Antitrust & Competition Policy Blog

Entry Barriers and Technological Innovation in Broadband

Tedi Skiti, Fox School of Business, Temple University identifies Entry Barriers and Technological Innovation in Broadband.

ABSTRACT: In this article, I present causal effects of institutional entry barriers to new firms on incumbents’ technological innovation. In particular, I investigate the effect of entry barriers to municipal providers on incumbents’ technology deployment in the U.S. broadband industry. I use a spatial regression discontinuity design for private incumbents’ investment behavior and different entry regimes as sharp cutoffs for municipal entry threat. I collect and combine unique firm-level data on cable investment decisions and state-level data on legal entry barriers. I find that in markets with these entry barriers incumbents invest less in new technologies. Specifically, I find that the local entry barriers lead to a 20% lower technology adoption rate by cable incumbents because of reduced entry threat. These results imply that institutions that restrict entry of new firms can lead to significantly decreased technological innovation and lower internet quality across local markets, not only by deterring new firms but also by altering incumbents’ strategic investment in broadband networks.

Platform Coopetition in the Tourism Industry: The Case of Booking.com's Closure in Turkey

Ebru Tekin Bilbil, Boğaziçi University studies Platform Coopetition in the Tourism Industry: The Case of Booking.com's Closure in Turkey.

ABSTRACT: In March 2017, Booking.com closed its platform for inbound tourism in Turkey after the court's precautionary interim decision to cease the company's operations as a result of a court case based on 'unfair competition practices' in the country. This was the first time in the world an online booking platform turned off access for inbound bookings for the domestic market. Employing a case-study approach, the Booking.com case is analysed from the perspective of tourism coopetition with two perspectives: industry-wide and agent-specific. The analysis on conflicts and tensions of the platform coopetition in the case of Booking.com in Turkey reveals the following outcomes: (1) tensions in the platform coopetition created destructive uncertainties and losses in the tourism industry, especially for small hotels; (2) the problem of representation in platform coopetition; and (3) the problem is not 'local versus global', but rather, 'online versus traditional'.

Recapture Ratios in Merger Analysis

Serge Moresi, Charles River Associates (CRA) and Hans Zenger, Charles River Associates (CRA) examine Recapture Ratios in Merger Analysis.

ABSTRACT: Most quantitative tools for assessing potential competitive effects of mergers (e.g., upward pricing pressure indices and merger simulation models) rely heavily on recapture ratios. We show how recapture ratios can be approximated using simple microeconomic relationships and commonly-used parameters — namely, the products’ sales, profit margins, and group elasticity of demand. We illustrate our approach for both horizontal and vertical product differentiation.

Hong Kong's Leniency Policy: A Critical Overview

Sandra Marco Colino, The Chinese University of Hong Kong (CUHK) - Faculty of Law provides Hong Kong's Leniency Policy: A Critical Overview.

ABSTRACT: Hong Kong is only just delving into the world of antitrust. The Hong Kong Competition Ordinance, the city’s first cross-sector competition law, became fully enforceable in December 2015. A month earlier, the Hong Kong Competition Commission had published a detailed Leniency Policy for Undertakings Involved in Cartel Conduct. Cartels are understood to be a common problem in Hong Kong, a city where trade associations have at times publicly called for their members to collectively raise prices, and where local courts have not been particularly damning of collusion. This article critically assesses the merits of the city’s new leniency policy and its potential to fight collusive practices.

Independence in Competition Policy and Enforcement

Antonio F. Bavasso, Jevons Institute discusses Independence in Competition Policy and Enforcement.

ABSTRACT: Independence has been a mainstay of competition policy and enforcement in Europe and in many jurisdictions that have followed that model. However, the perception of regulatory failure which led to the financial crisis, the rhetoric of political supremacy over technical expertise, the renewed attention towards the application of “public interest” tests in some jurisdictions and the quest for new tools of enforcement to meet the challenges of the so-called “new economy” in light of the alleged inadequacies of the current antitrust paradigm, all call this principle into question. 

The principle of political independence of competition authorities is widely accepted internationally. However, in practice it takes a multiplicity of forms in various jurisdictions and it has an impact on a number of dimensions of competition law and policy. This paper looks in greater detail at the experience of the EU and that of the UK with comparative references to other jurisdictions within the EU and elsewhere. The experience in the EU and the UK jurisdictions is interesting for a number of reasons. 

First, the origin and rationale for independence in competition law enforcement has some peculiarities which derive from the nature of competition law and practice within the institutional framework of the EU. However, as is the case with many aspects of the EU legal order, the principle has evolved beyond its original rationale over the initial decades of application. In light of the interrelation between the EU and the national jurisdictions the principle of independence in competition law enforcement has had an impact on the institutional design of national competition authorities within the EU which have proliferated over the last 20 years and aligned to the EU system with some important distinctions. Moreover the general principles that have emerged within this system have often been looked at and considered elsewhere internationally as a result of organisations such the OECD and the ICN. 

The comparison with the UK regime is particularly interesting for two reasons. First because, notwithstanding the alignment of the UK substantive regime with the EU, it has maintained a number of interesting distinctive features such as the ability to intervene on public interest grounds in relation to mergers and more widely in relation to markets (with the potentially far reaching ability to impose remedies in case of a negative finding even in the absence of unlawful conduct and competition law infringement). Second because Brexit provides at least an opportunity to consider certain aspects of the institutional design and remit of UK competition enforcement and the strength of the independence of the UK Competition & Markets Authority (the CMA) can be an important consideration.

This contribution looks at the principle of independence along two axes: (1) appointment and institutional design, (2) case selection and prioritisation. It then offers some conclusions and reflections on outcome and accountability. It concludes that now more than ever independence in competition law enforcement is required. Independence does not mean that a competition authority should be oblivious of the general political context within which it operates. To the contrary a competition authority must maintain a dialogue with both the executive branch and elected representatives to ensure the relevance of its action as well as to maintain a credible advocacy role in assisting other areas of policy and even legislation when it is afforded those powers. This form of “soft accountability”, if coupled with strong measures to protect an authority from pressure points, is desirable. As a law enforcement agency a competition authority should also subject to hard accountability through the judicial process. This is important and, far from creating a tension, this dimension is a guarantor of independence because judicial oversight of the application of the law has the effect of pushing a competition authority to adopt procedures that would withstand judicial scrutiny and indirectly preserve the integrity of the system.

Horizontal Mergers, Innovation and the Competitive Process

Giulio Federico, Chief Economist Team, DG Competition, European Commission; Barcelona Graduate School of Economics (Barcelona GSE) Horizontal focuses on Mergers, Innovation and the Competitive Process.

Abstract: Recent merger decisions by competition authorities have revived the debate on the relationship between competition and innovation. This article reviews this issue by drawing on the relevant economic literature, and by placing it in the broader policy debate on the benefits of competitive markets. The economic literature provides general principles that can guide the competition assessment of the impact of a merger on dynamic competition, including its effects on innovation.

First Night of Chanukah - Legal Interpretation Question

I have a question of religious interpretation. I am roughly a little past Vancouver on a plane on my way to Japan. In a sense, I keep going "backwards" in time. At some point over the Pacific, I will cross the international dateline. When do I celebrate Channukah? Of course, when I do celebrate it, I will do it with a virtual candle lighting as I cannot light the real thing on the plane.

The Dynamics of Online Hotel Prices and the EU Booking.Com Case

Andrea Mantovani, University of Bologna, Claudio A. Piga, Keele University - Keele Management School, Carlo Reggiani, University of Manchester analyze The Dynamics of Online Hotel Prices and the EU Booking.Com Case.

ABSTRACT: This paper analyses the dynamics of hotel prices listed on Booking.com in the period 2014-16. This period is characterised by the most important antitrust decisions regarding the use of price parity clauses by online travel agencies (OTAs) in the EU. First, we document the dynamics of hotel prices on Booking.com in tourism regions of three EU member states: France, Italy, and Spain. The evidence suggests that prices decreased in 2015, the year in which the major antitrust decisions took place, whereas they bounced back in 2016. Second, we provide both a comprehensive explanation of the previous evidence and a rationalisation based on a theoretical model of the OTAs sector. Overall, our overarching analysis of the price dynamics on Booking.com allows to explain both the impact of removing price parities and the possible response of the OTAs.

Common Ownership Concentration and Corporate Conduct

Martin C. Schmalz, University of Michigan, Stephen M. Ross School of Business addresses Common Ownership Concentration and Corporate Conduct.

ABSTRACT: The question whether and how ownership between strategically interacting firms affects firm behavior has been the subject of theoretical inquiry for decades. Since then, consolidation and increasing concentration in the asset management industry has led to more pronounced ownership links between firms, and recent empirical research has provided evidence for the validity of some of the literature's key predictions. The resulting antitrust concerns have received much attention from policy makers worldwide. However, the implications are more general: common ownership concentration (CoOCo) affects the objective function of the firm, and therefore has implications for all subfields of economics studying corporate behavior -- including corporate governance, strategy, industrial organization, and all of financial economics. This article connects the papers establishing the theoretical foundations, reviews the existing empirical and legal literatures, and discusses challenges and opportunities for future research.

Barriers to Fair Competition in China

Yongwei Chen, Peking University Yiqun Ye Peking University - Peking University Law School identify Barriers to Fair Competition in China.

ABSTRACT: This paper analyses three types of barriers that lead to market distortion: market segmentation, industry monopoly and industrial policy. Then we estimate the efficiency and welfare loss caused by these three barriers. The results show that the loss caused by market segmentation and industry monopoly respectively account for 6.42% and 18% of annual GDP. And either market segmentation or industry monopoly has been deeply influenced by industrial policies. We must correct the distortion if we truly want to establish a unified, open market system with orderly competition identified by the third plenary session of the 18th Communist Party Central Committee of CPC. To achieve this goal, we should not only change policies, but reform institutions as well.

Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs

Sven Heim, Centre for European Economic Research (ZEW), Kai Hüschelrath, Centre for European Economic Research (ZEW), Ulrich Laitenberger, Telecom ParisTech; Centre for European Economic Research (ZEW); KU Leuven - Department of Managerial Economics, Strategy, and Innovation, and Yossi Spiegel, Tel Aviv Univesity, Coller School of Management; Centre for Economic Policy Research (CEPR); Centre for European Economic Research (ZEW) have an interesting paper on Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs.

ABSTRACT: There is a growing concern that minority shareholding (MS) in rival firms may facilitate collusion. To examine this concern, we exploit the fact that leniency programs (LPs) are generally recognized as a shock that destabilizes collusive agreements and study the effect that the introduction of an LP has on horizontal MS acquisitions. Using data from 63 countries over the period 1990-2013, we find a large increase in horizontal MS acquisitions in the year in which an LP is introduced, especially in large rivals. The effect is present however only in countries with an effective antitrust enforcement and low levels of corruption and only when the acquisitions involve stakes of 10%-20%. These results suggest that MS acquisitions may stabilize collusive agreements that were destabilized by the introduction of the LP.

Algorithmic Pricing Agents and Tacit Collusion: A Technological Perspective

Ashwin Ittoo, University of Liege - HEC Management School, and Nicolas Petit, University of Liege - School of Law; International Center for Law & Economics (ICLE); University of South Australia - School of Law offer discuss Algorithmic Pricing Agents and Tacit Collusion: A Technological Perspective.

ABSTRACT: Amongst the wealth of concerns raised by Artificial Intelligence (“AI”), one is the risk that the deployment of algorithmic pricing agents on markets will increase occurrences of tacit collusion by orders of magnitude, and well beyond the oligopoly setting where such markets failures have been traditionally observed. This concern has already generated policy interest, and regulatory options are now commonly discussed at academic, commercial and official conferences. At the same time, however, we remain in lack of understanding of whether current AI technology holds the capabilities that entitle algorithmic pricing agents to autonomously enter into tacitly collusive strategies without human intervention. In this paper, we look at three plain-vanilla Reinforcement Learning (“RL”) technologies, and attempt to understand whether their introduction at scale on markets can lead to tacit collusion. While we do not deny the fact that smart pricing agents can enter into tacit collusion and that regulators may be right to be vigilant, we find that there are several technological challenges in the general realm of RL that mitigate this risk.

Our paper proceeds in five steps. We first discuss the algorithmic tacit collusion conjecture (I). We then provide a non technical overview of reinforcement learning technologies (II). We then move on to discuss how naïve single agent Q-learning (III) and multi-agent Q-learning (IV) interact as market players. We close with a discussion of how technological challenges fragilize the algorithmic tacit collusion conjecture (V).

Competition Law (and Its Limits) in the Sharing Economy

Niamh Dunne, London School of Economics - Law Department explores Competition Law (and Its Limits) in the Sharing Economy.

ABSTRACT: This contribution considers the potential application of competition law—specifically, the EU ‘antitrust’ rules found in Articles 101 and 102 TFEU—within the sharing economy. Although from one perspective a paradigmatic example of dynamic and effective competition, concerns exist that the competitive forces generated by and taking place within the sharing economy are inherently unfair and thus illegitimate; and that the success of its business models may result in market power and anticompetitive behaviour. The chapter considers the extent to which competition law might and should apply to constrain ostensibly anticompetitive conduct within such markets.

The Effects of Mandatory Disclosure of Supermarket Prices

Itai Ater, Tel Aviv University - Coller School of Management and Oren Rigbi, Ben-Gurion University of the Negev have written on The Effects of Mandatory Disclosure of Supermarket Prices.

ABSTRACT: We study how mandatory online disclosure of supermarket prices affects prices and price dispersion in brick-and-mortar stores. Using data collected before and after a transparency regulation went into effect in the Israeli food retail market, multiple complementary control groups and relying on a differences-in-differences research design, we document a sharp decline in price dispersion and a 4% to 5% drop in prices following the transparency regulation. The price drop varied across stores and products; it was smaller among branded products than among private-label products, and it was smaller among stores and products that were likely to have been associated with more intense search patterns even before prices became transparent (e.g., products in heavy-discount chains; popular products; products that meet stringent kosher requirements). Finally, we show that prices declined as more consumers used price-comparison websites, and we highlight the role of media coverage in encouraging retailers to set lower prices.

Is Occupational Licensing a Barrier to Interstate Migration?

Janna E. Johnson and Morris M. Kleiner ask Is Occupational Licensing a Barrier to Interstate Migration?

ABSTRACT: Occupational licensure, one of the most significant labor market regulations in the United States, may restrict the interstate movement of workers. We analyze the interstate migration of 22 licensed occupations. Using an empirical strategy that controls for unobservable characteristics that drive long-distance moves, we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration. The size of this effect varies across occupations and appears to be tied to the state specificity of licensing requirements. We also provide evidence that the adoption of reciprocity agreements, which lower re-licensure costs, increases the interstate migration rate of lawyers. Based on our results, we estimate that the rise in occupational licensing can explain part of the documented decline in interstate migration and job transitions in the United States.

The Antitrust Paradox of China Inc.

Angela Huyue Zhang, King's College London; The University of Hong Kong - Faculty of Law describes The Antitrust Paradox of China Inc.

ABSTRACT: Common ownership by the Chinese State caused a stir in Europe recently. During its review of a joint venture involving a Chinese nuclear power company, the European Commission held that it would treat all Chinese state-owned enterprises (SOEs) in the energy sector as a single entity. This decision carries significant legal and practical implications for both businesses and the regulator. It also contradicts the previous approach that the Commission has taken in dealing with European SOEs. In this Essay, I argue that the legal framework under the EU Merger Regulation (EUMR) is unsuited to deal with the anticompetitive effects of state ownership. While the delineation of the boundary of an undertaking is a prerequisite for merger review, ownership and control are not absolute. Importantly, the extent to which the coordination by the Chinese State has lessened competition is a quantitative question, rather than a qualitative one. Consequently, a bright-line approach of defining an undertaking would lead to both over-inclusive and under-inclusive outcomes. To address the EU’s dilemma in dealing with Chinese SOEs, I propose that the Commission ought to view national security review as a complement to its merger review. The optimal regulatory response to the Chinese acquisitions hinges not only on economics, but also, perhaps more importantly, on politics.

Competition Law Lecture by José Luis da Cruz Vilaça, Thursday 14 December

Public Lecture Centre of European Law The Dickson Poon School of Law The intensity of judicial review in complex economic matters - recent competition law judgments of the Court of Justice of the European Union  by José Luis da Cruz Vilaça, President of Chamber, European Court of Justice Professor Alison Jones, King's College London in the Chair Thursday 14 December 18.30 -19.30 The Edmond J Safra Lecture Theatre, King's College London Strand Campus The lecture will be followed by a drinks reception To register your place please click here Enquiries to cel@kcl.ac.uk

Antitrust via Rulemaking: Competition Catalysts

Tim Wu, Columbia has synthesized Antitrust via Rulemaking: Competition Catalysts.

ABSTRACT: The promotion of competition in the American economy is a task that has traditionally fallen to the enforcement agencies at the federal and state level, relying on the main antitrust statutes. However, the challenge of declining competition has also prompted interest in the use of regulatory alternatives to antitrust to “catalyze” competition. The strategy involves using industry-specific statutes, rulemakings, or other tools of the regulatory state to achieve the traditional competition goals associated with the antitrust laws. Hence, “antitrust via rulemaking.”

This paper has two goals. The first goal is to better describe the regulatory tools used by agencies and government—the so-called “competitive catalysts.” This paper attempts to develop both a vocabulary and basic theoretical account that helps to understand how rulemaking can promote competition. It does so by providing a taxonomy of major tools used to catalyze competition.

A second goal of the paper is the admittedly difficult goal of trying to understand why some competition initiatives have worked, while others fail. As these are highly complex industries and regulatory initiatives, any such analysis cannot be definitive. Nonetheless, a study of the efforts to jump-start competition yields patterns from which best-practices might be derived, and from which any future regulator should learn. The paper concludes with a list of best-practices or rules-of-thumb for those who would hope to use laws to catalyze competition in the future.

The Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents

Jorge Contreras has edited The Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents.

BOOK ABSTRACT: Technical standards are ubiquitous in the modern networked economy. They allow products made and sold by different vendors to interoperate with little to no consumer effort and enable new market entrants to innovate on top of established technology platforms. This groundbreaking volume, edited by Jorge L. Contreras, assesses and analyzes the legal aspects of technical standards and standardization. Bringing together more than thirty leading international scholars, advocates, and policymakers, it focuses on two of the most contentious and critical areas pertaining to standards today in key jurisdictions around the world: antitrust/competition law and patent law. (A subsequent volume will focus on international trade, copyright, and administrative law.) This comprehensive, detailed examination sheds new light on the standards that shape the global technology marketplace and will serve as an indispensable tool for scholars, practitioners, judges, and policymakers everywhere.

2018 Next Generation of Antitrust Scholars Conference, Friday, January 26, 2018

2018 Next Generation of Antitrust Scholars Conference

Friday, January 26, 2018
NYU School of Law
108 West 3rd Street
Lipton Hall

Conference Co-sponsors
NYU School of Law
American Bar Association, Section of Antitrust Law

Conference Co-organizers
Edward Cavanagh, St. John's University School of Law
Harry First, NYU School of Law
D. Daniel Sokol, University of Florida Levin College of Law

Abstract
The purpose of this day-long conference is to provide an opportunity for antitrust/competition law professors who began their full time professorial career in or after 2010 to present their latest research. Senior antitrust scholars and practitioners in the field will comment on the papers.

Registration
Free and open to the public. For registration and more information visit the ABA Section of Antitrust Law. NY CLE pending approval.

Agenda

08:20 – 08:50am         Registration and Continental Breakfast

08:50 – 09:00am         Welcome/Opening Remarks: Trevor Morrison, Dean, NYU School of Law (TBC)

09:00 – 10:45am         Session 1: Collusion

Session Chair:  Richard Steuer, Mayer Brown

Presenter:  Jordan Barry, University of San Diego School of Law
Discussant: Rosa Abrantes-Metz, NYU Stern School of Business

Presenter:  Marek Martyniszyn, Queen’s University Belfast Law
Discussant: Andrew Gavil, Howard University School of Law

Presenter:  Wentong Zheng, University of Florida Levin College of Law
Discussant: Edward Cavanagh, St. John's University School of Law

Overall Discussant: Irving Scher, Hausfeld

10:45 – 11:00am         Break

11:00 – 1:00pm         Session 2: Antitrust and Institutional Issues

Session Chair:  Geraldine Trujillo, FTC

Presenter:  Liza Vertinsky, Emory University School of Law
Discussant: Scott Hemphill, NYU School of Law

Presenter:  Jorge Contreras, The University of Utah College of Law
Discussant: Michael Carrier, Rutgers Law School - Camden

Presenter:  Rory Van Loo, Boston University School of Law
Discussant: D. Daniel Sokol, University of Florida Levin College of Law

Presenter:  John Newman, University of Memphis School of Law
Discussant: Harry First, NYU School of Law

Overall Discussant: Jonathan Jacobson, Wilson Sonsini Goodrich & Rosati

1:00 – 1:45pm             Lunch

1:45 – 3:05pm             Session 3: Antitrust and Business Law

Session Chair:  Lisl Dunlop, Manatt, Phelps & Phillips, LLP

Presenter:  Wendy Ng, University of Melbourne Law School
Discussant: Frank Upham, NYU School of Law

Presenter:  Viktoria Robertson, University of Graz Law
Discussant: Marina Lao, Seton Hall Law School

Presenter:  Anne Witt, University of Leicester Law School
Discussant: Anu Bradford, Columbia Law School

Overall Discussant: Rachel Brandenburger, Hogan Lovells

3:05 – 3:30pm             Break

3:30 – 5:00pm             Session 4: Antitrust Global Issues

Session Chair:  William Rooney, Wilkie Farr & Gallagher LLP

Presenter:  Sam Weinstein, Benjamin N. Cardozo School of Law
Discussant: Lawrence White, NYU Stern School of Business

Presenter:  Ramsi Woodcock, Georgia State University College of Law
Discussant: Ed Rock, NYU School of Law

Presenter:  Itai Paldor, Hebrew University Faculty of Law
Discussant: Barak Orbach, University of Arizona James E. Rogers College of Law

Overall Discussant: Elai Katz, Cahill Gordon & Reindel LLP

5:00 – 5:30pm             Cocktail Reception