Monday, November 26, 2018

The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets

A. Douglas Melamed, Stanford Law School and Nicolas Petit, University of Liege - School of Law; Hoover Institution; University of South Australia - School of Law address The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets.

ABSTRACT: This paper discusses the recent scholarly and policy attack against the consumer welfare (“CW”) standard. It shows that the CW standard is not the explanatory factor for perceived low levels of antitrust enforcement in the US. The arguments made against the CW standard reflect a misunderstanding of its purpose and effects. Moreover, any deviation from the CW framework would likely weaken antitrust enforcement in the platform age.

November 26, 2018 | Permalink | Comments (0)

The Pechstein Case: International Sports Arbitration Versus Competition Law. How the German Federal Supreme Court Set Standards for Arbitration

Rupprecht Podszun, Heinrich Heine University Dusseldorf - Faculty of Law; Max Planck Institute for Innovation and Competition addresses The Pechstein Case: International Sports Arbitration Versus Competition Law. How the German Federal Supreme Court Set Standards for Arbitration.

ABSTRACT: The German Federal Supreme Court in 2016 decided a case brought by athlete Claudia Pechstein against the International Skating Union on a doping matter. The question at issue was whether the arbitration clause in the athlete’s contract for participating in the World Championships, entered into with the only ice skating association, was actually amounting to an illegal abuse of dominance under competition law. A lower court had – sensationally – held that the underlying arbitration clause was a violation of competition law. The Federal Supreme Court, however, upheld the doping ban handed down by the sports institutions. Yet, in this interesting opinion the Federal Supreme Court sets standards for international arbitration.

This paper is a comment on this decision. In the first part of the paper, I set out what was at stake in the Pechstein case. In part II, I turn to the results for individual athletes vis-à-vis their sports associations. In part III, I try to define the standards set by the Court for arbitration. In part IV, I look at the antitrust angle of the case. In the concluding part (V), I sketch the importance of the decision for international arbitration.

November 26, 2018 | Permalink | Comments (0)

Predictability, Innovation, and Competition in Bitcoin's Mining Market

Robert Parham, University of Virginia and Einar C. Kjenstad, University of Aarhus discuss Predictability, Innovation, and Competition in Bitcoin's Mining Market.

ABSTRACT: We construct and estimate a dynamic oligopoly model of the Bitcoin mining market. Mining equipment manufacturers produce differentiated durable capital goods and endogenously choose optimal investments in R&D. Miners make dynamic purchase decisions based partly on beliefs regarding manufacturers' future choices. We show that policy-relevant values, such as aggregate R&D investment by manufacturers and network energy consumption, are predictable given only a Bitcoin price-path. We further show the industry is uniquely suited to test the impact of product market competition on innovation, a much-debated subject in the economics of R&D literature.

November 26, 2018 | Permalink | Comments (0)

Fighting Bundles: The Effects of Competition on Second Degree Price Discrimination

Andre Boik, University of California, Davis - Department of Economics and Hidenori Takahashi, University of Mannheim identify Fighting Bundles: The Effects of Competition on Second Degree Price Discrimination.

ABSTRACT: We study how changes in market structure affect how firms engage in second degree price discrimination. Specifically, we study how a large incumbent cable firm changes its menu of price-quality offerings and mixed bundles in response to entry. Competition strongly decreases the rate at which prices increase in quality and induces the incumbent to introduce additional medium-to-high quality offerings that the incumbent could have introduced absent competition but chose not to. Our findings are relevant for the broadband industry because they suggest that competition can improve broadband quality through direct pricing effects without any changes in investment in maximum quality.

November 26, 2018 | Permalink | Comments (0)

Friday, November 23, 2018

Competition Lore podcast - latest episode with Hal Varian

The latest episode of the podcast is out with an interview with Hal Varian, “Google, our God?”:

November 23, 2018 | Permalink | Comments (0)

Innovation by Dominant Firms in the Market: Damned If You Don't... But Damned If You Do?

Francisco Marcos, IE asks Innovation by Dominant Firms in the Market: Damned If You Don't... But Damned If You Do?

ABSTRACT: Innovation is key for dynamic efficiency and one of the best recipes to increase long-term businesses’ profits and, at the same time, enhance consumer welfare. Modern high-technology markets offer a perfect account of the importance of innovation for business success: either firms keep apace innovating, or rivals will overcome them and they will be left aside by consumers.

History shows many examples of firms that have failed to sustain the innovation game and have faded away. At the same time it also demonstrates how many successful businesses have gained a powerful position in the market in a very short period of time by offering good innovative products or services to consumers at competitive prices.

Nevertheless, by being successful, firms sometimes have attained a dominant position in the market and that may have meaningful implications from the perspective of antitrust or competition law. In that situation, the experience in many countries shows that innovation decisions by dominant market players can be second-guessed by competition authorities in search for anticompetitive behavior.

This paper will assess the limits and dangers competition law enforcers face in their investigations and sanctioning antitrust proceedings in the assessment of anticompetitive unilateral conduct by innovating firms.

November 23, 2018 | Permalink | Comments (0)

Will the FTC’s Success Continue?

Timothy J. Muris, George Mason University, Antonin Scalia Law School asks Will the FTC’s Success Continue?

ABSTRACT: The FTC has enjoyed great success for decades, and I address four topics here in this paper presented at the opening session of the FTC’s “Hearing on Competition and Consumer Protection in the 21st Century.” First, what durable success means for an agency like the FTC. Then, the vision I shared with my friend and predecessor as FTC Chairman, Robert Pitofsky, reflected in the second ABA Kirkpatrick Commission, that has helped lead to the agency’s success. Next, I consider recent challenges to that vision, in both competition and consumer protection, from two “p’s,” paternalism in consumer protection and populism in antitrust. Both of these “isms” once dominated FTC work, particularly in the 1970s, with disastrous consequences for consumers and the FTC. Finally, I debunk the shibboleth that an economic cult based in the University of Chicago somehow dominates FTC thinking, particularly in antitrust.

November 23, 2018 | Permalink | Comments (0)

Why Patent Hold-Up Does Not Violate Antitrust Law

Gregory J. Werden, U.S. Department of Justice - Antitrust Division and Luke M. Froeb, Vanderbilt University - Owen Graduate School of Management argue Why Patent Hold-Up Does Not Violate Antitrust Law.

ABSTRACT: Owners of standard essential patents (SEPs) are cast as villains for engaging in “patent hold-up,” i.e., taking advantage of the fact that they negotiate royalties with implementer-licensees that already have made sunk investments in the standard. In contrast to “patent ambush,” patent hold-up involves no standard-setting misconduct or harm to any competitive process, and thus cannot violate antitrust law. Commentators taking a contrary positions confuse the ends of antitrust law with its means. Antitrust law promotes consumer welfare only by protecting competition. Casting aside this core principle would expose business decisions, including ordinary price setting, to judicial oversight. Commitments made by SEP owners in the standard-setting process, however, should be enforced, and they are enforced. Without an antitrust cause of action, implementers invoke the powers of the courts to resolve royalty disputes over SEPs.

November 23, 2018 | Permalink | Comments (0)

Thursday, November 22, 2018

Coty, Amazon, and the Future of Vertical Restraints: Evolving Distribution Norms on Both Atlantic Shores

Chris Sagers Cleveland-Marshall College of Law, Cleveland State University, analyzes Coty, Amazon, and the Future of Vertical Restraints: Evolving Distribution Norms on Both Atlantic Shores.

ABSTRACT: Coty Germany, GmbH v. Parfümerie Akzente, GmbH, a late 2017 decision of the European Court of Justice (ECJ), set off something of a tizzy along North Atlantic shores concerning the future of vertical restraints and distribution relationships in online commerce sectors. Generally, Coty seemed to reflect the sense that online distribution posed threats to them that were new or special. Firms and their lawyers saw need to protect their brands from the rapacity of big, no-frills, price-cutting online retailers, including above all Amazon. Sure enough, the same anxieties find expression in other broad policy initiatives relating to online commerce, including the “Better Deal” program of Democrats in the U.S. Congress and the European Union’s ambitious new “Digital Single Market” program. But all this anxiety might look rather different if—contrary to our usual habit—consider it in historical context. In fact recent developments may not really be so new, at least not any ways relevant to competition policy. In fact, technological innovation in distribution, and the tension that has always characterized relations of suppliers and distributors, is an old story, and has been associated with some of the bitterest politics in antitrust history. And in times past, when similar anxieties of aggressive or innovative distributors have been met with private trade restraints or lobbying for protectionist government intervention, it has often enough turned out that the motives were not so pure and the changes that were feared were not ultimately so bad.

November 22, 2018 | Permalink | Comments (0)

Quantifying the Deterrent Effect of Anticartel Enforcement

S. W. Davies, University of East Anglia (UEA), Franco Mariuzzo, University of East Anglia (UEA) - Centre for Competition Policy, and Peter L. Ormosi, University of East Anglia (UEA) - Centre for Competition Policy; Norwich Business School are Quantifying the Deterrent Effect of Anticartel Enforcement.

ABSTRACT: This paper presents a rare attempt to quantify the deterrent effect of anticartel policy. It develops a conceptual framework, which establishes the sort of information necessary for such quantification. This is then illustrated and calibrated by drawing upon existing literatures and using evidence from legal cartels to approximate what would be observed absent policy. Measuring impact by the proportion of all potential harm that is deterred, our best estimate is two‐thirds and, even on conservative assumptions, at least half of all harms (or seven times the detected harm) is deterred.

November 22, 2018 | Permalink | Comments (0)

Specialization, Generic Firms and Market Competition

Mark Lijesen, VU University Amsterdam and Carlo Reggiani, University of Manchester examine Specialization, Generic Firms and Market Competition.

ABSTRACT: The choice of specialization affects firms' brand perception by consumers and it is of crucial importance for their profitability in competitive markets. We model how firms choose their level of specialization using the "spokes model". The model naturally captures local sub-markets where some brands are not available. We provide results on pricing and characterize the optimal specialization choice in duopoly and triopoly. Optimal specialization depends on: (i) the number of firms/brands, (ii) the number of firms/brands that have not entered a local market and (iii) the characteristics of the demand faced by firms. The model predicts the co-existence of generic and specialized firms, a feature common to many markets but very rare in modeling endogenous product differentiation.

November 22, 2018 | Permalink | Comments (0)

Labor's Share, the Firm's Market Power, and Total Factor Productivity

Robert John Dixon, The University of Melbourne - Department of Economics and Guay C. Lim, The University of Melbourne - Melbourne Institute of Applied Economic and Social Research explore Labor's Share, the Firm's Market Power, and Total Factor Productivity.

ABSTRACT: We investigate the relationship between labor's share, firm's market power, and the elasticity of output with respect to labor input using an approach based on an unobserved components model. The approach yields time‐varying estimates of market power and the elasticity. Evidence on the market power of firms (which we find to be rising since 2000) gives a deeper understanding of movements in labor's share and the labor wedge. The generated values of the elasticity yield revised estimates of total factor productivity growth which is informative about the extent of the downward bias inherent in traditional estimates which use labor's share as a proxy for the elasticity.

November 22, 2018 | Permalink | Comments (0)

Wednesday, November 21, 2018

My Favourite Competition Cases: Magill, Microsoft, Bosman by Ian Forrester Tuesday 4 December 2018

Centre of European Law
The Dickson Poon School of Law
Public Lecture

My Favourite Competition Cases: Magill, Microsoft, Bosman 

by Ian Forrester QC, Judge, General Court of the European Union

In the Chair Sir Jonathan Faull, Visiting Professor, King's College London

Tuesday 4 December 2018
12.00 -13.00
Parliament Chamber
The Inner Temple
Crown Office Row
London EC4Y 7DA

To reserve a place for this lecture click here

Judge Forrester has been an academic teacher, author and practitioner. He has lectured on EC legal and policy topics in many countries and published extensively on these themes, particularly competition, customs, dumping, pharmaceuticals, sport, the precautionary principle, and human rights. In April 2015 he was nominated to be a member of the General Court of the Court of Justice of the European Union and was sworn in on October 7th. He sits in the Third Chamber. His interests in competition include IP rights, dominance and due process. He argued, when a practitioner, a number of cases presenting the tension between IP rights and competition law.

Honorary Professor and Honorary Doctor of Laws (2009) at Glasgow University, he has lectured at numerous universities. He was appointed Queen’s Counsel (1988), and Bencher, Middle Temple (2012). His EC/EU cases include Magill (compulsory licensing); Bosman (football transfers); Microsoft (compulsory licensing); IMS (compulsory licensing); Pfizer Animal Health (the precautionary principle); Government of Gibraltar v Council (status of Gibraltar Airport); Glaxo Spain and Syfait et al v GlaxoSmithKline (parallel trade in pharmaceuticals); Les Laboratoires Servier (settlement of patent disputes); Chalkor/Halcor (due process and judicial review); Canon (dumping); A and Others v National Blood Authority (whether a blood transfusion can be a ‘defective’ product); Bellona Foundation v EFTA (environmental protection).

He was also involved in several European Court of Human Rights cases, including forcing a citizen to speak on pain of punishment even if the answer itself reveals punishable conduct (Al Fayed and Harrods: Fayed v The United Kingdom); press sources (Hans Martin Tillack: Tillack v Belgium); prisoner’s rights (Kalashnikov v Russia); fair trial and right to property (Karic and Djordjevic).

November 21, 2018 | Permalink | Comments (0)


Thursday, 29 November 2018, Mackenzie University, São Paulo, Brazil


Regional experts discuss the hottest topics in competition law and practice across Brazil and Latin America. GCR Live are proud to host this event on 29th November in São Paulo.

E-mail Tel: +44 20 3780 4137


Rafique Bachour

Freshfields Bruckhaus Deringer, Brussels

Rafique is a partner in Freshfields’ antitrust group where he specialises in antitrust and regulatory aspects of global M&A transactions, international cartel investigations, and other behavioural and regulatory matters. He also serves as global co-head of the firm’s industrials sector group. Rafique has extensive experience of managing parallel merger filings and other regulatory requirements around the world, including in Brazil (recently advising Suzano on its acquisition of Fibria; and RHI on its combination with Magnesita Refratarios). Rafique has an LL.M in international business law (London), is a non-governmental adviser to the International Competition Network (ICN) and lectures at King’s College, London. 


Alejandro Faya Rodríguez

Commissioner, Federal Economic Competition Commission (COFECE), Mexico City

Barbara Rosenberg

Barbosa Müssnich e Aragão, São Paulo

Caio Mario da Silva Pereira Neto

Pereira Neto | Macedo, São Paulo

Carlos Mena Labarthe

Creel, García-Cuéllar, Aiza y Enriquez, Mexico City

Carlos Patrón

Payet, Rey, Cauvi, Pérez, Lima

Cristiane Alkmin Junqueira Schmidt

Commissioner, Administrative Council for Economic Defense (CADE), Brasília

Cristianne Saccab Zarzur Chaccur

Pinheiro Neto, São Paulo

Fernando Carreño

Von Wobeser y Sierra, Mexico City

Jason Gudofsky

McCarthy Tétrault, Toronto

Josef Drexl

Director, Max Planck Institute for Innovation and Competition, Munich

Leonor Cordovil

Grinberg Cordovil, São Paulo

Lorena Pavic

Carey, Santiago

Marcio de Carvalho Silveira Bueno

President, IBRAC, São Paulo

Marcio Soares

Mattos Filho, São Paulo

Maria Cecilia Andrade

Antitrust, Compliance and Governmental Affairs, Construtora Norberto Odebrecht, São Paulo

Maytê Ximenes

Senior Legal Counsel for Brazil and LatAm, AirBnB

Megan Gerking

Morrison & Foerster, Washington, DC

Pablo Trevisan

Commissioner, Comisión Nacional de Defensa de la Competencia (CNDC)

Rita Motta

Latham & Watkins, Brussels

Santiago del Río

Marval, O'Farrell & Mairal, Buenos Aires

Thomas Ensign

Freshfields Bruckhaus Deringer, Washington DC

Vicente Bagnoli

Professor of Competition and Economic Law, Mackenzie Presbyterian University Law School


8.30: Coffee and registration

9.00: Welcome remarks

Vicente Bagnoli, Professor of Competition and Economic Law, Mackenzie Presbyterian University Law School

9.05: Chair’s opening remarks

Rafique BachourFreshfields Bruckhaus Deringer, Brussels

9.15: Enforcers roundtable

Regional enforcers share their analysis of developments over the past year and plans for the future.

Rafique BachourFreshfields Bruckhaus Deringer, Brussels

Alejandro Faya Rodríguez, Commissioner, Federal Economic Competition Commission (COFECE), Mexico City
Cristiane Alkmin Junqueira Schmidt, Commissioner, Administrative Council for Economic Defense (CADE), Brasília
Pablo Trevisan, Commissioner, Comisión Nacional de Defensa de la Competencia (CNDC), Buenos Aires

10.00: Coffee break

10.25: Merger control in Latin America

Panellists will discuss recent trends and developments in merger control within the region, in particular, the growing use of new theories of harm by different LATAM regulators, such as coordinated and conglomerate effects and vertical theories of harm as well as the challenges in designing and negotiating remedies, coordination with foreign authorities, and how recent legislative changes - especially in Chile and Argentina - are expected to affect cross-border transactions going forward.

Santiago del Río, Marval, O'Farrell & Mairal, Buenos Aires

Marcio Soares, Mattos Filho, São Paulo
Fernando Carreño, Von Wobeser y Sierra, Mexico City
Lorena Pavic, Carey, Santiago

11.35: Coffee break

12.00: Gun-jumping and information exchange – what can be shared before adeal clears?

With the introduction of new pre-merger control regimes in a number of Latin American countries, both domestic and foreign companies have had to adjust to a new reality where various limitations apply to the interactions between parties whenever a deal is subject to merger control clearance. Global mergers have also been made more challenging by developments in this area in the EU and other jurisdictions. Global experts will discuss practical experiences offering key insights for merging companies as they plan their future integration, including: limitations on what kind of information can be shared between signing and closing, when influence on the business of the target can cross the line into gun-jumping, how to design and implement antitrust protocols and clean teams, and carve-outs, among other topics. 

Thomas Ensign, Freshfields Bruckhaus Deringer, Washington, DC

Jason Gudofsky, McCarthy Tétrault, Toronto
Barbara Rosenberg, Barbosa Müssnich e Aragão, São Paulo
Rita Motta, Latham & Watkins, Brussels
Carlos Mena Labarthe, Creel, García-Cuéllar, Aiza y Enriquez, Mexico City

13.10: Networking lunch

14.20: Afternoon welcome 

Marcio de Carvalho Silveira Bueno, President, IBRAC, São Paulo

14.40: Cartel enforcement: Is leniency as attractive as it once was?

Throughout Latin America – and, indeed, the entire world – enforcers have touted the efficacy of robust leniency programmes for deterring, detecting and prosecuting cartels. However, in the face of growing follow-on litigation in various countries, questions have surfaced about whether the benefits of leniency and immunity from criminal prosecution are as attractive as they used to be. The panel will explore the intricate decision process that companies and individuals have to go through when assessing the pros and cons of immunity applications in Latin America, especially after Ecuador’s antitrust enforcer passed on confidential leniency material to the regional Andean competition agency, and, more recently, Brazil’s antitrust authority released new rules on disclosure of leniency materials to third parties. Panellists will also discuss the level of fines, exposure to criminal prosecution and the complexity of handling multiple leniency standards adopted by antitrust, anticorruption and criminal authorities when it comes to bid-rigging cases. 

Cristianne Saccab Zarzur Chaccur, Pinheiro Neto, São Paulo

Megan Gerking, Morrison & Foerster, Washington, DC
Maria Cecilia Andrade, Antitrust, Compliance and Governmental Affairs, Construtora Norberto Odebrecht
Carlos Patrón, Payet, Rey, Cauvi, Pérez Abogados, Lima

15.50: Coffee break

16.15: What is the role of antitrust at its intersection with consumer protectionand data protection?

The intersection between antitrust, consumer rights and data protection has gained new focus with the rise of competition and consumer protection issues related to big data industries, requiring further reflection on the strengths and weaknesses of each legal subsystem. This debate gains even more importance with the emergence of new data protection rules in various jurisdictions, most notably in Europe and Brazil, while questions about unilateral conduct have permeated the globe, including as agencies scrutinise the behaviour of large tech companies. Leading practitioners will examine this complex myriad of factors, looking to address questions such as: where to draw the line between the roles of data protection, consumer protection and antitrust in the world of big data; how to collaborate most effectively with antitrust authorities, and to what extent may data increase barriers to entry and confer market power.

Caio Mario da Silva Pereira Neto, Pereira Neto | Macedo, São Paulo

Maytê Ximenes, Senior Legal Counsel for Brazil and LatAm, AirBnB, São Paulo
Josef Drexl, Director, Max Planck Institute for Innovation and Competition, Munich
Leonor Cordovil, Grinberg Cordovil, São Paulo

17.25: Chair's closing remarks

Rafique BachourFreshfields Bruckhaus Deringer, Brussels

17.30: All delegates are invited to attend a drinks reception kindly hosted by Pereira Neto | Macedo and Barbosa Müssnich e Aragão


November 21, 2018 | Permalink | Comments (0)

Ratcheting, Competition, and the Diffusion of Technological Change: The Case of Televisions Under an Energy Efficiency Program

Tomomichi Amano, Columbia University - Columbia Business School and Hiroshi Ohashi, University of Tokyo - Faculty of Economics are Ratcheting, Competition, and the Diffusion of Technological Change: The Case of Televisions Under an Energy Efficiency Program.

ABSTRACT: In differentiated goods markets with societal implications, quality standards are commonly implemented to avoid the under-provision of innovation. Firms have clear incentives to engage in strategic behavior because policymakers use market outcomes as a benchmark in designing regulation. This study examines a unique energy efficiency standard for television sets, under which future minimum efficiency standards are explicitly a function of current product offerings. The setting illustrates firms’ dual incentives at work: A firm better differentiates products under a looser standard, but may want to induce a tighter standard if it can benefit from raising rivals’ costs. These incentives drive firms to ratchet quality. We develop a structural model of product entry that illustrates how the regulator’s standard setting rule affects a firm’s product quality decision. Counterfactual simulations illustrate that ratcheting down was prevalent in this market and that incentives to ratchet up did not exist. The results suggest that in many commonly regulated markets in which firms share similar cost structures, firms are likely to experience incentives to ratchet down and delay the introduction of innovative products. The study highlights the importance of understanding supply side incentives, such as ratcheting, in designing and assessing policy.

November 21, 2018 | Permalink | Comments (0)

Anticompetitive Effects of Horizontal Acquisitions: The Impact of Within-Industry Product Similarity

Maryam Fathollahi, University of Arizona - Department of Finance, Jarrad Harford, University of Washington, and Sandy Klasa, University of Arizona - Department of Finance Anticompetitive identify the Effects of Horizontal Acquisitions: The Impact of Within-Industry Product Similarity.

ABSTRACT: This study provides novel evidence on whether horizontal acquisitions reduce industry competition intensity. We examine the effect of within-industry product similarity, associated with intense industry competition, on a firm’s propensity to make a horizontal acquisition, and the impact of the acquisition on the firm, its rivals, and supplier and customer firms. Industry product similarity positively impacts a firm’s propensity of making a horizontal acquisition and acquisition announcement returns for the firm and its industry rivals. Consistent with these effects being driven by firms in industries with high product similarity trying to reduce competition intensity, these effects are more pronounced when other aspects of an industry further intensify competition. We also provide evidence that horizontal acquisitions conducted in industries with high product similarity reduce firm value in dependent customer and supplier industries. Overall, our findings imply that in industries with high product similarity horizontal acquisitions are used to raise incumbent firms’ market power.

November 21, 2018 | Permalink | Comments (0)

Private Enforcement of EU Competition Law The Impact of the Damages Directive

Pier Luigi Parcu and Giorgio Monti, European University Institute, Italy and Marco Botta, Max-Planck-Institut für Innovation und Wettbewerb, Germany have edited Private Enforcement of EU Competition Law The Impact of the Damages Directive.

BOOK ABSTRACT: During the past decade, the use of private enforcement within competition law has gradually increased throughout Europe but major differences still exist among Member States. By harmonizing a number of procedural rules, the implementation of the Damages Directive has established a level playing field among EU Member States. This book represents the first assessment of the implementation of the Damages Directive at the national level.

The contributors explore the topic from a cross-cutting perspective as well as via a set of country case studies. Each chapter focuses on a number of procedural aspects harmonized by the Directive, and analyses the impact of the Directive by taking into consideration the national jurisprudence and the existing legal framework at the national level. By using a comparative lens, this timely book thus provides an up-to-date account of the emerging trends in private enforcement of competition law in Europe.
Contributors: M. Botta, P. Burke, C. Krüger, J. Maillo, G. Monti, P.L. Parcu, S. Peyer, A.R. Pisarkiewicz, M.A. Rossi, T. Schreiber, S. Solidoro, S.V. Walle

November 21, 2018 | Permalink | Comments (0)

Tuesday, November 20, 2018

Optimal Law Enforcement with Ordered Leniency

Claudia M. Landeo and Kathryn E. Spier discuss Optimal Law Enforcement with Ordered Leniency.

ABSTRACT: This paper studies the design of enforcement policies to detect and deter harmful short-term activities committed by groups of injurers. With an ordered-leniency policy, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. By creating a "race to the courthouse," ordered-leniency policies lead to faster detection and stronger deterrence of illegal activities. The socially-optimal level of deterrence can be obtained at zero cost when the externalities associated with the harmful activities are not too high. Without leniency for self-reporting, the enforcement cost is strictly positive and there is underdeterrence of harmful activities relative to the first-best level. Hence, ordered-leniency policies are welfare improving. Our findings for environments with groups of injurers complement Kaplow and Shavell's (1994) results for single-injurer environments.

November 20, 2018 | Permalink | Comments (0)

Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting

Claudia M. Landeo and Kathryn E. Spier offer Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting.

ABSTRACT: This paper reports the results of an experiment designed to assess the ability of an enforcement agency to detect and deter harmful short-term activities committed by groups of injurers. With ordered-leniency policies, early cooperators receive reduced sanctions. We replicate the strategic environment described by Landeo and Spier (2018). In theory, the optimal ordered-leniency policy depends on the refinement criterion applied in case of multiplicity of equilibria. Our findings are as follows. First, we provide empirical evidence of a "race-to-the-courthouse" effect of ordered leniency: Mild and Strong Leniency induce the injurers to self-report promptly. These findings suggest that the injurers' behaviors are aligned with the risk-dominance refinement. Second, Mild and Strong Leniency significantly increase the likelihood of detection of harmful activities. This fundamental finding is explained by the high self-reporting rates under ordered-leniency policies. Third, as a result of the increase in the detection rates, the averages fines are significantly higher under Mild and Strong Leniency. As expected when the risk-dominance refinement is applied, Mild Leniency exhibits the highest average fine.

November 20, 2018 | Permalink | Comments (0)

The Impact of Mobile Consolidation on Innovation and Quality

Serafino Abate measures The Impact of Mobile Consolidation on Innovation and Quality.

ABSTRACT: Historically, authorities tasked with reviewing mobile mergers have assessed the overall effects on consumers primarily on the basis on how mobile mergers affect prices in the short-term ('static' effects). However, innovation and quality ('dynamic' effects) have not been modelled and evaluated properly. Likewise, the existing economic literature that analyses the impact of mobile mergers primarily focuses on price effects, and only a few, more recent studies show how mobile mergers impact investments. Building on these, a recent study published by the GSMA analyses how the 2012 merger in Austria between H3G and Orange affected innovation and quality. The study is the first of its kind in analysing the impact of a mobile...

November 20, 2018 | Permalink | Comments (0)