Friday, September 29, 2017
The Normative Foundations of European Competition Law Assessing the Goals of Antitrust through the Lens of Legal Philosophy
Oles Andriychuk, University of Stirling has written on The Normative Foundations of European Competition Law Assessing the Goals of Antitrust through the Lens of Legal Philosophy.
BOOK ABSTRACT: Does the competitive process constitute an autonomous societal value, or is it a means for achieving more reliable and measurable goals such as welfare, growth, integration, and innovation? This insightful book addresses this question from philosophical, legal and economic perspectives and demonstrates exactly why the competitive process is a value independent from other legitimate antitrust goals.
Oles Andriychuk consolidates the normative theories surrounding freedom, market and competition by assessing their effective use within the matrix of EU competition policy. He outlines the broader context of the phenomenon of competition such as its pivotal role in the electoral system and its implications for free speech, and then goes on to investigate its relationship with the proponents of various antitrust-related goals. Further to this, some relevant solutions to persistent regulatory problems of antitrust are discussed.
Timely and thought provoking, this book will be of interest to both students and scholars of European competition law, as well as those who are curious about its philosophical foundations. Offering deep insights into the nature of the competitive process, it will also appeal to judges and politicians weighing up antitrust goals.
Monopolistic Competition When Income Matters.
Paolo Bertoletti, University of Pavia - Department of Political Economy and Quantitative Methods and Federico Etro, Ca Foscari University of Venice have written on Monopolistic Competition When Income Matters.
Abstract: We analyse monopolistic competition when consumers have an indirect utility that is additively separable. This leads to markups depending on income (both in the short and long run) but not on the market size, which generates pricing to market, incomplete pass‐through and pure gains from variety for countries that open up to trade. Firms’ heterogeneity à la Melitz implies a Darwinian effect of consumers’ spending on business creation and a Linderian effect on (endogenous) quality provision. We discuss extensions with an outside good and heterogenous agents, and offer simple and tractable specifications (linear or log‐linear) of the demand functions.
Guilherme Teno Castilho Misale & Yan Villela Vieira ask Why (not) talk about the sociology of competition?
Thursday, September 28, 2017
Impact of the New Nationalism on Competition and Economic Development in Developing Countries
Pharmaceuticals: Pricing and Access
Mergers: Impact on Development
Innovation and Technology: The Next Frontier on Antitrust for Developing Countries?
Enforcers’ Roundtable: What’s under the Radar?
Kate Ho and Robin S. Lee have written on Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets.
ABSTRACT: Why do insurers choose to exclude medical providers, and when would this be socially desirable? We examine network design from the perspective of a profit-maximizing insurer and a social planner to evaluate the welfare effects of narrow networks and restrictions on their use. An insurer may engage in exclusion to steer patients to less expensive providers, cream-skim enrollees, and negotiate lower reimbursement rates. Private incentives for exclusion may diverge from social incentives: in addition to the standard quality distortion arising from market power, there is a "pecuniary" distortion introduced when insurers commit to restricted networks in order to negotiate lower rates. We introduce a new bargaining solution concept for bilateral oligopoly, Nash-in-Nash with Threat of Replacement, that captures such bargaining incentives and rationalizes observed levels of exclusion. Pairing our framework with hospital and insurance demand estimates from Ho and Lee (2017), we compare social, consumer, and insurer-optimal hospital networks for the largest non-integrated HMO carrier in California across several geographic markets. We find that both an insurer and consumers prefer narrower networks than the social planner in most markets. The insurer benefits from lower negotiated reimbursement rates (up to 30% in some markets), and consumers benefit when savings are passed along in the form of lower premiums. A social planner may prefer a broader network if it encourages the utilization of more efficient insurers or providers. We predict that, on average, network regulation prohibiting exclusion has no significant effect on social surplus but increases hospital prices and premiums and lowers consumer surplus. However, there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.
Herbert J. Hovenkamp, Univ. of Pennsylvania Law and Wharton Business offers thoughts on Progressive Antitrust.
ABSTRACT: Several American political candidates and administrations have both run and served under the “progressive” banner for more than a century, right through the 2016 election season. For the most part these have pursued interventionist antitrust policies, reflecting a belief that markets are fragile and in need of repair, that certain interest groups require greater protection, or in some cases that antitrust policy is an extended arm of regulation. This paper argues that most of this progressive antitrust policy was misconceived, including that reflected in the 2016 antitrust plank of the Democratic Party. The progressive state is best served by a fundamentally neoclassical antitrust policy whose principal goal is the preservation of market competition as measured by consumer welfare.
Overall, progressive administrations have produced an impressive economic record, at least when compared with real world alternatives. For example, economic growth and job creation during Democrat administrations has been roughly double that than during Republican administrations. But the progressive record in antitrust policy tells a different story, particularly prior to the Clinton administration. Not only have progressives been expansionist in antitrust policy, they also pursued policies that did not fit well into any coherent vision of the economy, often in ways that hindered rather than furthered competitiveness and economic growth. In fact, for much of its history progressive antitrust policy has exhibited fairly strong special interest protectionism.
What should be the role of antitrust in a progressive economy that is more intensively regulated than the one that existed when the antitrust laws were passed? Antitrust could pursue one of three very general routes. First, what it has historically done is develop interventionist approaches that recognize many of the same goals and interest group pressures as regulatory policy generally. Second, it could pursue internally a set of essentially neoclassical goals, limiting its own decision making to markets in which the government has not asserted conflicting regulatory policies. Or third, it could act as a “super-enforcer” of competition, actually limiting or disciplining regulation that conflicts with its own neoclassical principles. The approach suggested here is a version of the second, provided that care be taken to distinguish public from private conduct.
John M. Newman, University of Memphis - Cecil C. Humphreys School of Law has written Procompetitive Justifications in Antitrust Law. This paper is interesting.
ABSTRACT: The rule of reason has come to dominate modern antitrust law. Rule-of-reason analysis takes into account both harmful and beneficial effects of defendants’ conduct. For decades, what qualifies as “harmful” has been the subject of intense academic and judicial debate. But what counts as “beneficial”? Despite its fundamental importance to antitrust enforcement, this has remained a surprisingly open question. The relevant case law is a disorganized and sometimes incoherent tangle of competing approaches.
This article identifies the “market failure” approach as the doctrinally correct — and economically optimal — basis for procompetitive-justification analysis. Under this approach, restraints of trade may be justified if — but only if — they increase consumer surplus. With that in mind, this article establishes a novel taxonomy of market failures and corresponding procompetitive justifications. “Structural” justifications alleviate market failures that do not result from irrationality, whereas “behavioral” justifications correct irrational marketplace conduct. “Non-welfare” justifications, on the other hand, achieve moral or ethical ends not related to the economic concept of market failure.
These distinctions shed new light on antitrust case law and commentary. The concept of behavioral justifications, in particular, allows this article to contribute more insightful readings of multiple canonical Supreme Court decisions. On both doctrinal and consequentialist grounds, this article demonstrates that antitrust should continue to relax the rationality assumption so as to recognize behavioral justifications. Moreover, discretely analyzing non-welfare justifications reveals some surprising — and disturbing — examples of courts blessing restraints for reasons altogether foreign to antitrust law. The article concludes by identifying the proper rule-of-reason framework, a more rigorous test that will minimize error costs and maximize consumer welfare.
INAUGURAL WILLIAM HOWARD TAFT LECTURE: "THE RULE OF REASON IN THE POST-ACTAVIS WORLD"
Thursday, September 28, 2017
The Penn Club of New York
30 West 44th Street
New York, New York
Main Dining Room
Breakfast - 9:30 a.m.
Lecture - 10:00 a.m. - 11:15 a.m.
NYSBA Members: Free
1.5 in Professional Practice (non-transitional)
William H. Rooney, Partner, Willkie Farr & Gallagher LLP
Michael A. Carrier, Distinguished Professor, Rutgers Law School
Saul P. Morgenstern, Partner, Arnold & Porter Kaye Scholer LLP
The lecture will address the rule of reason as applied to reverse payment ("pay-for-delay") settlement agreements since the Supreme Court's ruling in FTC v. Actavis in 2013.
Benjamin Klein, University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon asks The Apple E-Books Case: When is a Vertical Contract a Hub in a Hub-and-Spoke Conspiracy?
ABSTRACT: Apple’s economic role in the Publisher conspiracy to increase Amazon’s below cost pricing of e-books is examined in a hub-and-spoke conspiracy framework. The Publishers conspired because of their concern that Amazon’s low prices would adversely affect physical book demand and prices and also create an Amazon retail monopoly under which Amazon would negotiate substantially lower wholesale e-book prices. The Publisher conspiracy successfully moved Amazon to an agency relationship and gained control over e-book retail pricing. This was accomplished with joint Publisher threats of Amazon to window (delay) the release of new e-book titles, which imposed a significant potential cost on Amazon in the face of Apple's scheduled entry with access to all new release titles without delay. It is demonstrated that Apple economically facilitated the Publisher conspiracy solely through its entry, not through any of its iBookstore contract terms. Specifically, contrary to the court, the MFN and maximum price terms in the Apple contracts had no effect on facilitating the Publisher conspiracy. In fact, if Apple had entered without these contract terms, e-book prices would have been substantially higher. Apple's contracts therefore should not have been evaluated under a per se standard.
Wednesday, September 27, 2017
Giuseppe Colangelo, LUISS Guido Carli, Department of Business and Management; University of Basilicata, Department of Mathematics, Computer Science and Economics; Stanford Law School and Valerio Torti, LUISS University of Rome are Filling Huawei's Gaps: The Recent German Case Law on Standard Essential Patents.
ABSTRACT: The Huawei ruling identified the steps that owners and users of SEPs will have to follow in negotiating a FRAND royalty. Compliance with the code of conduct will shield patent holders from the gaze of competition law and, at the same time, will protect implementers from the threat of an injunction.
The licensing framework provided by the CJEU is aimed at increasing legal certainty and predictability for the whole standardisation environment. Nevertheless, the judgment has been criticised because a relevant number of issues are left unresolved. In this scenario the activities of national courts in filling the gaps left by the CJEU deserve the utmost consideration. This paper will seek to explore the approach developed at national level post Huawei, focusing on the German judicial experience.
Jan De Loecker and Jan Eeckhout identify The Rise of Market Power and the Macroeconomic Implications.
ABSTRACT: We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. There is no strong pattern across industries, though markups tend to be higher, across all sectors of the economy, in smaller firms and most of the increase is due to an increase within industry. We do see a notable change in the distribution of markups with the increase exclusively due to a sharp increase in high markup firms.
We then evaluate the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the last 3 decades: 1. decrease in labor share, 2. increase in capital share, 3. decrease in low skill wages, 4. decrease in labor force participation, 5. decrease in labor flows, 6. decrease in migration rates, 7. slowdown in aggregate output.
Kati Cseres, University of Amsterdam - Amsterdam Centre for European Law and Governance and Amsterdam Center for Law & Economics and Annalies Outhuijse, University of Groningen, Faculty of Law discuss Parallel Enforcement and Accountability: The Case of EU Competition Law.
ABSTRACT: EU competition law is enforced parallel by the EU Commission and 28 national competition authorities (NCAs) in a multi-level governance system composed of EU and national procedural laws. Regulation 1/2003 established the European Competition Network (ECN) in order to coordinate parallel proceedings between the Commission and the NCAs. This chapter analyses the shared enforcement of EU competition law from the perspective of political and judicial accountability. The chapter focuses on the accountability of the Commission, the NCAs and the ECN in their role of/as main actors of the shared enforcement. Two jurisdictions are used to illustrate the role and powers of the NCAs: the Netherlands and Hungary. After analysis of the powers and roles of the three respective actors (the Commission, the NCAs and the ECN) of parallel enforcement, section 3 examines judicial and political accountability and section 4 concludes.
Joseph Stiglitz, Columbia University offers insights into The Revolution of Information Economics: The Past and the Future.
ABSTRACT: The economics of information has constituted a revolution in economics, providing explanations of phenomena that previously had been unexplained and upsetting longstanding presumptions, including that of market efficiency, with profound implications for economic policy. Information failures are associated with numerous other market failures, including incomplete risk markets, imperfect capital markets, and imperfections in competition, enhancing opportunities for rent seeking and exploitation. This paper puts into perspective nearly a half century of research, including recent advances in understanding the implications of imperfect information for financial market regulation, macro-stability, inequality, and public and corporate governance; and in recognizing the endogeneity of information imperfections. It explores the consequences of recent advances in technology and the policy challenges and opportunities they present for competition policy and policies regarding privacy and transparency. The paper notes the role that information economics played in stimulating other advances in economics, including contract theory and behavioral economics. It reinvigorated institutional economics, showing how institutions mattered, in some cases explaining institutional features that could not be well-understood in the conventional paradigm, and in others showing how institutional responses to market failures might or might not be welfare enhancing. The paper argues that the new paradigm provides a markedly different, and better, lens for looking at the economy than the older perfect markets competitive paradigm.
Nicolo Zingales, University of Sussex Law School asks The Legal Framework for SEP Disputes in EU Post-Huawei: Whither Harmonization?
ABSTRACT: This article revisits the antitrust treatment of unilateral conduct in Standard Essential Patent (SEP) disputes in EU, with particular focus on the landmark CJEU judgment in Huawei v ZTE and the way it has affected subsequent developments before national courts. It illustrates that while the Court in Huawei significantly improved legal certainty both for SEP holders and their potential licensees, it also left open a number of crucial questions affecting everyday’s licensing practice. First, it is not entirely clear whether the liability of an SEP holder presupposes leveraging by a vertically integrated firm or can also arise in purely vertical or horizontal relationships. Secondly, the safe harbor procedure formulated in the judgment begs important questions concerning burden of proof and portfolio licensing, which have given rise to divergent interpretations. It follows that the space remains wide open for competing national and even regional approaches to the rights and obligations of SEP holders, calling for further European harmonization - be it judicially, legislatively, or administratively through the European Commission. In support for the latter measures, the article illustrates the limited remit of EU private international law rules in preventing the forum shopping which is likely to unfold as a result of a fragmented landscape for the resolution of SEP disputes.
Tuesday, September 26, 2017
ABA Antitrust Section’s Legislation Committee is seeking up to three student volunteers to be policy monitors
The ABA Antitrust Section’s Legislation Committee is seeking up to three student volunteers who are interested in contributing to the Antitrust Section by monitoring states’ legislative developments relating to antitrust and consumer protection. Each student will monitor legislative developments in two or three states and prepare blog posts on developments of interest to the antitrust community. The blog posts are widely distributed to antitrust practitioners and FTC and DOJ officials. Students may also be selected to contribute to the Committees’ annual newsletters. This project is a great way to start gaining exposure within the antitrust community. If interested, please contact [email protected], and include a resume or a short bio.
Borja Mesa‐Sánchez, Universidad Carlos III de Madrid analyzes Preemptive Mergers in a Vertically Differentiated Unionized Oligopoly.
ABSTRACT: In the context of an international unionized oligopoly with vertical differentiation, the pattern of mergers is investigated. We show that mergers between firms producing the same‐quality good lead wages to the reservation level, as well as maximize industry profits. However, it turns out that most of the market structure equilibria are shaped by mergers between producers of differentiated and homogeneous goods. This is so because mergers increase the market share of participating firms at the expense of that of the outsiders, leading to a scenario of preemptive mergers, where the main driving force can be to preempt rival mergers. Finally, it is shown that if three‐firm mergers are not allowed, the strategic behavior of firms is eliminated, mergers between same‐quality producers occur and social welfare is maximized.
Alan R Beckenstein, Darden Business School, University of Virginia and Brian M. Campbell, Campbell-Hill Aviation Group, LLC study Public Benefits and Private Success: The Southwest Effect Revisited.
Jorge Padilla, John Davies and Aleksandra Boutin, all at Compass Lexecon, have published The Economic Impact of Technology Standards.
The authors argue that open technology standards, agreed through voluntary participation in industry bodies, lead to impressive industry performance through effects on market structure and on incentives for innovation. They examine industries in which technical standards are important: mobile telephony, TV broadcasting and PC operating systems. These case studies illustrate how and why standards matter for economic outcomes but also show how different economic outcomes emerge, depending on the institutional frameworks governing the development and adoption of standards. Open, voluntary standard-setting - in which experts from technology providers and equipment manufacturers work together to create openly published technical standards - allows firms of different sizes and specialisations to participate in the value chain. In contrast, uncompetitive industry structures can emerge when standards are set by governments or are under the proprietary control of individual companies, harming innovation and efficiency.
The mobile telephony industry illustrates some of the benefits of open standard-setting. Over the last 20 years or more, the number of devices sold has increased by about 20% per year, while the cost of mobile subscriptions relative to maximum data speed has decreased by around 40%. This impressive performance has arisen from a highly competitive market structure, at all levels of the supply chain. Not only is there competition in production of devices and software but upstream, the ownership and development of technology shows increasing diversity, from one mobile communications generation to the next.
This competitive and diverse market structure partly results from the institutions that develop standards – the industry would be very different were there a large proprietary standard-owner or if governments were more directly involved in standard-setting. Maintaining this approach depends on the Standard Development Organisations, which govern open standard-setting, striking the right balance between the interests of technology developers and technology users.
The mobile telecoms model will not suit all industries. However, it offers an attractive alternative to a simple dichotomy of private monopoly vs government regulation. In any event, as more products become connected in the ‘Internet of Things’, more industries will take on some of the characteristics of the telecoms industry, including the need to agree and use standards.
ABSTRACT: Since the adoption of the Law on the Protection of Competition and the Prohibition of Monopolistic practices number 3 of 2005 (‘ECL’), to date, the Egyptian Competition Authority (‘ECA’) has been focusing much of its resources on the detection and sanctioning of cartels. As a result, the ECA was able to prove 15 cartel cases during that period. Moreover, the ECA has been advancing its merger notification regime and its cooperation with different regional organisations and countries. This article explores the advances and developments of the Egyptian competition regime. It is also highlights main enforcement trends and tools used by the ECA.
The Impact of Price Controls in Two-sided Markets : Evidence from US Debit Card Interchange Fee Regulation
Mark D. Manuszak and Krzysztof Wozniak measure The Impact of Price Controls in Two-sided Markets : Evidence from US Debit Card Interchange Fee Regulation.
ABSTRACT: We study the pricing of deposit accounts following a regulation that capped debit card interchange fees in the United States and provide the first empirical investigation of the link between interchange fees and granular deposit account prices. This link is broadly predicted by the theoretical literature on two-sided markets, but the nature and magnitude of price changes are key empirical issues. To examine the ways that banks adjusted their account prices in response to the regulatory cap on interchange fees, we exploit the cap's differential applicability across banks and account types, while accounting for equilibrium spillover effects on banks exempt from the cap. Our results show that banks subject to the cap raised checking account prices by decreasing the availability of free accounts, raising monthly fees, and increasing minimum balance requirements, with different adjustment across account types. We also find that banks exempt from the cap adjusted prices as a competitive response to price changes made by regulated banks. Not accounting for such competitive responses underestimates the policy's impact on the market, for both banks subject to the cap and those exempt from it.