Thursday, October 18, 2018
The ABA Antitrust Section’s Legislation Committee is seeking 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 Committee’s annual newsletter. This project is a great way to start gaining exposure within the antitrust community. If interested, please contact firstname.lastname@example.org, and include a resume or a short bio.
James W. Coleman, Southern Methodist University - Dedman School of Law discusses Energy Competition: From Commodity to Boutique & Back.
ABSTRACT: Energy products such as power, gas, and oil have long been the world’s premier commodities. Consumers demand that power and fuel are available when they want it and they prefer to pay less for it. Few know or care where their fuel or power comes from. So for years energy companies believed that efforts to differentiate their products were mostly ineffective — they were re-signed to compete on price in fierce global commodity markets. But in recent years, a new focus on regulating how energy commodities are produced has begun to splinter previously integrated energy markets, creating markets for boutique fuels and power, and allowing energy firms to restrict output and raise prices without fear of competition.
This Article documents the causes and effects of this trend toward boutique energy markets. It shows how consumer-driven supply-chain certifications that call for environmentally sound production methods have gradually evolved into government-mandated production standards. These standards take identical commodities — barrels of oil or kilowatt-hours of electricity — and differentiate them based on how they were produced. Most typically, products that were produced using particularly greenhouse gas intensive methods are banned or otherwise penalized. These supply-chain standards have been adopted by countries, but increasingly also by individual provinces, states, and localities. As a result, they are breaking the trade links in global energy supply chains. To sell in each of these markets, energy companies must be able to certify the production methods used by their entire supply chain. To do this, they must either control the entire vertical supply chain or only deal with the subset of companies that is prepared to meet the regulatory requirements of each jurisdiction that might import fuel or oil. Inevitably, this is increasing concentration of power and fuel markets.
The Article suggests how to turn energy back into a commodity without sacrificing the goals of the supply-chain standards. It suggests that jurisdiction specific supply-chain standards be replaced with one or two agreed supply-chain standards that would allow more energy companies to compete across jurisdictions. And it offers recommendations for how competition and energy regulators can work together to ensure that energy standards do not undercut the aims of competition policies.
Weimin Wu, University of Iowa, College of Law describes Managing Cartels through Patent Pools.
ABSTRACT: Patent pools can serve many purposes. Some of them are procompetitive while others anticompetitive. This article addresses one aspect of patent pools that has not received much attention—patent pool’s role in stabilizing a cartel of downstream producers. The article first reviews the problem of cartel cheating, which threats the stability of cartels. Any potential mechanisms that cartels can use to increase stability face three main challenges: (1) the cost of management, (2) agency costs, and (3) the requirement of secrecy. Our analysis shows that a vertically-related firm is an ideal candidate to manage a cartel. Our analysis has important implications for our understanding of patent pools. Because a patent pool is in a vertical relationship with multiple downstream producers, they can use a patent pool as a mechanism to facilitate collusion. The article argues that the vertical licensor-licensee relationship gives a patent pool better chances to evade antitrust scrutiny and more latitude in monitoring downstream producers’ performances. It also argues that aggregation of patents in a patent pool would make it more effective in punishing cartel cheating. The article’s main finding that a patent pool is uniquely suited to manage a downstream cartel is a reminder that an overly permissive view of patent pools can invite anticompetitive hazards.
Konstantinos Stylianou, University of Leeds - School of Law offers thoughts on Exclusion in Digital Markets.
ABSTRACT: This article recasts the existing analytical framework on exclusion to account for the technology-intensive nature of digital markets. It discusses:
a) technological ways that affect the competitive intensity in digital markets
b) empirical data on the durability of competitive advantage in digital markets, and
c) the nature of exclusion as a monopolization tactic from a technological point of view
The technology element is important because as a matter of order it is technological capabilities and limitations that define what the transactional overlay can be, not the other way around. Economists start from the pre-assumption that “in the beginning there [are] markets,” but in markets where the high technology element is prominent, which market actors, transactional interactions, and options are available, and under which conditions, is largely dependent on what is technically possible.
David Glasner, Federal Trade Commission and Sean Patrick Sullivan, University of Iowa - College of Law discuss The Logic of Market Definition.
ABSTRACT: Despite the voluminous commentary that the topic has attracted in recent years, much confusion still surrounds the proper definition of antitrust markets. This paper seeks to clarify market definition, partly by explaining what should not factor into the exercise. Specifically, we identify and describe three common errors in how courts and advocates approach market definition. The first error is what we call the natural market fallacy: the mistake of treating market boundaries as preexisting features of competition, rather than the purely conceptual abstractions of a particular analytical process. The second is the independent market fallacy: the failure to recognize that antitrust markets must always be defined to reflect a theory of harm, and do not exist independent of a theory of harm. The third is the single market fallacy: the tendency of courts and advocates to seek some single, best relevant market, when in reality there will typically be many relevant markets, all of which could be appropriately drawn to aid in competitive effects analysis. In the process of dispelling these common fallacies, this paper offers a clarifying framework for understanding the fundamental logic of market definition.
Wednesday, October 17, 2018
Francisco Marcos, Barry J. Rodger and Miguel Sousa Ferro and PROMOTION AND HARMONIZATION OF ANTITRUST DAMAGES CLAIMS BY DIRECTIVE EU/2014/104?
ABSTRACT: Directive EU/2014/104 is the latest legal instrument that crystalizes the evolution of EU competition law enforcement. This paper assesses critically the features of the Directive and the challenges it poses for its implementation by Member States. The Directive codifies the case law of the EUCJ and it encroaches upon the autonomy of Member States in setting the institutions, remedies and procedures available for victims’ of antitrust infringements. Although the Directive provides a fragmented and incomplete set of rules that only partially harmonizes antitrust damages claims in the EU, and it’s slanted towards follow-on cartel damages claims, it has publicised the availability of damages claims, creating momentum that will transform how competition law is enforced in the future.
Assistant Attorney General Makan Delrahim Delivers Remarks at the University of Haifa in Israel Haifa,Israel ~ Wednesday, October 17, 2018
Makan Delrahim delivers remarks on “Start Me Up”: Start-Up Nations, Innovation, and Antitrust Policy.
Jorge L. Contreras, University of Utah - S.J. Quinney College of Law is Taking it to the Limit: Shifting U.S. Antitrust Policy Toward Standards Development.
ABSTRACT: In November 2017, U.S. Assistant Attorney General Makan Delrahim, chief of the Department of Justice (DOJ) Antitrust Division, gave a speech at University of Southern California provocatively entitled “Take it to the Limit: Respecting Innovation Incentives in the Application of Antitrust Law”. In this speech, Mr. Delrahim announced a new DOJ policy approach to the antitrust analysis of collaborative standard setting and standards-development organizations (SDOs) -- the trade associations and other groups in which industry participants cooperate to develop interoperability standards such as Wi-Fi, Bluetooth, 4G and 5G, USB and the like. He explained that the DOJ had “strayed too far” in its focus on single firm conduct concerning standards, particularly the assertion of patents essential to the implementation of standards in technology products (“standards-essential patents” or “SEPs”), and that antitrust authorities should be more concerned with potential collusion by competitors within SDOs (i.e., an apparent shift in doctrinal focus from unilateral conduct under Section 2 of the Sherman Act to concerted action under Section 1 of the Sherman Act). One commentator described the DOJ policy shift announced by Mr. Delrahim as “a 180 degree turn” on SEP issues. The new policy also seems to put the enforcement priorities of the Antitrust Division at odds with those of the other principal U.S. antitrust enforcement agency, the Federal Trade Commission (FTC). This article analyzes the contours of the emerging divide among U.S. antitrust agencies, as well as reactions to the “Take it to the Limit Speech” by industry, academics and Mr. Delrahim’s subsequent public statements.
Harry First, New York University School of Law and Spencer Weber Waller, Loyola University of Chicago, School of Law - Institute for Consumer Antitrust Studies offer Internet Markets and Algorithmic Competition: The Rest of the Story.
ABSTRACT: This paper, presented at the Oxford Conference "Online Markets and Offline Welfare Effects," explores two areas that were not the focus of the conference but that are quite important to how competition law will deal with Internet markets and their challenges: (1) the role of private rights of action and (2) the role of legal regimes other than the European Union and the United States. The paper argues that private actions will be needed to fill gaps in public enforcement and that regimes outside the EU and US may provide necessary perspective on Internet market issues through their consideration of "public interest" factors, as required in many of their statutes.
Egor Krivosheya, National Research University Higher School of Economics; Moscow School of Management is Evaluating Efficient Multilateral Interchange Fees: Evidence from End-User Benefits.
ABSTRACT: This article evaluates the efficiency of current MIF rates for the Russian market and identifies the effects of their changes. In order to estimate the demand of end users and end-user surpluses the study uses the adopted version of the Bedre-Defolie and Calvano (2013) model as well as representative samples of 800 traditional (offline) Russian merchants, 1500 Russian individuals and 7 banks from the top 20 that cover more than 80% of the Russian issuing and acquiring markets and the end-user benefits. Results confirm the efficiency of currently set MIF rates. Comparative statics analysis confirms that the changes in MIF rates never lead to a Pareto improvement, while the total surplus changes are asymmetric across different market parts. The article also shows that once the realistic assumptions are introduced to the models (e.g., information asymmetry, imperfect pass-through of changes) the end-user welfare is distorted more severely as a result of the MIF rates changes. The first-best policy for the Russian regulator and legislators is the use of alternative (non-tariff) stimulating measures for a cashless economy in order to isolate the effect of changes to the intended groups.
Tuesday, October 16, 2018
David Imhof, Yavuz Karagök, and Samuel Rutz ask SCREENING FOR BID RIGGING—DOES IT WORK?
ABSTRACT: This paper proposes a method to detect bid rigging by applying mutually reinforcing screens to a road construction procurement dataset from Switzerland in which no prior information about collusion was available. The screening method is particularly suited to address the problem of partial collusion, that is, collusion that does not involve all firms and/or all contracts in a specific dataset, implying that many of the classical markers discussed in the corresponding literature will fail to identify bid rigging. In addition to presenting new screens for collusion, it is shown how benchmarks and the combination of different screens may be used to identify subsets of suspicious contracts and firms. The discussed screening method succeeds in isolating a group of “suspicious” firms exhibiting the characteristics of a local bid-rigging cartel with cover bids and a—more or less pronounced—bid rotation scheme. Based on these findings, the Swiss Competition Commission (COMCO) opened an investigation and sanctioned the identified “suspicious” firms for bid rigging in 2016.
Michael Funk, and Christian Jaag offer The MORE ECONOMIC APPROACH TO PREDATORY PRICING .
ABSTRACT: The “more economic approach” was introduced to antitrust to achieve a more effect-based and theoretically grounded enforcement. However, related to predatory pricing it resulted in systematic over- and under-enforcement: Economic theory does not require dominance for predation to be a rational (and harmful) strategy, although an ex ante dominant firm would often refrain from predation. Hence, within the current legal framework which requires dominance for antitrust to apply, a more effect-based and theoretically grounded antitrust enforcement cannot pursue harmful predation. Therefore, we suggest separating predatory pricing from exclusionary abuse of a dominant firm, both legally and analytically. Instead, predatory pricing should be analyzed along the same logic as a merger. In particular, we argue that three elements from merger control should be adopted: in the absence of dominance, market share and/or turnover thresholds may serve as a de minimis rule; recoupment should be analyzed similar to the competitive effect of a merger between the predator and its prey; and a stronger efficiency defense should be established.
Jan De Loecker, Princeton University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and Jan Eeckhout, University College London - Department of Economics analyze Global Market Power.
ABSTRACT: To date, little is known about the evolution of market power for the economies around the world. We extract data from the financial statements of over 70,000 firms in 134 countries, and we analyze and document the evolution of markups over the last four decades. We show that the average global markup has gone up from close to 1.1 in 1980 to around 1.6 in 2016. Markups have risen most in North America and Europe, and least in emerging economies in Latin America and Asia. We discuss the distributional implications of the rise in global market power for the labor share and for the profit share.
There is a Baseball Hall of Fame, a Rock and Roll Hall of Fame, and even a Polka Hall of Fame. New to the world of antitrust is that AAI has announced a Private Antitrust Enforcement Hall of Fame. I hope that this is the first of many induction ceremnies.
The American Antitrust Institute (AAI) is pleased to announce the establishment of the Private Antitrust Enforcement Hall of Fame. The introduction of the Hall of Fame in 2018 is an important part of celebrating the AAI's 20th anniversary and furthering the legacy of the progressive competition research, education, and advocacy that has defined AAI's mission and success since its founding in 1998.
The Hall of Fame highlights the importance of private antitrust enforcement at a time when vigorous antitrust enforcement could not be more essential for the health of the U.S. economy and its markets, and for the protection of consumers, workers, and innovators. The inaugural "Class of 2018" sets a high standard for the caliber of success and achievement that AAI seeks to honor. The Hall of Fame recognizes practitioners for three major contributions:
The Private Antitrust Enforcement Hall of Fame 2018 inductees are:
Joseph Goldberg is a senior shareholder in the law firm of Freedman Boyd Hollander Goldberg Urias & Ward P.A. Mr. Goldberg taught in law schools for nearly 20 years and has been in active private practice for more than 25 years. His practice focuses on antitrust, class actions, complex commercial litigation and election law. Mr. Goldberg is nationally and internationally recognized as one of the leading plaintiffs' antitrust litigators in the U.S. He is well known for his work with economic and statistical experts, his ability to understand complex cases and convey complicated issues, and to communicate those issues to juries.
Mr. Goldberg has tried a number of cases to multimillion-dollar verdicts and has recovered more than $5 billion for victims of antitrust violations. He served as lead plaintiffs' trial lawyer in In re Urethane Antitrust Litigation, one of the largest price-fixing verdicts in history, and has served in leadership positions in numerous other national class actions, including Polypropylene Carpet Antitrust Litigation, Bulk Vitamins Antitrust Litigation, and Visa/Mastercard Interchange Fee Antitrust Litigation.
Mr. Goldberg served on the law school faculties of the University of North Dakota and University of New Mexico. He also served as the General Counsel for the University of New Mexico and as Secretary of the New Mexico Human Services Department and the New Mexico Health & Environment Department. He currently serves on the Advisory Board of the American Antitrust Institute and the U.S. Advisory Board of the Loyola University Institute for Consumer Antitrust Studies.
H. Laddie Montague Jr. is Chairman Emeritus, Managing Shareholder, and Co-Chairman of the Antitrust Department at Berger Montague, where he co-founded the firm in 1970. Mr. Montague has been repeatedly named as one of the top competition lawyers in the U.S. and internationally. Mr. Montague is known for his long-term stewardship of his firm's antitrust department, regarded by his peers in the legal profession as "the dean of the Bar," and widely recognized and respected as fair-minded.
Mr. Montague was courtroom trial counsel for plaintiffs in the landmark Exxon Valdez Oil Spill Litigation, for which he received the Trial Lawyers for Public Justice 1995 Trial Lawyer of the Year Award. He has served as lead or co-lead counsel in numerous class actions, including: In re Domestic Drywall Antitrust Litigation, High Fructose Corn Syrup Antitrust Litigation, In re Infant Formula Antitrust Litigation, and Bogosian v. Gulf Oil Corp. Mr. Montague was co-lead counsel for the State of Connecticut in its litigation against the tobacco industry, has tried several complex jury cases, including the In re Corrugated Container Antitrust Litigation and In re Brand Name Prescription Drugs Antitrust LitigationMDL class actions. He is currently co-lead counsel in several pending class actions.
Mr. Montague has spoken widely in various international venues, including: the OECD, European Commission, International Bar Association, Canadian Bar Association, and Competition Law & Policy Forum. He is former Chairman of the Board of Trustees of the Dickinson School of Law at Penn State University and current Chairman of the Dickinson Law Association.
The 2018 Hall of Fame ceremony will be held November 14, 2018 during the luncheon of the AAI's Annual Private Antitrust Enforcement Conference.
Eray Cumbul, TOBB University of Economics and Technology weighs Stackelberg Versus Cournot Oligopoly with Private Information.
ABSTRACT: In this paper, we compare an n-firm Cournot model with a Stackelberg model, wheren-firms choose outputs sequentially, in a stochastic demand environment with private information. The Stackelberg perfect revealing equilibrium (SPRE) expected total output, consumer surplus(CS), and total surplus(TS) are lower while expected price and total profits are higher than the Cournot equilibrium ones irrespective of how noisy both the demand shocks and private demand signals of firms are. These rankings are the opposite to the rankings of prices, total output, surplus, and profits under perfect information. We also show that the first n-1 firms' expected profits form a decreasing sequence from the first to the (n-1)st in the Stackelberg game while all firms get the same expected profit in our Cournot game. The last-mover gets the highest expected profit if and only if the number of firms is fewer than or equal to four or the private signals of firms are uninformative enough. Lastly, in the Stackelberg model, as n grows, the SPRE converges to the efficient outcome; and when all firms are better informed, expected total output and TS always increase.
Monday, October 15, 2018
Doireann Fitzgerald Federal Reserve Banks - Federal Reserve Bank of Minneapolis and Anthony Priolo, University of Minnesota - Twin Cities - Department of Economics ask How Do Firms Build Market Share?
ABSTRACT: The question of how firms build market share matters for firm dynamics, business cycles, international trade, and industrial organization. Using Nielsen Retail Scanner data for the United States, we document that in the consumer food industry, brands experience substantial growth in market share in the first four years after successful entry into a regional market. However, markups are flat with respect to brand tenure. This finding is at odds with a large literature on customer markets which argues that firms acquire customers by temporarily offering low markups, and later raise markups once customers are locked in. However, it is consistent with a literature which emphasizes the importance of marketing and advertising activities for building market share.
Luis M. B. Cabral, New York University (NYU) - Leonard N. Stern School of Business - Department of Economics; Centre for Economic Policy Research (CEPR) offers thoughts Towards a Theory of Platform Dynamics.
ABSTRACT: I introduce a dynamic framework to analyze platforms. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc) make platform membership decisions occasionally. I show that optimal platform pricing addresses two externalities: across sides and across time periods. This results in optimal prices which depend on platform size in a non-trivial way. By means of numerical simulations, I examine the determinants of equilibrium platform size, showing that the stationary distribution of platform size may be bi-modal, that is, with some probability the platform remains very low or takes very long to increase in size. I also contrast the dynamics of proprietary vs non-proprietary (i.e., zero-priced) platforms; and consider the specific case of asymmetric platforms (one side cares about the other but not vice-versa).
Chris Sagers, Cleveland Marshall suggests #LOLNothingMatters.
ABSTRACT: Institutions matter in antitrust, at least as much as ideas. Most antitrust arguments, and especially the contretemps currently enjoying some attention in the popular press, imagine that antitrust problems are short- or medium-term matters, and that they can be corrected with local doctrinal steps. I suggest there is a deeper problem, a phenomenon more deeply inherent in the nature of competition itself. The problem will cyclically recur, so long as institutional brakes are unavailable to keep it at bay. Specifically, it seems that competitive markets are difficult to preserve without some prospective, no-fault rule to control concentration for its own sake. At least nominally, American antitrust has such a rule in its basic merger law, Clayton Act § 7, but the rest of it consists of retrospective, fault-based, law enforcement rules that in their application are by nature somewhat piecemeal. A prospective concentration rule is needed because once markets become concentrated, situations are common in which neither disciplinary new entry nor retrospective conduct remedies can restore competition. The deeper problem inherent in competition policy, which demonstrates the significance of institutions as well as ideas, is that such a rule is also most difficult to enforce. That is so because markets in their ordinary operation are confusing and contradictory to watch, and the hardest interventions for government to defend to a skeptical public are those that are prospective. Finally, however, it so happens that one institutional correction currently on the legislative agenda could conceivably do some good in correcting for this problem — a specific plank in congressional Democrats’ “Better Deal” platform.
Understanding the Implications of Big Data and Big Data Analytics for Competition Law: An Attempt for a Primer
Mira Burri, University of Lucerne is Understanding the Implications of Big Data and Big Data Analytics for Competition Law: An Attempt for a Primer.
ABSTRACT: The chapter is conceptualized as a primer on the implications of Big Data and Big Data analytics for market dynamics and competition law. It provides an overview of the existing scholarship and the contested opinions on whether Big Data is a distinct phenomenon that demands adjustments in the currently applied competition law toolkit.