Friday, August 31, 2018

Antitrust and Costless Verification: An Optimistic and a Pessimistic View of the Implications of Blockchain Technology

Christian Catalini, Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER) and Catherine E. Tucker, Massachusetts Institute of Technology (MIT) - Management Science (MS) have an interesting paper on Antitrust and Costless Verification: An Optimistic and a Pessimistic View of the Implications of Blockchain TechnologyWorth reading!

ABSTRACT: Blockchain technology allows a network of individuals, institutions or devices to coordinate economic activity on a global scale ('internet-level consensus') without assigning the same degree of control to the intermediary operating and facilitating transactions in the marketplace. This allows for the creation of new types of decentralized digital platforms where the benefits of network effects are separated from the traditional costs they entail in terms of market power. We discuss both the opportunities and challenges the technology involves from an antitrust perspective, and in particular how it can be used to facilitate the creation of extremely efficient and competitive digital markets, as well as to facilitate collusion and make antitrust enforcement more difficult.

August 31, 2018 | Permalink | Comments (0)

Antitrust Scrutiny of Excessive Prices in the Pharmaceutical Sector: A Comparative Study of the Italian and UK Experiences

Margherita Colangelo, University of Rome III - Department of Law and Claudia Desogus analyze Antitrust Scrutiny of Excessive Prices in the Pharmaceutical Sector: A Comparative Study of the Italian and UK Experiences.

ABSTRACT: Excessive pricing has generally been seen as a problem to be addressed through sector-specific regulation rather than through antitrust intervention. Literature on the issue is divided between scholars calling for an interventionist approach and those supporting a non-interventionist approach on the basis of conflicting rationales. However, recent cases have called attention to the imposition of excessive prices in the pharmaceutical sector. The Aspen and the Flynn cases, in particular, constitute emblematic examples of such practice in the field of off-patent drugs. The analysis of the investigations conducted by national competition authorities in these cases provides some important insights into the controversial issues of ascertaining when antitrust intervention can be considered justified and of determining which methodology may be properly adopted in order to assess whether a drug price is unfairly high.

August 31, 2018 | Permalink | Comments (0)

Mergers and R&D Diversity: How Much Competition is Enough?

Rich Gilbert, Berkeley asked Mergers and R&D Diversity: How Much Competition is Enough?

ABSTRACT: This paper describes a simple model of research and development investment in which firms can choose any number of R&D projects that have independent and identical probabilities of success. The measure of R&D diversity is the number of projects undertaken by an industry. Innovations are drastic. Mergers can reduce incentives to invest in R&D through business-stealing effects: a party to a merger does not value profits from a discovery that occur at the expense of its merger partner. The model shows that competition generally (but not always) increases R&D diversity, but the incremental effects from a merger are small if the industry has more than five or six rivals that compete to innovate prior to the merger, provided that the merger does not increase the profits that are at risk from innovation. Mergers can have significant adverse effects if the merging firms have large profits that can be replaced by an innovation. A merger can promote investment in R&D if rivals can benefit from information spillovers by imitating a discovery.

August 31, 2018 | Permalink | Comments (0)

Thursday, August 30, 2018

Foreign ownership and market power: the special case of European banks

Panayotis D. Alexakis (National and Kapodistrian University of Athens) and Ioannis G. Samantas (National and Kapodistrian University of Athens) examine Foreign ownership and market power: the special case of European banks.

ABSTRACT: The paper examines the nexus of foreign ownership and market power in 26 European banking sectors, for the period 1997-2013. The sample comprises 11,761 bank-year estimates of marginal cost and market power, which are then matched with data on the foreign ownership status and presence across all host countries. The analysis reports strong evidence over the significant effect of well-capitalised foreign-owned banks on their monopolistic conduct. There is also a weaker indication that foreign presence leads to higher margins in large-sized foreign banks in fast-growing economies and markets of stricter regulation on capital, in which foreign penetration lies above 14% of the host banking industry.

August 30, 2018 | Permalink | Comments (0)

Biologics as the New Antitrust Frontier: Reflections, Riposte, and Recommendations

Daryl Lim, John Marshall, offers Biologics as the New Antitrust Frontier: Reflections, Riposte, and Recommendations.

ABSTRACT: History reminds us that without regulation, the strong do what they will and the weak suffer what they must. Self-interest drives incumbents to entrench their dominance and thwart challenge. Congress enacts laws to protect the process of competition in the marketplace from the tyranny of corporate might. In turn, courts attempt to give effect to those policies while safeguarding the incentive of incumbents and entrants to invest and innovate. The challenge of walking that tightrope at each technological frontier remains the same — whether dealing with sewing machines, computer operating systems, small-molecule (SM) drugs, or biologics. In each case, courts must operationalize antitrust precedent by adapting them to the technology before them and providing meaningful public guidance.

Michael Carrier and Carl Minniti offer a commanding survey of how antitrust policy and precedent interface with the competitive dynamics of biologics. With patent settlements, as the Authors note, the Actavis framework will continue to be applicable in situations where reference biologics (RBs) pay “follow-on biologics” (FOBs) to stay out of their markets. The Authors’ optimism that reverse payments will be less likely, however, should be tempered. Factors including the ability for FOBs to offer interchangeable therapies over time, the likelihood that FOBs must disclose manufacturing trade secrets during Biologics Price Competition and Innovation Act (BPCIA) litigation, and the real and present threat of patent revocation in post-grant proceedings both individually and may cumulatively result in a higher incidence of reverse payments than the Authors predict. At the same time, the lack of automatic reporting obligations will make anticompetitive biologic settlements more difficult to detect than those in the SM space. 

With product hopping, the Authors are similarly optimistic. RBs are less likely to reformulate biologics; FOBs must price their biologics higher, making it less attractive for RBs to engineer “hard switches”; state substitution laws do not apply to biosimilars; and the BPCIA does not provide additional exclusivity for minor reformulations. As with the reverse-payments scenario, however, interchangeable FOB therapies will become the norm over time. The primacy of process innovation in biologics will make reformulation easier than in the SM space. Actavis also cautions against the Authors’ suggestion that RBs who enter with a reformulated biologic after a FOB should qualify for a safe harbor. Rather, the rule of reason should still be applied, though that analysis may be concluded in a “twinkling of an eye.” 

Finally, as the Authors note, regulatory abuse (including (Risk Evaluation and Mitigation Strategy) REMS) will continue to raise antitrust concerns. In this regard, the Response amplifies the Authors’ analysis of refusals to deal in biologic samples for REMS purposes, as well as their analogies to patent assertion entities and standard essential patents, explain how each of these can inform the antitrust analysis in the biologics space. The Response also discusses why and how patent misuse can be used as a policy lever to address regulatory abuses, and why the cumulative nature of innovation in the biologics space makes patent misuse a particularly apt response. 

Despite the BPCIA’s thoughtful construction, antitrust law has a gap-filling role. No solution is watertight and each piece is a compromised fit at best. RBs are not malefactors any more than FOBs are angels. Like a referee calling out strikes, antitrust law simply provides a marker to identify and penalize behaviors that run contrary to expectations of good gamesmanship when competing. The enterprise of developing a coherent understanding of biologics and its antitrust implications has only begun, but in all our endeavors, we can be grateful to the Authors for helping point the way.

August 30, 2018 | Permalink | Comments (0)

The Law on Fines Imposed in EU Competition Proceedings: Converging Towards Hazier Lines

Eric Barbier de La Serre and Eileen Lagathu describe The Law on Fines Imposed in EU Competition Proceedings: Converging Towards Hazier Lines.

ABSTRACT: 2017 was about achieving greater convergence among competition authorities through harmonisation of the main procedural aspects of their fining policies. Efforts were also made to achieve greater convergence between the different fields of Competition Law, by modelling the fining methodology for infringements of merger control rules on that applicable to violations of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). However, as will be seen below, this quest for consistency may be endangered by the recent blurring of the individualisation of the fine on account of the significant discretion left to the Commission concerning the stage(s) at which the gravity of the undertaking’s behaviour is undertaken.

August 30, 2018 | Permalink | Comments (0)

More Competition Lore Podcasts are Up - Episodes 5-7

What I can term the "Inside the Actors' Studio" type Q&A project that Caron Beaton-Wells has created continues with new episodes by Maurice Stucke, Geoff Manne and Pinar Akman.  Listen here.

August 30, 2018 | Permalink | Comments (0)

Wednesday, August 29, 2018

Pumpkin Spice Latte is Back at Starbucks (and life is better as a result)

I always love the seasonal flavor Pumpkin Spice Latte (PSL) at Starbucks.  This is the first year that our law school Starbucks is open in the fall.  Given that it was 92F yesterday in Gainesville, isn't it odd that PSL returns in August?  The Boston Globe explains this strange anomaly by noting Pumpkin Spice Derangement Syndrome is here already by noting, "The drink that drives soccer moms and yoga-pants pushers wild has somehow eluded my editor in the 15 years since it first debuted." 

August 29, 2018 | Permalink | Comments (0)

Oversight of the Enforcement of the Antitrust Laws: SUBCOMMITTEE HEARING Wednesday, October 3, 2018

Oversight of the Enforcement of the Antitrust Laws


Subcommittee on Antitrust, Competition Policy and Consumer Rights

DATE: Wednesday, October 3, 2018 ADD TO MY CALENDAR
TIME: 02:30 PM
LOCATION: Dirksen Senate Office Building 226
PRESIDING: Senator Lee

Check back for live video of this hearing.


  1. The Honorable Joseph Simons
    Federal Trade Commission
    Washington , DC

August 29, 2018 | Permalink | Comments (0)

Arbitration Clauses and Competition Law

James Segan describes Arbitration Clauses and Competition Law.

ABSTRACT: There is a considerable body of literature on the topic of arbitrating competition law disputes.1 The focus of such literature has tended to be on three topics in particular, namely (i) whether competition law claims are arbitrable at all; (ii) whether arbitral tribunals are under a duty to rule upon competition law claims raised by the parties or to raise such issues ex officio, and (iii) whether and in what ways a court, asked to review an arbitral award, should apply competition law even if not raised before the arbitral tribunal. 

August 29, 2018 | Permalink | Comments (0)

Does managed competition constrain hospitals’ contract prices? Evidence from the Netherlands

Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Monique Burger; and Erik Schut ask Does managed competition constrain hospitals’ contract prices? Evidence from the Netherlands.

ABSTRACT:  In the Dutch health care system health insurers negotiate with hospitals about the pricing of hospital products in a managed competition framework. In this paper, we study these contract prices that became for the first time publicly available in 2016. The data show substantive price variation between hospitals for the same products, and within a hospital for the same product across insurers. About 27% of the contract prices for a hospital product is 20% higher or lower than the average contract price in the market. For about half of the products the highest and lowest contract price across hospitals differ by a factor three or more. Moreover, hospital product prices do not follow a consistent ranking across hospitals, suggesting substantial cross subsidization between hospital products. Potential explanations for the large and seemingly random price variation are: (i) different cost pricing methods used by hospitals, (ii) uncertainty due to frequent changes in the hospital payment system; (iii) price adjustments related to negotiated lumpsum payments, and (iv) differences in hospital and insurer market power. Several policy options are discussed to reduce variation and increase transparency of hospital prices.

August 29, 2018 | Permalink | Comments (0)

The New Prescription Drug Paradox: Pipeline Pressure and Rising Prices

Alice M. Ellyson and Anirban Basu offer The New Prescription Drug Paradox: Pipeline Pressure and Rising Prices.

ABSTRACT: Economic literature has extensively studied how prices for incumbent pharmaceutical drugs respond to generic competition after entry. However, less attention has been paid to pricing behavior in anticipation of brand-to-brand competition. We contribute to this gap in the literature by both developing a model of pricing strategies for incumbent drug manufacturers under tiered-insurance anticipating branded competition. Our model predicts rising prices for incumbent drugs for a range of elasticities as the likelihood of entry increases from competitors with horizontally-differentiated products. Using the insulin market as a natural experiment, we exploit exogenous variation in a potential entrant's completion of clinical trials to identify the effect of drug pipeline pressure on the prices of incumbent drugs. Results suggest that pipeline pressure significantly increases the prices of incumbent drugs. We expect that similar pricing effects will be prevalent with potential biosimilar entry.

August 29, 2018 | Permalink | Comments (0)

Tuesday, August 28, 2018

Who Should Conservatives Blame for Alex Jones’ Ban From Social Media? Themselves.

Bob Lande (Baltimore) and Chris Sagers (Cleveland State) ask and answer - Who Should Conservatives Blame for Alex Jones’ Ban From Social Media? Themselves.

August 28, 2018 | Permalink | Comments (0)

Collusion in mixed oligopolies and the coordinated effects of privatization

João Correia-da-Silva (CEF.UP and Faculdade de Economia, Universidade do Porto.) and Joana Pinho (CEF.UP and Faculdade de Economia, Universidade do Porto.) study Collusion in mixed oligopolies and the coordinated effects of privatization.

ABSTRACT: We study the sustainability of collusion in mixed oligopolies where private and public firms only differ in their objective: private firms maximize profits, while public firms maximize total surplus. If marginal costs are increasing, public firms do not supply the entire market, leaving room for private firms to produce and possibly cooperate by restricting output. The presence of public firms makes collusion among private firms harder to sustain, and maybe even unprofitable. As the number of private firms increases, collusion may become easier or harder to sustain. Privatization makes collusion easier to sustain, and is socially detrimental whenever firms are able to collude after privatization (which is always the case if they are sufficiently patient). Coordinated effects thus reverse the traditional result according to which privatization is socially desirable if there are many firms in the industry.

August 28, 2018 | Permalink | Comments (0)

Global Antitrust Discussion is Imperative – Fordham’s is the Premium International Conference

James Keyte, Director of Fordham University’s Competition Law Center, writes about the 45th installment of the Annual Conference on Competition Law and Policy, to be held September 5-7 in New York City.

On September 5-7, Fordham will host its 45thInternational Antitrust Law and Policy Conference, which is free for young attorneys (years 1-3) and all in-house counsel. When I was a young attorney, I learned an enormous amount by attending conferences where there were high-level discussions on antitrust policy, enforcement and practical issues around the globe. At Fordham, we want to encourage young antitrust lawyers to add to their practices and encourage them to be part of the international antitrust dialogue. This is also why, four years ago, we started the Antitrust Economics Workshop, which this year is hosted by Compass Lexecon and The Brattle Group (conference and workshop programs can be downloaded below).

While there has been a steady buildup in antitrust legislation worldwide over the past two or three decades, the speed at which new business models have gained market power across borders and the international scrutiny faced by even medium sized companues, has increased the urgency for attorneys and economists to look beyond their jurisdictions. The past few months alone have been witness to a growing debate on populism and antitrust, a reevaluation of vertical mergers and the definition of relevant markets in platform businesses that will reverberate worldwide, investigations into the impact of new business models on traditional industries, and a questioning of due process across jurisdictions and the role of comity in harmonizing competition law enforcement both for mergers and conduct, among other pressing questions with international repercussions.

The main program of this years Fordham conference addresses these issues. We continue to take the lead in focusing on cutting-edge antitrust issues that are relevant to practitioners, enforcers and academics alike. Day 1  starts with keynotes from Makan Delrahim (DOJ) and Johannes Laitenberger (DG Comp), including a question and answer period open to the audience. This is followed by a highly relevant panel on “Antitrust and Populism” (moderated by Eleanor Fox .  The remainder of the day includes a program of vertical restraints (moderated by Judge Douglas Ginsburg), which is particularly timely given recent EU developments.  And the afternoon addresses emerging issues in antitrust and healthcare (moderated by Dan Sokol).

Day 2, kicks off with two more incredible keynote speakers, Andrea Coscelli (MA) and Maureen Ohlhausen (FTC), followed again by an open question and answer session. The panels on day 2 are equally topical and forward-looking.  Deb Feinstein will moderate a panel on international merger enforcement, and Sharis Pozen will host this year In-House Counsel Roundtable, which will present a conversation between two leading enforcers and two in-house counsel on the challenges of dealing with multi-jurisdictional investigations and actions.

In my fifth year as Director of the Fordham Competition Law Institute, I believe this is the best program yet. I hope that all will continue to see the Fordham Conference as the fall, international meeting place to exchange and debate critical antitrust issues and, of course, to interact with colleagues, academics and enforcers from around the world.

More about the Conference 

Download the Conference Agenda

Download the Workshop Agenda 

August 28, 2018 | Permalink | Comments (0)

Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection

Julieta Caunedo (Cornell University) examines Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection.

ABSTRACT: Disparities in revenue productivity for narrowly defined industries is ubiquitous in firm-level data. Whereas often times such a heterogeneity is a symptom of factor misallocation, it is also possible that part of it is induced by firms' optimal decisions under technology and information constraints. To date, there is limited understanding of the implications of the observed revenue product heterogeneity for efficiency in frameworks where both sources for dispersion coexist. This paper fills the gap. Market distortions that generate inefficient factor accumulation may feed back into the equilibrium distribution of revenue productivity, and hence, empirical measures of allocative efficiency. Understanding such interaction is key for policy design. In this paper, I focus on the study of market distortions generated by firms' market power and I generate endogenous revenue product dispersion through either heterogeneous market power, non-convex production technologies, or information frictions. I characterize the market decentralization of efficient outcomes via policies that do not require firm-level information. Most importantly, I show that the welfare gains for a wide class of models when implementing these optimal policies follows a common pattern: welfare gains are proportional to the change in average revenue product and the number of operating units in the market.

August 28, 2018 | Permalink | Comments (0)

Monday, August 27, 2018



Fri, November 9, 2018

8:30 AM – 6:30 PM EST

Add to Calendar


Harvard Law School

1585 Massachusetts Avenue

Cambridge, MA 02138


Rob ATKINSON, President, Information Technology and Innovation, Washington DC

Jonathan B. BAKER, Research Professor of Law, American University Washington College of Law, Washington DC

James BESSEN, Executive Director, Technology & Policy Research Initiative Director and Founder, Research on Innovation, Boston University School of Law

Julie BRILL, Corporate Vice President and Deputy General Counsel, Microsoft, Redmond

Einer R. ELHAUGE, Professor of Law, Harvard Law School, Cambridge

David S. EVANS, Chairman, Global Economics Group; Founder & CEO, CPI, Boston

Eliana GARCÉS, Senior Economist, The Brattle Group, Washington DC

Andrei HAGIU, Visiting Associate Professor of Technological Innovation, Entrepreneurship, and Strategic Management, MIT Sloan School of Management, Cambridge

Renata B. HESSE, Partner, Sullivan & Cromwell, Washington DC

Greg IP, Chief Economics Commentator, The Wall Street Journal, New York

Bruce H. KOBAYASHI, Director, Bureau of Economics, US FTC, Washington DC

William E. KOVACIC, Director, The GWU Competition Law Center, Washington DC, Former Chairman, US FTC, Washington DC

Michael MANDEL, Chief Economic Strategist, Progressive Policy Institute, Washington DC

Diana MOSS, President, AAI, Washington DC

Nancy ROSE, Professor of Applied Economics, MIT, Cambridge

Fiona SCOTT-MORTON, Professor of Economics, Yale University School of Management

Nikhil SHANBHAG, Director, Competition and Telecommunications Law, Facebook, San Francisco

Hal VARIAN, Professor of Business, Economics, and Information Management, University of California, Berkeley

Lawrence WHITE, Professor, NYU Stern Business School, New York

Joshua D. WRIGHT, Professor of Law, Scalia Law School; Executive Director, Global Antitrust Institute, Arlington







Accommodation: Sheraton Commander – Hotel Reservations Cut-offs date: November 1st. A discounted block of sleeping rooms has been reserved at the Sheraton Commander Hotel under the “CPI Conference.” Rooms will be available until the cut-off or when the block fills, whichever comes first.

Sheraton Commander Hotel, 16 Garden Street, Cambridge, +1-617-547-4800

Alternative Hotels:

The Charles Hotel, 1 Benner Street, Cambridge, +1-855-213-0582

Harvard Square Hotel, 110 Mount Auburn Street, Harvard Square, Cambridge +1- 617-864-5200

August 27, 2018 | Permalink | Comments (0)

Firm Size, Concentration And The Labor Share

Lijun Zhu (Washington University in St. Louis) examines Firm Size, Concentration And The Labor Share.

ABSTRACT: The labor share has been declining for the last 20 to 25 years in U.S. This paper investigates the effect of industrial concentration on the decline of labor share, and quantify this effect. We document two empirical facts. First, there is a positive and significant correlation between the increase in concentration, measured as share of sales by large firms in a sector, and decrease in sectoral labor share from 1997 to 2012. Second, in average, the labor share for large firms is lower than small firms within the same sector. We propose the following explanation: large firms have lower labor share since they use more capital intensive technologies, which is supported by firm level data which reveals that capital-labor ratio is positively and significantly correlated with firm size, measured as sales, assets, and/or employees.; Mergers & Acquisitions, due to weakening of Anti-trust laws since 1980s, transfers market share from small to large firms, increases concentration ratio, and decreases labor share. A firm dynamics model that features merger and acquisition is developed. Production technologies are endogenized, with more productive firms choosing more capital intensive technology. Our quantitative exercise shows that the proposed mechanism explains 30-40% of the decrease in labor share from 1997 to 2012.

August 27, 2018 | Permalink | Comments (0)

Bid rigging and entry deterrence in public procurement: Evidence from an investigation into collusion and corruption in Quebec

Robert Clark (Queen's University); decio Coviello (HEC Montreal); Jean-Francois Gauthier (Boston College); Art Shneyerov (Concordia University) explore Bid rigging and entry deterrence in public procurement: Evidence from an investigation into collusion and corruption in Quebec.

ABSTRACT: We study the impact of an investigation into collusion and corruption to learn about the organization of cartels in public procurement auctions. Our focus is on Montreal's asphalt industry, where there have been allegations of bid rigging, market segmentation, complementary bidding and bribes to bureaucrats, and where, in 2009, a police investigation was launched. We collect procurement data and use a difference-in-difference approach to compare outcomes before and after the investigation in Montreal and in Quebec City, where there have been no allegations of collusion or corruption. We find that entry and participation increased, and that the price of procurement decreased. We then decompose the price decrease to quantify the importance of two aspects of cartel organization, coordination and entry deterrence, for collusive pricing. We find that the latter explains only a small part of the decrease.

August 27, 2018 | Permalink | Comments (0)

Sunday, August 26, 2018

Which Antitrust Economist Is the Most Cited in Law Reviews 2013-2018?

Based on the latest Sisk data, there are all sorts of lists of most cited law professors.  Perhaps more interesting is to see the impact of economists in antitrust scholarship today.  Some economists wrote/write on a number of topics.  I focus, as does the Leiter approach to "expertise" to 75% or more of the citations focusing on the field.  By that standard, the most important antitrust economist shaping ideas in legal scholarship (and it isn't even close, so I do not provide a top 5) is:


Carl Shapiro, Berkeley Haas School of Business


Carl has 740 citations in law reviews in the past 5 years.  In terms of citations in antitrust, that would put Carl below only Herb Hovenkamp in terms of someone who writes at least 75% of the time in antitrust and below Hovenkamp and Louis Kaplow if we include people who write in antitrust and other fields (with Louis making critically important contributions in tax and law and economics more generally in addition to shaking up the foundations of antitrust).  

August 26, 2018 | Permalink | Comments (0)