Wednesday, February 22, 2017

The Antitrust of Foreign Direct Investments vis-à-vis Energy and Sustainability Patents

Parham Farhang Vesal, Graduate Institute, Geneva (IHEID) describes The Antitrust of Foreign Direct Investments vis-à-vis Energy and Sustainability Patents.

ABSTRACT: This study analyzes the feasibility of optimal equilibrium between antitrust exigencies and patent law necessities, when it comes to transnational investments in energy and sustainability global market. In doing so, the study first briefs on the ambits encircling the several interconnected subject-matters of law and economy associated with its general topic. Having scrutinized the current state of antitrust-patent intersection at WTO forum, the study moves on towards landmark literature and national practices and precedents regarding the interactivity of antitrust policy and patent law. With that backset, the specific antitrust problems of foreign direct investment in the global market of energy and sustainability products are explored in details. Based on all the argumentations and analyses provided, the study proposes a solution to the antitrust problem of foreign direct investment vis-à-vis energy and sustainability patents. Using mathematical schemes for decision-making, the proposed solution aims at introducing a fuzzjective efficiency test implementation for energy and sustainability patents. Lastly, the study portrays the orbits, components, and participants of a functional constitutive structure in which such decision-makings are to be carried out.

 

February 22, 2017 | Permalink | Comments (1)

From Economic Recession to Legal Opportunity: The Case for Cartel Criminalisation in Europe

Anna Tzanaki, University College London, Centre for Law, Economics and Society, has written on From Economic Recession to Legal Opportunity: The Case for Cartel Criminalisation in Europe.

ABSTRACT: In the aftermath of the global financial meltdown and ensuing EU crisis, the European Union still tries to agree on the causes and fine-tune its regulatory responses. Among the policy tools employed, once unimagined but now the new mainstream, have been high-powered EU state-aid laws, bank bail-in rules and aggressive intervention away from market fundamentals. Yet the crucial question remains looming upon EU policymakers: can the next crisis be prevented? Perhaps an affirmative answer partly lies with enhancing individual liability that goes beyond macro and reactive approaches and promotes deterrence of the actual wrongdoers. After all, it is people behind financial and private organisations making the actual decisions that impact our lives.

In the area of EU competition law, the time is ripe to seriously think about criminalising cartels. Despite details of implementation – EU harmonisation or decentralised enforcement, the price of another missed opportunity is too high and the challenges posed by the EU supranational structure can no longer serve as an excuse. More importantly, counter to claims that such a move is not in line with the European tradition, there is ample evidence that several Member States criminalise hard-core anticompetitive behaviour in their national laws, and the EU itself is moving to that direction in other areas (e.g. criminal sanctions for market abuse offences). In the age of corporate elites, managerial capitalism, financial and industrial globalisation the most effective way to hold accountable those at the top of the ladder is by raising the threat of criminal liability. In this way we make sure that their incentives are closely aligned with those of society as a whole. In the process we also address major problems such as agency costs, moral hazard and reinforce the effectiveness of existing leniency programmes aiming to undermine cartel stability.

What Europe mostly needs is more competition and to that goal we must make market players realise that they cannot rig the rules, as they shall have “skin in the game”. By having individuals bear at least some of the consequences of their actions, not only do we foster competition on the merits and help restore public confidence in markets but we also relieve companies and their parents from exorbitant monetary sanctions which have proved ineffectual and counterproductive and hence set the path for the natural selection of value creating firms in a healthy business environment. Criminalising hard-core cartels is the right thing to do and is also good economic policy that sets the tone for more thriving EU business and more law-abiding corporate employees. No question many challenges lie ahead and one needs to proceeds with great care in designing and implementing criminal law policy, yet the direction is clear.

This essay attempts to answer three questions: i) why illegal cartels persist given the existing liability regime in Europe; ii) why criminal sanctions against hard-core cartelists are a necessary supplement to the antitrust enforcement toolbox; iii) why criminal sanctions are desirable from a normative perspective. Accordingly, the analysis proceeds as follows. Part II sheds light on two prominent but underappreciated problems in the intersection of EU antitrust law and corporate governance that underlie the failures and inadequacy of the existing liability regime. Part III analyses the advantages of moving towards a mixed regime that combines corporate and individual criminal liability. Part IV explores the normative, economic and moral, arguments for cartel criminalisation. Part V concludes with some thoughts on lessons to be learnt from the crisis and the way forward for Europe.

 

 

February 22, 2017 | Permalink | Comments (0)

Tuesday, February 21, 2017

Securing the Legitimacy of Individual Sanctions in UK Competition Law

Jonathan Galloway, Newcastle Law School has written on Securing the Legitimacy of Individual Sanctions in UK Competition Law.

ABSTRACT: Traditional deterrence theory relies on a combination of probability and severity of punishment to impose a perception of sufficiently high costs to deter wrongdoing. Yet when a very high severity of punishment counters a low probability, disproportionate outcomes give rise to societal concerns about procedural fairness and justice, such that the law loses legitimacy. Any loss of legitimacy undermines would-be offenders’ normative commitment to, and voluntary compliance with, the law. The UK has encountered significant obstacles in efforts to enhance the deterrence of competition law. The Enterprise Act 2002 and the Enterprise and Regulatory Reform Act 2013 introduced individual sanctions, consisting of a criminal cartel offence and director disqualification orders, to deter anti-competitive behaviour. This article argues that poor drafting and prosecutorial failure are responsible for the failure to earn and secure the legitimacy of the cartel offence. Yet the greatest regulatory failure is not making fuller use of the disqualification powers, which have greater legitimacy. By following the approach suggested in this article the deterrent value and legitimacy of UK competition law would increase, and we would be closer to achieving the goals of the individual sanctions when they were introduced over 13 years ago.

 

February 21, 2017 | Permalink | Comments (0)

Big Data, Open Data, Privacy Regulations, Intellectual Property and Competition Law in an Internet of Things World

Bjorn Lundqvist, Stockholm University - Faculty of Law analyzes Big Data, Open Data, Privacy Regulations, Intellectual Property and Competition Law in an Internet of Things World.

ABSTRACT: The interface between the legal systems triggered by the creation, distribution and consumption of Data is difficult to grasp, and this paper therefore tries to dissect this interface by following information, i.e. ‘the data’ from its sources, to users and re-users and ultimately to its consumers in an ‘Internet of Things’, or Industrial Internet, setting. The paper starts with the attempt to identify what legal systems are applicable this process, with special focus on when competition law may be useful for accessing data. The paper conclude that general competition law may not be readily available for accessing generic (personal or non-personal) Data, except for the situation where the Data set is indispensable to access an industry or a relevant market; while sector specific regulations seem to emerge as a tool for accessing Data held by competitors and third parties. However, the main issue under general competition law in the Data industry, at its current stage of development, is to create a levelled playing field by trying to facilitate the implementation of Internet of Things.

February 21, 2017 | Permalink | Comments (0)

A Theory of Bundling Advertisements in Media Markets

Kevin M. Murphy and Ignacio Palacios-Huerta offer A Theory of Bundling Advertisements in Media Markets.

ABSTRACT: Watching TV and other forms of media consumption represent, after sleeping and working, the main activity that adults perform in developed countries. We present a dynamic theory of commercial broadcasting where the media trade utility-raising goods (programs, information, and services) with audiences in exchange for their exposure to advertisements (utility-decreasing bads), and where goods are otherwise free to the audience except for their opportunity cost of time. Goods and bads are dynamically arranged, and as such traded in an intertemporal bundle. No monetary transfers take place between media and audiences, and this barter exchange is not contractually sustained. We study this dynamic problem in a model that captures the central characteristics of how commercial media markets operate. The model is rich enough to account for a variety of disparate evidence in television, radio, print media and the web.

February 21, 2017 | Permalink | Comments (0)

Publishing Retail Prices in an Inflationary Context: Evidence from Argentina

Horacio Larreguy; Robert Rodriguez and Laura Trucco have written up Publishing Retail Prices in an Inflationary Context: Evidence from Argentina.

ABSTRACT: When inflation is high, the dispersion of prices across sellers of the same good increases, and both sellers and consumers lose sight of reference prices. As a result, the degree of competition in the market weakens. The government of Argentina, a country with a current 35% annual inflation rate, has recently launched a program that provides consumers with store-level daily-updated information on prices for goods sold in major supermarkets across the entire nation. In this project, we use a unique dataset with this rich information on daily geolocated prices in order to study the effect of publishing prices on competition across stores, and its consequences on price dispersion.

February 21, 2017 | Permalink | Comments (0)

Monday, February 20, 2017

Characterization of the relevant market in the media industry: some new evidence!

Bardey, David ; Santos, Nicolas and Tovar, Jorge offer a Characterization of the relevant market in the media industry: some new evidence!

ABSTRACT: In this paper we estimate the degree of substitutability for advertisers across different media outlets. The estimates are motivated by the need that competition agencies have to properly characterize the relevant market when dealing with mergers in the media industry. As technology changes the industry, advertisers may not view a given media outlet as independent from those operating in other media platforms. Indeed, our results show that advertisers see outlets across platforms, either as substitutes or complements. From a policy perspective, our findings imply that competition agencies, particularly when defining relevant markets, should not assume that advertisers operate independently within a single media platform.

February 20, 2017 | Permalink | Comments (0)

Price discrimination of ott providers under duopolistic competition and multi-dimmesional product differentiation in retail broadband access

José Marino García García; Aurelia Valiño Castro; and A. Jesús Sánchez Fuentes examine Price discrimination of ott providers under duopolistic competition and multi-dimmesional product differentiation in retail broadband access.

ABSTRACT: Network neutrality regulation prevents price discrimination from Access Providers to Content Providers and product differentiation in terms of connection quality in the retail broadband access market. This paper analyzes the economic implications of price discrimination under duopolistic competition and multi-dimensional product differentiation in retail internet access using a sequential-moves game theoretic model. Under this framework, we discuss the impact of product differentiation and price discrimination on social welfare, and offer systematic simulations using feasible ranges for parameters value to help discern the impact of departing from network neutrality regulation on social welfare.

February 20, 2017 | Permalink | Comments (0)

On leniency and markers in antitrust: how many informants are enough?

Konstantinos Charistos (Department of Economics, University of Macedonia) and Christos Constantatos (Department of Economics, University of Macedonia) ask On leniency and markers in antitrust: how many informants are enough?

ABSTRACT: In this paper we investigate the impact of leniency programs on firms’ decision to collude. We depart from previous literature by relaxing the assumption that evidence provided by a single firm suffices to convict an existing cartel with certainty. Assuming the conviction-probability to be increasing in the number of reporting firms, we show first that efficient cartel deterrence requires incentives for all firms to report. Under a regime that secures a marker for the first in line applicant, eligibility for leniency should be extended to at least a second informant. Further, we show that the introduction of the marker system has an ambiguous impact on cartel deterrence. In relation to the manner that the marker is secured and the cartel-related evidence is allocated, we derive the conditions under which allowing the first applicant to secure a marker enhances cartel deterrence.

February 20, 2017 | Permalink | Comments (0)

Innovation, Competition and Technical Efficiency

Elina Berghall discusses Innovation, Competition and Technical Efficiency.

ABSTRACT:  Contradictory empirical and theoretical evidence on the relationship between innovation and competition has been reconciled in a model that yields an inverted U-shaped curve. I test whether the predictions of the model are supported by the data with an unbalanced panel of firms for 1990-2003 in a high productivity growth, high-tech industry, Finnish ICT manufacturing. In particular, I investigate how well alternative, yet rigorous measures of innovation and the technology gap, such as R&D intensity, R&D elasticity, technical change, technical efficiency and total factor productivity fare with respect to competition measured by the Lerner index. The results prove sensitive to the choice of variable. Overall, the model is not supported by the empirical evidence of the industry.

February 20, 2017 | Permalink | Comments (0)

Friday, February 17, 2017

Reputation and foreclosure with vertical integration: Experimental evidence

Claudia Mollers discusses Reputation and foreclosure with vertical integration: Experimental evidence.

ABSTRACT: Building on the seminal paper of Ordover, Saloner and Salop (1990), I study the role of reputation building on foreclosure in laboratory experiments. In one-shot interactions, upstream firms can choose to build a reputation by revealing their price history to the current upstream competitor. In particular, integrated firms can establish a reputation to foreclose the input market.an outcome that would otherwise not be tenable due to a commitment problem. I get three main results: First, withdrawal from the input market is three times more common with reputation building of the integrated firm. Second, the anticompetitive effects are much stronger when the integrated firm builds a reputation. Third, integrated firms choose to build a reputation significantly more often than non-integrated firms. Markets with reputation building of the integrated firm are ten times more often monopolized than without.

February 17, 2017 | Permalink | Comments (0)

Consumer Loss Aversion, Product Experimentation and Implicit Collusion

Salvatore Piccolo (Università Cattolica del Sacro Cuore (Milano), and CSEF) and Aldo Pignataro (Università Cattolica del Sacro Cuore (Milano)) identify Consumer Loss Aversion, Product Experimentation and Implicit Collusion.

ABSTRACT: Two firms supplying experience goods compete to attract loss averse consumers that are uncertain about how well these goods fit their needs. To resolve valuation uncertainty, firms can allow perspective customers to test (experiment) their products before purchase. We investigate firms' dynamic incentives to allow experimentation and analyze the resulting effects on the profitability and the stability of horizontal price fixing. The analysis shows that, depending on the regulatory regime in place | i.e., whether experimentation is forbidden, mandated or simply allowed but not imposed (laissez-faire) | the degree of consumer loss aversion has ambiguous effects both on the profits that firms can achieve through implicit collusion and on the extent to which these agreements can be sustained. Moreover, we also show that while in static environments consumer welfare is always maximized by a policy that forbids experimentation, the opposite might happen in a dynamic environment.

February 17, 2017 | Permalink | Comments (0)

The European Commission's E-commerce Sector Inquiry

Thomas Kramler, DG Competition describes The European Commission's E-commerce Sector Inquiry.

ABSTRACT: E-commerce in the EU has grown steadily over the past years. Today, the EU is the largest e-commerce market in the world. In total, 53 per cent of the EU population shopped online in 2015. The rapid development of e-commerce affects both consumers and businesses alike. The enhanced transparency in online markets lowers search costs for consumers who are now able to instantaneously obtain and compare product and price information online. This provides consumers with better choice at better prices as the price transparency leads to more intensive price competition. For businesses, e-commerce brings opportunities in terms of wider reach of potential customers but also challenges in terms of preserving the brand image, the quality of distribution, and guarding against free-riding. EU competition policy and enforcement needs to be in sync with these new market realities.

February 17, 2017 | Permalink | Comments (0)

Thursday, February 16, 2017

FTC Acting Chairman Ohlhausen Announces Tad Lipsky as Acting Director of Bureau of Competition

FTC Chair Maureen Ohlhausen has tapped the highly capable Tad Lipsky to be the Acting Head of the Bureau of Competition.  Tad has had a distinguished career.  He also may be the coolest person to ever have practiced antitrust.  Put differently, unless you too have played onstage with BB King, you will never be as cool as Tad.  Tad was also the first guest speaker I ever had for an antitrust class.  He guest lectured for my international antitrust class at the University of Wisconsin in the spring 2007 and the students loved him.

February 16, 2017 | Permalink | Comments (1)

Alleged Scandal involving bribery and the KFTC

News reports from Korea  are not positive for Samsung. The Associated Press reports that anti-corruption prosecutors are investigating the KFTC:

The investigators have also reportedly looked at whether South Korea's fair trade commission gave any favors to Samsung related to a complex cross-shareholding structure that allows the Lee family to exert an outsized influence on Samsung Electronics and its dozens of affiliates, while holding a small stake. The anti-trust regulator was raided earlier this month by prosecutors.

February 16, 2017 | Permalink | Comments (0)

How Far Can the Anti-Monopoly Enforcement Agencies Go When Adopting Commitment Decisions? The Need to Safeguard the Commitment Procedure Under the Chinese Anti-Monopoly Law

Yichen Yang asks How Far Can the Anti-Monopoly Enforcement Agencies Go When Adopting Commitment Decisions? The Need to Safeguard the Commitment Procedure Under the Chinese Anti-Monopoly Law.

ABSTRACT: Since the Chinese Anti-Monopoly Law (AML) entry into force in 2008, the commitment decision as an alternative to an infringement decision has been established for use by the Anti-monopoly Enforcement Authorities (AMEAs) in putting an end to anticompetitive conduct. As Article 45 of the AML stipulates, if the AMEA deems the commitments offered by an undertaking adequately address the identified competitive concerns, the AMEA shall suspend the investigation, which means it may put a long investigatory process to an end without establishing the illegality of the conduct and without imposing a fine on it. The purpose of commitment decisions is to increase procedural efficiency, which represents ‘a rapid solution’ for bringing anticompetitive behaviour to an end and restoring effective competition to the relevant market. So Article 45 of the AML emphasises that commitment decisions are proposed to ‘eliminate the effects of such [monopolistic] conduct by implementing specific measures within the time limit prescribed by the AMEA’.3 This is similar to Article 9 of Regulation 1/2003 under EU competition law that ‘such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission’.

February 16, 2017 | Permalink | Comments (0)

Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers

Alberto Cavallo asks Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers.

ABSTRACT: Online prices are increasingly used for measurement and research applications, yet little is known about their relation to prices collected offline, where most retail transactions take place. I conduct the first large-scale comparison of prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72 percent of the time. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for national statistical offices, researchers using online data, and anyone interested in the effect of the Internet on retail prices.

February 16, 2017 | Permalink | Comments (0)

The effects of competition on medical service provision

Brosig-Koch, Jeannette ; Hehenkamp, Burkhard and Kokot, Johanna analyze The effects of competition on medical service provision.

ABSTRACT: We explore how competition between physicians affects medical service provision. Previous research has shown that, without competition, physicians deviate from patient-optimal treatment under payment systems like capitation and fee-for-service. While competition might reduce these distortions, physicians usually interact with each other repeatedly over time and only a fraction of patients switches providers at all. Both patterns might prevent competition to work in the desired direction. To analyze the behavioral effects of competition, we develop a theoretical benchmark which is then tested in a controlled laboratory experiment. Experimental conditions vary physician payment and patient characteristics. Real patients benefit from treatment decisions made in the experiment. Our results reveal that, in line with the theoretical prediction, introducing competition can reduce overprovision and underprovision, respectively. The observed effects depend on patient characteristics and the payment system, though. Tacit collusion is observed and particularly pronounced with fee-for-service payment, but it appears to be less frequent than in related experimental research on price competition.

February 16, 2017 | Permalink | Comments (0)

'Telephone terrorism' has rattled 48 Jewish centers. Is anyone paying attention?

This story is alarming - CNN reports 'Telephone terrorism' has rattled 48 Jewish centers. Is anyone paying attention?

Of note was the following stat:

In 2014 and 2015 the FBI tallied more than 1,270 hate crime incidents targeting Jews, far more than any other religious groups, and some Jewish leaders say the situation is getting worse.

 

February 16, 2017 | Permalink | Comments (0)

Oligopoly Power in the Food Industries Revisited: A Stochastic Frontier Approach

Lopez, Rigoberto A. (University of Connecticut) ; Zheng, Hualu (University of Connecticut) and Azzam, Azzeddine (University of Nebraska-Lincoln) discuss Oligopoly Power in the Food Industries Revisited: A Stochastic Frontier Approach.

ABSTRACT: This study estimates mark-ups and oligopoly power for U.S. food industries using a stochastic frontier (SF; Kumbhakar, Baardsen and Lien, 2012; Baraigi and Azzam, 2014) approach, where mark-ups are treated as systematic deviations from a marginal cost pricing frontier. We apply the analysis to 36 U.S. food industries using NBER-CES Manufacturing Industry Database (2014), which covers a span of 31 years from 1979 to 2009. Empirical results show that all the food industries in the sample exercise at least some degree of oligopoly power, but most in a moderate manner. The estimated mean Lerner index is approximately 0.06, generally much lower than obtained using the conventional NEIO approaches. The SF model used provides a novel and promising framework to test and measure the degree of market power in agricultural and food markets.

February 16, 2017 | Permalink | Comments (0)