Monday, July 31, 2017

Why and How the Supreme Court Should Have Decided O'Bannon v. NCAA

Matt Mitten, Marquette University - Law School explains Why and How the Supreme Court Should Have Decided O'Bannon v. NCAA.

ABSTRACT: Despite requests by both parties, the United States Supreme Court refused to grant a writ of certiorari in O’Bannon v. NCAA, the first federal appellate court decision holding that an NCAA student-athlete eligibility rule violates section 1 of the Sherman Act. The Ninth Circuit ruled that NCAA rules prohibiting intercollegiate athletes from receiving any revenue from videogames and telecasts incorporating their names, images, or likenesses unreasonably restrain economic competition among its member universities in the college education market in which these athletes purchase higher education services and sell their athletic services, which violates federal antitrust law. Circuit court rulings conflict regarding whether student-athlete eligibility rules are commercial restraints subject to the Sherman Act, and lower courts have inconsistently interpreted and applied NCAA v Board of Regents of University of Oklahoma, the Supreme Court’s only intercollegiate athletics antitrust law precedent. The Supreme Court’s refusal to resolve this conflict continues the significant judicial confusion regarding how antitrust law constrains the NCAA’s governance of intercollegiate athletics, which has evolved into a multibillion dollar part of the entertainment industry with millions of fans and more than 450,000 student-athletes. Its decision not to do also creates uncertainty regarding how lower courts will resolve pending antitrust challenges to other NCAA amateurism rules and input market restraints such as limits on the duration and maximum number of athletic scholarships per sport as well as transfer rules. This article makes some recommendations for applying section 1 to NCAA student-athlete eligibility rules and input market restraints, which will better promote consumer welfare, protect student-athletes’ economic rights, and permit the NCAA to promote the unique features of intercollegiate sports without unwarranted judicial micromanagement.

July 31, 2017 | Permalink | Comments (0)

Consumer Preferences, Cannibalization and Competition: Evidence from the Personal Computer Industry

Bin Li, Wright State University, Xinxin Li, University of Connecticut - School of Business, and Hongju Liu, University of Connecticut analyze Consumer Preferences, Cannibalization and Competition: Evidence from the Personal Computer Industry.

ABSTRACT: Understanding the degree of cannibalization and competition in online and offline markets is important to firms’ product line designs. However, few empirical studies have measured both effects simultaneously or have examined the factors that determine the extent of cannibalization and competition. In this study, we develop an empirical model to identify cannibalization and competition effects simultaneously in different markets, and further examine the impacts of consumer preferences on these two effects in a single integrated framework. Using data from the U.S. personal computer (PC) industry, we find that the online market exhibits stronger cannibalization and competition than the offline market. Both effects are significantly influenced by consumers’ search behavior and brand preference. Specifically, more active consumer search not only intensifies inter-brand competition but also amplifies intra-brand cannibalization. In addition, search has a higher impact on cannibalization than competition. Stronger consumer brand preference mitigates inter-brand competition, but its effect on intra-brand cannibalization varies for different consumer segments. In markets consisting of more high-end consumers, the intra-brand cannibalization increases with consumer brand preference, while, in contrast, in markets consisting of more low-end consumers, the intra-brand cannibalization decreases with consumer brand preference. The differences in consumer search and brand preference explain a significant fraction of the variations in both cannibalization and competition between different PC markets.

July 31, 2017 | Permalink | Comments (0)

Foreign State’s Entanglement in Anticompetitive Conduct

July 31, 2017 | Permalink | Comments (0)

The Growing Problem of Horizontal Shareholding

Einer Elhauge, Harvard sounds the alarm about The Growing Problem of Horizontal Shareholding.

ABSTRACT: Horizontal shareholding exists when significant shareholders have stock in horizontal competitors. (It is often imprecisely called "common shareholding," but that term can also apply when shareholders own stock in two noncompeting corporations. It differs from "cross-shareholding," which describes situations when firms own stock in each other, though cross-shareholding is effectively a special case of horizontal shareholding when the firms are competitors.) This Article presents new evidence confirming that horizontal shareholding has anticompetitive effects harmful to our economy and showing that the problem is only getting worse. It also rebuts various critiques of my proposal that high levels of horizontal shareholding in concentrated markets should be investigated and subject to antitrust enforcement when they are shown to have anticompetitive effects.

July 31, 2017 | Permalink | Comments (0)

Sunday, July 30, 2017

Most Downloaded Faculty on SSRN in the Last 12 Months - Antitrust Professors in the Top 100

How many people who teach or write in antitrust (at least one work in the last 2 years) are among the most influential, at least in terms of downloads, among all law scholars?  

Rank     Name Institution Downloads
4     Mark Lemley Stanford 16,290
11 Eric Posner Chicago     11,111
17 Damien Geradin Tilburg 9,951
22 David Evans UCL 8,951
34 Tim Wu     Columbia 6,747
39 Maurice Stucke Tennessee 6,283
43     Josh Wright George Mason 6,117
48 Nicolas Petit Liege 5,971
49 Wouter Wils European Commission 5,666
79 Daniel Sokol     University of Florida 4,463
82 Michael Carrier Rutgers 4,409
99     Jorge Contreras Utah 3,975


Update: I went through the list again and found that I omitted someone. 

July 30, 2017 | Permalink | Comments (0)

Friday, July 28, 2017

Asian Regional Competition Issues: Corruption, Communications, Nationalism: Globalisation in Reverse?

Asian Competition Forum
13th Annual Conference

Asian Regional Competition Issues: Corruption, Communications, Nationalism: Globalisation in Reverse?

Hong Kong
11-12 December 2017

Submissions should contain a title and an abstract limited to 500 words and should be sent to:
[email protected] by 31 July 2017.

This year’s conference has three principal themes:
1) Competition and corruption
Many Asian jurisdictions have problems with the interaction between competition and corruption in various forms. Collusion between government officials and commercial entities to rig bids for public procurement contracts is a widespread practice causing large losses for tax payers. This interface can cause complications for law enforcement due to conflicts between competition law and criminal law, as well as creating political tensions due to powerful vested interests. Technical complications can also arise regarding leniency, burden of proof, prosecutorial authority and the jurisdiction of various courts. Corruption and competition may also manifest itself in other ways via cartels and abuse of dominance.

2) Competition and communications
The ability to communicate within countries and between them in Asia is essential to improving individual firms’ and national competitiveness. We define communications broadly to include telecommunications and digital services, press and media, as well as physical communications – road, rail, shipping and aviation services. Without adequate communications within and between national markets, competition in many goods and services markets – both national and regional – are impaired. Many Asian communications markets have relatively low levels of competitive rivalry – ports, airports, shipping services, telecommunications, road and rail transport, often with markets dominated by state or legacy incumbents that are protected by high entry barriers or regulatory regimes.

3) Competition and nationalism
Many Asian jurisdictions have both publicly or privately-owned national champions which are supported by government policies that favour them and disfavour actual or potential rivals. Exemptions, de facto or de jure, direct or indirect state aid and restrictive licensing requirements may also impair competition and benefit the national champion. Moreover, the application of competition law may be used as a disguised protectionist tool to benefit domestic players and disfavour foreign rivals Obviously, due process and procedural issues can be, and often are, relevant to any of our chosen themes. As such, contributions on these issues are also most welcome.

July 28, 2017 | Permalink | Comments (0)

Advertising Competition in the Free-to-Air TV Broadcasting Industry

Marc Ivaldi, Toulouse School of Economics; Centre for Economic Policy Research (CEPR) and Jiekai Zhang, CREST-ENSAI analyze Advertising Competition in the Free-to-Air TV Broadcasting Industry.

ABSTRACT: This paper empirically investigates the advertising competition in the French broadcast television industry within a two-sided market framework. We use a unique dataset on the French broadcast television market including audience, prices, and quantities of advertising of twenty-one TV channels from March 2008 to December 2013. We specify a structural model of oligopoly competition and identify the shape and magnitude of the feedback loop between TV viewers and advertisers. We also implement a simple procedure to identify the conduct of firms on the market. We find that the nature of competition in the French TV advertising market is of the Cournot type. Further, we provide empirical evidence that the price-cost margin is not a good indicator of the market power of firms operating on two-sided markets. Finally, we provide a competition analysis. The counterfactual simulation suggests that the merger of advertising sales houses would not have significantly affected the equilibrium outcomes in this industry because of the strong network externalities between TV viewers and advertisers. These results provide a critical evaluation of the 2010 decision of the French competition authority to authorize the acquisition of two broadcast TV channels by a large media group under behavioral remedies.

July 28, 2017 | Permalink | Comments (0)

The "Better Deal" Makes Competition Policy a National Priority — AAI Offers An Actionable Agenda Moving Forward

From the press release:

With the announcement of the "Better Deal," the Democrats in Congress made competition policy a national priority. In recent work, the AAI has articulated concrete, actionable steps to effectively promote competition in the U.S. economy. In September of 2016, the AAI issued its National Competition Policy Statement, which provides detailed priorities for an antitrust enforcement agenda moving forward. It explains a variety of enforcement and policy responses to growing concentration, increasing inequality, and slower rates of start-ups that antitrust scholars, enforcers, and policymakers have identified over the last several years. The AAI also highlights the many tools in the current antitrust “toolkit” for how enforcement can tackle inequality. In a recent op-ed, AAI President Diana Moss outlines what antitrust has done and should do to help workers.

July 28, 2017 | Permalink | Comments (0)

The Commission’s e-commerce sector inquiry – Time to change presumptions on vertical restraints?

Lars Wiethaus and Simon Chisholm discuss The Commission’s e-commerce sector inquiry – Time to change presumptions on vertical restraints?

ABSTRACT: In May 2017, the European Commission published the final report of its e-commerce sector inquiry. In this article, published in Competition Law and Policy Debate, Lars Wiethaus and Simon Chisholm review the findings relating to e-commerce in goods and, from an economic perspective, assess whether the motivations of firms to employ vertical restraints support possible pro-competitive or anti-competitive interpretations. For the full article, click the link below.  

July 28, 2017 | Permalink | Comments (0)

Damages for Delay: The EU Held Liable for Harm Caused by ‘Unjustified Inactivity’ in General Court Proceedings

Luuk Bressers has written Damages for Delay: The EU Held Liable for Harm Caused by ‘Unjustified Inactivity’ in General Court Proceedings.

ABSTRACT: In a series of recent judgements the General Court ruled on the non-contractual liability of the Court of Justice of the European Union (‘CJEU’). In three of those cases the General Court held the CJEU liable for damages caused by delayed proceedings and awarded the applicants compensation for material and immaterial damages. While the non-contractual liability of the institutions of the European Union is a well-established principle of EU law, this was the first time this principle was applied to the CJEU itself.

July 28, 2017 | Permalink | Comments (0)

Thursday, July 27, 2017

Penalizing on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty

Yannis Katsoulacos, Athens University of Economics and Business, Evgenia Motchenkova, VU University Amsterdam - Department of Economics; TILEC, and David Ulph, University of St. Andrews - School of Economics and Finance are Penalizing on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty.

ABSTRACT: In Katsoulacos, Motchenkova and Ulph (2015) we examined the welfare properties of a number of monetary penalty regimes for tackling cartels, including revenue-based penalties (the most widely used regime), illegal gains-based penalties, and overcharge-based penalties. We showed that the latter regime welfare-dominates the others. However it is subject to criticism on the grounds of legal uncertainty and high implementation costs. In this paper we focus on analysing an alternative regime: a sophisticated revenue-based penalty regime in which the penalty base is the revenue of the cartel but the penalty rate depends on (and increases with) the cartel overcharge rate. Thus, in contrast to the currently employed simple revenue-based regime, the proposed regime penalises cartels taking also into account the severity of their offence in terms of the height of their overcharge. We show that this hybrid regime can effectively replicate the desirable welfare properties of an overcharge-based penalty structure while having very low levels of legal uncertainty and implementation costs.

July 27, 2017 | Permalink | Comments (0)

Growth Policy, Agglomeration and (the Lack of) Competition

Wyatt J. Brooks (University of Notre Dame) ; Joseph Kaboski (University of Notre Dame) ; and Yao Amber Li (Hong Kong University of Science and Technology) address Growth Policy, Agglomeration and (the Lack of) Competition.

ABSTRACT: Industrial clusters are promoted by policy and generally viewed as good for growth and development, but both clusters and policies may also enable non- competitive behavior. This paper studies the presence of non-competitive pricing in geographic industrial clusters. We develop, validate, and apply a novel test for collusive behavior. We derive the test from the solution to a partial cartel of perfectly colluding firms in an industry. Outside of a cartel, a firm’s markup depends on its market share, but in the cartel, markups across firms converge and depend instead on the total market share of the cartel. Empirically, we validate the test using plants with common owners, and then test for collusion using data from Chinese manufacturing firms (1999-2009). We find strong evidence for non-competitive pricing within a subset of industrial clusters, and we find the level of non-competitive pricing is about four times higher in Chinese special economic zones than outside those zones.

July 27, 2017 | Permalink | Comments (0)

Competition in Retail Electricity Markets : An Assessment of Ten Years Dutch Experience

Mulder, M. ; Willems, Bert (Tilburg University, TILEC) discuss Competition in Retail Electricity Markets : An Assessment of Ten Years Dutch Experience.

ABSTRACT: This paper examines a decade of retail competition in the Dutch electricity market and discusses market structure, regulation, and market performance. We find a proliferation of product variety, in particular by the introduction of quality-differentiated green-energy products. Product innovation could be a sign of a well-functioning market that caters to customer’s preferences, but it can also indicate a strategic product differentiation to soften price competition. Although slightly downward trending, gross retail margins remain relatively high, especially for green products. Price dispersion across retailers for identical products remains high, as also across products for a single retailer. We do not find evidence of asymmetric pass-through of wholesale costs. Overall, the retail market matured as evidenced by fewer consumer complaints and higher switching rates. A fairly intensive regulation of mature energy retail markets appears to be needed to create benefits for consumers.

July 27, 2017 | Permalink | Comments (0)

Wednesday, July 26, 2017

Tariffs, Vertical Oligopoly, and Market Structure

ARA Tomohiro and Arghya GHOSH discuss Tariffs, Vertical Oligopoly, and Market Structure.

ABSTRACT: We study the impact of market thickness on the optimal tariff in vertical specialization. We show that, in the exogenous market structure where the extensive margin is fixed and only the intensive margin responds to trade policy, when the Home optimal tariff is higher, the thicker is the Home final-good market (relative to the Foreign intermediate-good market). In the endogenous market structure where both extensive and intensive margins respond to trade policy, this relationship is overturned and as the Home optimal tariff is higher, the thinner is the Home final-good market. We also show that our analysis has an advantage of separately deriving the impact of tariffs on the extensive and intensive margins of homogeneous goods.

July 26, 2017 | Permalink | Comments (0)

Competition with Aftermarket Power When Consumers are Heterogeneous

Dainis Zegners, University of Cologne - Faculty of Management, Economics and Social Sciences and Tobias Kretschmer, Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR) address Competition with Aftermarket Power When Consumers are Heterogeneous.

ABSTRACT: We study a model of competitive foremarkets and partly monopolized aftermarkets. We show that high aftermarket power prompts firms to engage in inefficiently aggressive below‐cost pricing in the foremarket. This inefficiency is driven by the presence of consumers with valuations below marginal cost. While for intermediate aftermarket power their presence leads to a competition‐softening effect, for high aftermarket power firms attract increasing numbers of unprofitable consumers by aggressively pricing below cost. For high aftermarket power, firms' equilibrium profits can therefore be decreasing in aftermarket power but are always higher than for low aftermarket power. If firms engage in price discrimination by bundling the foremarket and aftermarket goods or by reducing their aftermarket power, they avoid selling to unprofitable consumers but also reduce the competition‐softening effect. This decreases firms' equilibrium profits but increases consumer and social welfare.

July 26, 2017 | Permalink | Comments (0)

Predatory Innovation: A Response to Suzanne Van Arsdale & Cody Venzke

Thibault Schrepel, University of Paris-Saclay offer Predatory Innovation: A Response to Suzanne Van Arsdale & Cody Venzke.

ABSTRACT: Predatory innovation – which is defined as the alteration of one or more technical elements of a product to limit or eliminate competition – is arguably one of the most important subjects faced by antitrust law in the context of the New Economy. It encompasses all practices that, under the appearance of genuine innovations, are anti-competitive strategies (Sherman Act Section 2 or 102 TFEU) aimed at eliminating competition. The objective is to remove the compatibility of third party technologies with a dominant firm’s product, or to impair competing technologies’ operations.

Very few literature deals with predatory innovation, and yet, the significance that digital technologies have taken in our everyday life implies that related anti-competitive practices might affect a great number. Predatory innovation practices are particularly propitious to spread rapidly to the extent that they may appear with any updates, which sometimes are installed without the user's consent.

On this basis, Suzanne Van Arsdale & Cody Venzke had published an article entitled “Predatory Innovation in Software Markets” in the Harvard Journal of Law & Technology (2015). Most predatory innovation related issues are well identified but the Article proposes the implementation of a specifically designed legality test—to address whether related practices should be sanctioned—which has numerous flaws. This note intends to show that the rules proposed by Van Arsdale & Venzke should be rejected and offers a broader perspective on how to deal with predatory innovation practices.

July 26, 2017 | Permalink | Comments (0)

Methodologies for Calculating FRAND Damages: An Economic and Comparative Analysis of the Case Law from China, the European Union, India, and the United States

Anne Layne-Farrar, Charles River Associates; Northwestern University and Koren W. Wong-Ervin, George Mason University, Scalia Law School - Global Antitrust Institute offer Methodologies for Calculating FRAND Damages: An Economic and Comparative Analysis of the Case Law from China, the European Union, India, and the United States.

ABSTRACT: In the last several years, courts around the world, including in China, the European Union, India, and the United States, have ruled on appropriate methodologies for calculating either a reasonable royalty rate or reasonable royalty damages on standard-essential patents (SEPs) upon which a patent holder has made an assurance to license on fair, reasonable and non-discriminatory (FRAND) terms. Included in these decisions are determinations about patent holdup, licensee holdout, the seeking of injunctive relief, royalty stacking, the incremental value rule, reliance on comparable licenses, the appropriate revenue base for royalty calculations, and the use of worldwide portfolio licensing. This article provides an economic and comparative analysis of the case law to date, including the landmark 2013 FRAND-royalty determination issued by the Shenzhen Intermediate People’s Court (and affirmed by the Guangdong Province High People’s Court) in Huawei v. InterDigital; numerous U.S. district court decisions; recent seminal decisions from the United States Court of Appeals for the Federal Circuit in Ericsson v. D-Link and CISCO v. CSIRO; the six recent decisions involving Ericsson issued by the Delhi High Court; the European Court of Justice decision in Huawei v. ZTE; and numerous post-Huawei v. ZTE decisions by European Union member states. While this article focuses on court decisions, discussions of the various agency decisions from around the world are also included throughout.

July 26, 2017 | Permalink | Comments (0)

Tuesday, July 25, 2017

Platform Monopolization by Narrow-PPC-BPG Combination: Booking Et Al.

Francisca Wals, University of Amsterdam - Faculty of Economics and Business (FEB) and Maarten Pieter Schinkel, University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) have a paper on Platform Monopolization by Narrow-PPC-BPG Combination: Booking Et Al.

ABSTRACT: The price parity clauses (PPCs) that online booking platforms impose have come under antitrust scrutiny. Wang and Wright (2017) argue that by preventing showrooming, a narrow PPC can reduce search costs and benefit consumers under between-platform competition. In response to having to give up its wide PPC to hotels, emphasized its best price guarantee (BPG) to customers. We observe that a narrow PPC combined with a BPG leaves only Wang and Wright's Price Parity and Monopoly Equilibrium (PPME), in which consumers are worse off than with no platform operating at all. A more efficient (incumbent) platform can deter entry with the BPG, whereas upon entry of an equally efficient platform, the BPG allows the platforms to price coordinate. The detrimental narrow-PPC-BPG contract combination that we point out calls for different platform competition policy.

July 25, 2017 | Permalink | Comments (0)

Sharing, Samples, and Generics: An Antitrust Framework

Michael A. Carrier, Rutgers Law School provides Sharing, Samples, and Generics: An Antitrust Framework.

ABSTRACT: Rising drug prices are in the news. By increasing price, drug companies have placed vital, even life-saving, medicines out of the reach of consumers. In a recent development, brand firms have prevented generics even from entering the market. The ruse for this strategy involves risk-management programs known as Risk Evaluation and Mitigation Strategies (“REMS”). Pursuant to legislation enacted in 2007, the FDA requires REMS when a drug’s risks (such as death or injury) outweigh its rewards. Brands have used this regime, intended to bring drugs to the market, to block generic competition. Regulations such as the federal Hatch-Waxman Act and state substitution laws foster widespread generic competition. But these regimes can only be effectuated through generic entry. And that entry can take place only if a generic can use a brand’s sample to show that its product is equivalent.

More than 100 generic firms have complained that they have not been able to access needed samples. One study of 40 drugs subject to restricted access programs found that generics’ inability to enter cost more than $5 billion a year. Brand firms have contended that antitrust law does not compel them to deal with their competitors and have highlighted concerns related to safety and product liability in justifying their refusals. This Article rebuts these claims. It highlights the importance of samples in the regulatory regime and the FDA’s inability to address the issue. It shows how a sharing requirement in this setting is consistent with Supreme Court caselaw. And it demonstrates that the brands’ behavior fails the defendant-friendly “no economic sense” test because the conduct literally makes no sense other than by harming generics.

Brands’ denial of samples offers a textbook case of monopolization. In the universe of pharmaceutical antitrust behavior, other conduct — such as “pay for delay” settlements between brands and generics and “product hopping” from one drug to a slightly modified version — has received the lion’s share of attention. But sample denials are overdue for antitrust scrutiny. This Article fills this gap. Given the failure of Congress and the FDA to remedy the issue, antitrust can play a crucial role in ensuring generic access to samples, affirming a linchpin of the pharmaceutical regime.

July 25, 2017 | Permalink | Comments (0)

Competition Law Prescriptions and Competitive Outcomes: Insights from Southern and East Africa

Simon Roberts, Centre for Competition, Regulation & Economic Development (CCRED) offers Competition Law Prescriptions and Competitive Outcomes: Insights from Southern and East Africa.

ABSTRACT: The spread of competition law across southern and East Africa is considered in light of issues raised by research done across the region in recent years in key markets. This research considers the nature and extent of competition in practice, and the role, if any, played by competition law and policy. The selected markets are for two commodities, cement and fertilizer, which can be considered the ‘bread and butter’ of competition enforcement, and the markets for services in telecommunications and finance commonly described under the heading of ‘mobile money’. East Africa, specifically Kenya and Tanzania, are global leaders in the development of these services. The paper also reflects on work relating to barriers to entry in South Africa. Conclusions are drawn as to a competition policy and enforcement agenda to foster competitive markets in African countries.

July 25, 2017 | Permalink | Comments (0)