Tuesday, July 11, 2017

On the countervailing power of large retailers when shopping costs matter

Caprice, Stéphane and Shekhar, Shiva provide thoughts On the countervailing power of large retailers when shopping costs matter.

ABSTRACT: We consider a set-up with vertical contracting between a supplier and a retail industry where a large retailer competes with smaller retailers that carry a narrower range of products. Consumers are heterogeneous in their shopping costs; they will either be multistop shoppers or one-stop shoppers. The countervailing power of the large retailer is modeled as a threat of demand-side substitution. We show that retail prices are higher, and industry surplus and social welfare fall, when the large retailer possesses countervailing power. Increasing marginal wholesale prices discourages multistop shopping behavior of consumers, making demand substitution less attractive for the large retailer.

July 11, 2017 | Permalink | Comments (0)

Complementarity and Bargaining Power

Bonnet, Céline ; Bouamra-Mechemache, Zohra ; Richards, Timothy discuss Complementarity and Bargaining Power.

ABSTRACT: Bargaining power in vertical channels depends critically on the "disagreement profit" or the opportunity cost to each player should negotiations fail. In a multiproduct context, disagreement profit depends on the degree of substitutability among the products offered by the downstream retailer. Horn and Wolinsky (1988) use this fact to argue for the clear importance of complementarity relationships on bargaining power. We develop an empirical framework that is able to estimate the effect of retail complementarity on bargaining power, and margins earned by manufacturers and retailers in the French soft drink industry. We show that complementarity increases the strength of retailers' bargaining position, so their share of the total margin increases by almost 28% relative to the no-complementarity case.

July 11, 2017 | Permalink | Comments (0)

Monday, July 10, 2017

Evaluating Market Consolidation in Mobile Communications

Christos Genakos, Cambridge University; Centre for Economic Performance (CEP), Tommaso M. Valletti, Imperial College Business School; University of Rome, Tor Vergata - Department of Financial and Quantitative Economics; Centre for Economic Policy Research (CEPR), and Frank Verboven, KU Leuven are Evaluating Market Consolidation in Mobile Communications.

ABSTRACT: We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators' prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user prices. Furthermore, they also lead to higher investment per mobile operator, though the impact on total investment is not conclusive. Our findings are not only relevant for the current consolidation wave in the telecommunications industry. More generally, they stress that competition and regulatory authorities should take seriously the potential trade-off between market power effects and efficiency gains stemming from agreements between firms.

July 10, 2017 | Permalink | Comments (0)

A Retrospective Evaluation of the GDF/Suez Merger: Effects on Gas Hub Prices

Elena Argentesi, University of Bologna - Department of Economics, Albert Banal-Estañol, Universitat Pompeu Fabra - Department of Economics and Business (DEB); City University London - Department of Economics, Jo Seldeslachts, University of Amsterdam; Tinbergen Institute and Meagan Andrews offer A Retrospective Evaluation of the GDF/Suez Merger: Effects on Gas Hub Prices.

ABSTRACT: We present an ex-post analysis of the effects of GDF’s acquisition of Suez in 2006 created one of the world’s largest energy companies. We perform an econometric analysis, based on Difference-in-Difference techniques on the market for trading on the Zeebrugge gas hub in Belgium. Removing barriers to entry and facilitating access to the hub through ownership unbundling were an important part of the objectives of the remedies imposed by the European Commission. Our analysis shows a price decline after the merger. This decline suggests the remedies were effective in limiting the potential anti-competitive effects of the merger. Moreover, it suggests that ownership unbundling has generated improved access to the hub. Therefore, the remedies may have done more than simply mitigate the potential anticompetitive effects of the merger; they may have effectively created competition.

July 10, 2017 | Permalink | Comments (0)

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 10, 2017 | Permalink | Comments (0)

Portfolio Diversification, Market Power, and the Theory of the Firm

José Azar, University of Navarra, IESE Business School identifies Portfolio Diversification, Market Power, and the Theory of the Firm.

ABSTRACT: This paper develops a model of firm behavior in the context of oligopoly and portfolio diversification by shareholders. Competition for shareholder votes among potential managers seeking corporate office leads to internalization and aggregation of shareholder objectives, including shareholdings in other firms, and the fact that shareholders are consumers and workers of the firms. When all shareholders hold market portfolios, firms that are formally separate behave as a single firm. I introduce new indices that capture the internalization effects from consumer/worker control, and discuss implications for antitrust, stakeholder theory, and the boundaries of the firm.

July 10, 2017 | Permalink | Comments (0)

Friday, July 7, 2017

Defining the Public Interest in Regulatory Decisions: The Case for Economic Efficiency

Jeffrey Church, University of Calgary - Department of Economics is Defining the Public Interest in Regulatory Decisions: The Case for Economic Efficiency.

ABSTRACT: Canada’s public utility regulators – in sectors ranging from energy to telecommunications – are under attack. Regulators and their decisions have been subject to withering commentary, hostility, disbelief, contempt and even disobedience.

Many of the concerns regarding regulation arise because their enabling legislation does not clearly articulate the purpose of regulation. The goal of regulation should be to maximize the value of production from Canada’s scarce resources, its land, natural resources, capital, and labour. The only goal of regulation should be economic efficiency: maximizing the wealth of the nation. But, it usually is not.

In circumstances when markets do not deliver efficiency, for instance when firms degrade the environment without paying or have monopoly power, intervention by an independent regulator can promote investment, economic growth, and rising standards of living. For intervention to be more likely to have these positive effects, the sole mandate of the regulator needs to be promoting efficiency.

Instead, many governments provide regulators with a vague mandate to act in the public interest, or multiple, often conflicting objectives. That leaves regulators with far too much latitude to be influenced by lobbying, rent seeking, and political influence. Indeed, to minimize the potential for exchanges between politicians and special interest groups involving favourable policy in return for cash and votes, it is important that governments delegate regulatory decisions to independent regulators (handcuffed by an efficiency mandate), and not leave regulatory decisions to politicians.

Issues such as income distribution are too important for governments to delegate to autonomous unelected regulators. The issue of the appropriate distribution of income, which fundamentally involves taking from one group of citizens and giving to another, should be determined in the political process. Regulatory processes are not a substitute forum for the expression of preferences over the distribution of income and resource development. Some of today’s social frustration with regulation is a result of it being asked to decide whose preferences are more worthy, a task for which regulators are ill-suited. Instead, regulators with an efficiency mandate would focus only on aggregate costs and benefits. Such a renewed focus would have important, beneficial, implications for the practice of regulation.

An advantage to society of an economic efficiency mandate is that a regulator can more readily resist demands that, in the short run, have immediate benefits for some, but in the long run destroy the incentive for investment and wealth creation. It is time that governments across Canada refocus regulators with an explicit and singular mandate to improve economic efficiency.

July 7, 2017 | Permalink | Comments (0)

Never a Sporting Chance: Broadband and Content Bundling in the Merger of Two Dominant Firms

Bronwyn E. Howell, Victoria University of Wellington - School of Management and Petrus H Potgieter, University of South Africa suggest Never a Sporting Chance: Broadband and Content Bundling in the Merger of Two Dominant Firms.

ABSTRACT: Bundling of broadband access and other services prevails in telecommunications markets. In converging markets, bundling broadband with video content is feared to foreclose broadband market competition. However, the motivations for bundling are many and complex, as are the forms it can take in different demand- and supply-side circumstances and its effects on both profits and welfare. Yet discussion of bundling in telecommunications markets has focused almost exclusively on the potential for strategic foreclosure by a dominant firm.

Analysing the recently-declined New Zealand merger between Sky Television and Vodafone, we find that bundling fixed broadband with fixed voice connections or with mobile services likely harms dynamic efficiency more than bundling it with one content deliverer or application. Preventing content and broadband bundling can potentially interfere with infrastructure investment and decommissioning decisions during the transition to an all-IP environment. Furthermore, deep discounting of bundles may be evidence of informed consumers acting rationally or effectively competitive firms responding to market incentives, as well as of an intention to foreclosure.

We recommend that more attention be given in future analyses to demand-side factors influencing the efficiency of bundled offers, and the form of bundling employed in addition to its presence or absence.

July 7, 2017 | Permalink | Comments (0)

Legal Issues Surrounding the Use of Social Media - July 13, 2017

From LinkedIn to Instagram to Twitter, social media is everywhere. And it is surrounded by legal issues. How do companies manage their employee’s use of social media to protect their brands and intellectual property, and how can companies protect consumers’ privacy and avoid causing confusion when marketing through social media?

July 13, 2017

5:30 pm – 6:30 pm

Kelley Drye & Warren LLP
Washington Harbour
3050 K Street NW, Suite 400
Washington, DC 20007

Join us for a panel discussion of these and other legal issues related to social media, followed by a networking reception. Panelists will include Professor Rebecca Tushnet of Georgetown Law School and Susan Duarte of Sprint Corporation.

There is no cost for this event, which is open to Intellectual Property Members, Government, Non-Profit, Students, and Other Non-Members.

July 7, 2017 | Permalink | Comments (0)

Data Protection Authorities and Information Technology

Ivan Szekely, OSA Archivum; Eotvos Karoly Policy Institute and Charles D. Raab, University of Edinburgh discuss Data Protection Authorities and Information Technology.

ABSTRACT: The ability of data protection authorities (DPAs) to gain and deploy sufficient knowledge of new technological developments in their regulation of personal-information practices is an important consideration now and for the future. However, DPAs’ capacity to keep abreast of these developments has been questionable, and improvements in this are a matter of concern, especially given DPAs’ task requirements under the European Union’s (EU) General Data Protection Regulation (GDPR). This article reports the findings of a recent survey of EU DPAs that explore the problems they have in comprehending new technologies and how they are dealing with them.

July 7, 2017 | Permalink | Comments (0)

Thursday, July 6, 2017

Tad Lipsky rides off to retirement

Tad Lipsky officially retired this week after 40 years of practice including senior level stints at both the DOJ and FTC. I first met Tad on a deal in 2004.  We bonded at a closing dinner at the client's mega estate in Palm Beach.  Tad and I had a common background (Amherst College) but in many ways, Tad was far cooler than I could ever hope to have been pre-kids and now with kids, I can never be cool.  

As a graduate student at Stanford, Tad had a band that was supposed to open for musical legend BB King.  Because BB's backup guitarist got sick, Tad played on stage with BB for the entire night (second coolest antitrust lawyer on stage is Brazil's Paulo Lilla who played a song onstage with U2 a few years ago).  Tad is smart and had a meteoric rise as DOJ, where he was one of the Bill Baxter group of young Turk DAAGs that reshaped antitrust.  I would add that over the years working with the US Chamber, Tad often had the most insightful comments in meetings.  His published articles showed deep thought on some of the most difficult antitrust issues.  He was cool headed and made a spectacular guest lecturer in my class.  At the FTC, he was often the public face of the agency and said exactly what he thought.  I wish more people were like Tad in so many ways.

July 6, 2017 | Permalink | Comments (0)

Supermarket Power in Australia: Looking Back and Ahead Friday, 13 October 2017

 

Supermarket Power in Australia:

Looking Back and Ahead

_____

Public Symposium

 

2018 marks important milestones in the ongoing debate about the role and impact of the major supermarket chains in Australia’s grocery sector, economy and society.


Next year is the 10th anniversary of the Australian Competition and Consumer Commission’s significant report into grocery prices, the year in which there will be a government review of the Food and Grocery Code of Conduct introduced in 2015 and five years since the first Supermarket Power Symposium convened by the University of Melbourne and Monash University.

Hosted by the University of Melbourne in 2017, this academically guided symposium brings together representatives from industry, government, the legal profession and civic society to explore key issues relating to competition, fair trading and consumers , reflecting on significant developments over the last decade and looking ahead to foreshadow future directions in the sector.

Inspired by a major research project being conducted by the University, the symposium has a particular focus on analysing and assessing the approach taken to regulation of competition and fair trading in the sector and draws for this purpose on insights from overseas experience.

Organisers

The Symposium is organised by Professor Caron Beaton-Wells, in conjunction with Emeritus Professor David Merrett of the University of Melbourne, Adjunct Professor Christopher Arup of Monash University, Honorary Associate Professor Jane Dixon of the Australian National University, and Research Fellow Jo Paul of the University of Melbourne.

Speakers

  • David Brewster, Coles
  • Sarah Court, Australian Competition and Consumer Commission
  • Natalie Davis, Woolworths Group
  • Judith Fox, Australian Shareholders Association
  • John McQueen, Australian Dairy Farmers
  • Professor Christine Parker, University of Melbourne
  • Neil Rechlin, NextGen
  • Dr Nick Rose, The Australian Food Network
  • Dr Marcus Spiller, SGS Economics and Planning
  • Craig Woolford, Citi
 

Venue

The David P. Derham Theatre, Mezzanine level,
Melbourne Law School, 185 Pelham Street, Carlton

Google map reference 

Time

Registration from 9am
Program commences, 9:30am
Program closes, 5:00pm

RSVP

Friday, 13 October 2017 (places are limited).

 

July 6, 2017 | Permalink | Comments (0)

Wednesday, July 5, 2017

Standard Essential Patents: Royalty Determination in the Supply Chain

Roberto Grasso has written Standard Essential Patents: Royalty Determination in the Supply Chain.

ABSTRACT: Standard Essential Patents (‘SEPs’) enable compatibility and interoperability between products and lower costs by increasing the volume of manufactured goods.1 They further market integration and promote competition by enabling consumers to switch more easily between products and suppliers. This standard-setting process can generate significant efficiencies, including network effects, and ultimately enhances consumer wealth.

July 5, 2017 | Permalink | Comments (0)

The Treatment of State-owned Enterprises in EU Competition Law: New Developments and Future Challenges

ABSTRACT: The Treaty on the Functioning of the European Union (‘TFEU’) provides that the European Union (‘EU’) must remain neutral in matters of ownership of companies, i.e. vis-à-vis privately and State-owned enterprises (‘SOEs’). This is an important issue for Member States, as some of them own a relatively large number of companies active in sectors they consider to be of strategic or public interest. The energy sector in particular is a field where the number and importance of SOEs is notable. The EU Merger Regulation (‘EUMR’) reiterates the principle of non-discrimination between the public and the private sector exposed in the TFEU.

July 5, 2017 | Permalink | Comments (0)

Timab v Commission: The First Lessons on Hybrid Cartel Settlement Procedures

Freya van Schaik discusses Timab v Commission: The First Lessons on Hybrid Cartel Settlement Procedures.

ABSTRACT: In a standard procedure following an undertaking's withdrawal from a settlement procedure, the Commission is not bound by the fines range communicated to it during the settlement procedure.

July 5, 2017 | Permalink | Comments (0)

Commission v World Duty Free Group a.o.: Selectivity in (Fiscal) State Aid, quo vadis Curia?

Jacques Derenne asks Commission v World Duty Free Group a.o.: Selectivity in (Fiscal) State Aid, quo vadis Curia?

ABSTRACT: The selectivity criterion can be satisfied even though the measure is available to all undertakings and its application merely depends upon the choice of undertakings adopting the relevant activity. It is not necessary to identify a particular category of undertakings for a fiscal measure to be selective.

July 5, 2017 | Permalink | Comments (0)

Tuesday, July 4, 2017

The French Competition Authority's Altice Decision: Record Fine for the First ‘Genuine’ Gun Jumping Case in Europe

ABSTRACT: Most jurisdictions worldwide have opted for an ex ante merger control system whereby reportable transactions can be closed and implemented only after they have been formally authorised by the relevant competition authorities.

 

 

July 4, 2017 | Permalink | Comments (0)

Monday, July 3, 2017

Agency and Competition Law in Australia Following ACCC v Flight Centre Travel Group

ABSTRACT: On 14 December 2016, the High Court of Australia delivered its judgement in Australian Competition and Consumer Commission v Flight Centre Travel Group Limited (‘Flight Centre’). By a 4-1 majority, the High Court found that a travel agent, Flight Centre, had attempted to engage in price-fixing with three international airlines in relation to ticket prices for international air travel.

 

July 3, 2017 | Permalink | Comments (0)

The EU Cartel Settlement Procedure: Latest Developments

ABSTRACT: In the period under review in the present article (August 2015–December 2016), three further decisions were adopted by the European Commission under the settlement procedure. The adoption of the Alternators and StartersTrucks and Rechargeable batteries decisions have thus brought the total cases treated under the EU Cartel Settlement procedure to 22 (an overview of these cases can be found in Section III of the present article). While the Alternators and Starters case and the Rechargeable Batteries case were ‘classical’ full settlements, the Trucks case presents the particularity of being not only hybrid (as one party opted out of the settlement process), but also being concluded after the issuance of a statement of objections.

July 3, 2017 | Permalink | Comments (0)