must therefore account for the distorting effect of its own inference.

 

January 20, 2017 | Permalink | Comments (0)

Thursday, January 19, 2017

Innovation Economics for Antitrust Lawyers, Friday 3 February

Concurrences Review, in partnership with King’s College London, will hold the first edition of their annual joint conference “Innovation Economics for Antitrust Lawyers » on Friday 3 February, from 08.30am to 6.00pm, at King’s College, Strand, WC2R 2LS London.
 
Speakers include:
 
William Allan, Member, Competition Appeal Tribunal, London
Lord David Currie, Chairman, Competition and Markets Authority, London
- Frédéric Jenny, Chairman, OECD Competition Committee | Professor, ESSEC, Paris
Miguel de la Mano, Managing Director, Compass Lexecon Europe, Barcelona/Brussels 
Maurits Dolmans, Partner, Cleary Gottlieb Steen & Hamilton, London/Brussels
Ariel Ezrachi, Slaughter and May Professor of Competition Law, The University of Oxford
- Alison Jones, Professor, King’s College London
William E. Kovacic, Professor, King’s College London | Non-Executive Director, Competition and Markets Authority, London
- Thomas Kramler, Head of Sector, Task Force Digital Single Market, DG COMP, Brussels
- Valérie Meunier, Vice President, Compass Lexecon, Paris
- Andreas Mundt, President, Bundeskartellamt, Bonn / Chairman, ICN
Renato Nazzini, Professor, King’s College London
Damien Neven, Professor of Economics, The Graduate Institute, Geneva | Senior consultant, Compass Lexecon
Jorge Padilla, Senior Managing Director – Head, Compass Lexecon Europe, Barcelona/Brussels
- Mark Powell, Partner, White & Case, Brussels
Vivien Rose, Chairman, Competition Appeal Tribunal, London
Maurice Stucke, Professor of Law, University of Tennessee, Knoxville
Deirdre Trapp, Partner, Freshfields Bruckhaus Deringer, London
Thomas Vinje, Partner, Clifford Chance, Brussels
- Richard Whish, Professor King’s College London
- Wouter Wils, Visiting Professor, King’s College London / Hearing Officer, European Commission
 
There will be four panels:
- Privacy & Big Data: Can the Big Data Companies be Coerced?
- e-Commerce and the Single Market: A Renewed Point of View?
- Do New Technologies Impact Cartels Formation and Functioning?
- Disruptive Technologies: Is Antitrust Policy Antiproductive?
 
You can find the detailed program on the dedicated website: https://innovation-economics.eventbrite.fr
 

January 19, 2017 | Permalink | Comments (0)

King's College London & IBA Executive LLM

 
 
 
 
 
 
A unique opportunity to learn with, and from, the best
The International Bar Association and King’s College London are collaborating to offer an elite, professional LLM. Our advanced program brings together diverse legal perspectives and expertise from around the world. Together, we confront some of the world’s most challenging legal issues; while bolstering your soft skills, important for leaders; and further integrating commercial and policy insights. We also help you to improve your international professional network. Our program's flexibility allows you to do all of this while continuing to advance your career.
This two-year, advanced Master of Laws is for collaborative, ethical, visionary lawyers from law firms, in-house or regulators (including competition authorities and tribunals), keen to build on their achievements. Our focus is on more senior lawyers, with approximately seven years of professional experience.
Through our unique course, participants engage with KCL's world-renowned authorities in Competition law, Finance law or International Dispute Resolution. A module in Transnational law encourages students to employ the gaps between jurisdictions, to benefit their 'clients'. Together, we combine insights in these areas with legal, commercial and policy perspectives in various sectors (small, focused teams select one of: Energy and Resources; Technology-based Enterprises; Major Projects; and Healthcare and Life Sciences). In advanced soft skills tutorials, we practice negotiation, leadership and difficult conversations, replicating the challenging environments that students confront every day. Finally, electives from beyond law, inspire participants to better understand the world in which firms operate, this includes: risk management, ethical decisions for multi-nationals and decision-making under conditions of uncertainty. All modules bridge theory and practice, bringing theoretical insights alive through real-world, practical case studies (often developed with influential IBA practitioners), and the shared experiences of the participants themselves.
The foundations of this part-time, Master of Laws are primarily delivered online. This gives you the flexibility to fit your study around your work commitments, while allowing us to deliver advanced content to you anywhere in the world. Five mandatory, London-based immersive weekends (three in the first year and two in the second year) build upon these foundations supporting you as you broaden, deepen and enrich your knowledge. Simultaneously, these collaborations enable your international, professional network to expand and bloom.
For more information and to apply visit the course pageTo register your interest click here or email executiveLLM@kcl.ac.uk.

January 19, 2017 | Permalink | Comments (0)

Free Innovation

Eric A. von Hippel, Massachusetts Institute of Technology (MIT) - Sloan School of Management describes Free Innovation.

ABSTRACT: In this book I integrate new theory and new research findings into the framework of a “free innovation paradigm.” Free innovation involves innovations developed and given away by consumers as a “free good,” with resulting improvements in social welfare. I explain that free innovation is an inherently simple, transaction-free, grassroots innovation process engaged in by tens of millions of people in the household sector of national economies. Unlike producer innovation, free innovation does not require intellectual property rights to function. Indeed, from the perspective of participants, free innovation is fundamentally not about money – it is about human flourishing.

I spell out the economics of free innovation relative to producer innovation, and its major economic impacts. These are currently not measured and so hidden from view. I also develop and explore major implications of free innovation for innovation theory, policymaking, and practice.

January 19, 2017 | Permalink | Comments (0)