Antitrust & Competition Policy Blog

Antitrust by Design – The Prohibition of Anti-Competitive Coordination and the Consensus Mechanism of the Blockchain

Sebastian Louven, University of Oldenburg and David Saive, University of Oldenburg describe Antitrust by Design – The Prohibition of Anti-Competitive Coordination and the Consensus Mechanism of the Blockchain.

ABSTRACT: Is the blockchain technology with its technical coordination mechanisms also posing new challenges to antitrust dogma? Are conventional principles transferable to platforms or do we need new approaches? This paper examines the applicability of the prohibition of concerted practices to blockchain issues and which requirements arise for a compliance-conscious design of new technologies.

Concentrating on Competition: An Antitrust Perspective on Platforms and Industry Consolidation

Principal Deputy Assistant Attorney General Andrew Finch Delivers Keynote Address at Capitol Forum’s Fifth Annual Tech, Media & Telecom Competition Conference, Washington, DC ~ Friday, December 14, 2018.

See here.

Access to Digital Car Data and Competition in Aftersales Services

Bertin Martens, Joint Research Centre and Frank Mueller-Langer, European Commission, Joint Research Center; Max Planck Institute for Innovation and Competition identify Access to Digital Car Data and Competition in Aftersales Services.

Abstract: This study looks at car data markets from an economic perspective. We start from several options for the technical characteristics of data access points that have been discussed among stakeholders in the automotive industry. We examine the structure of data markets that are likely to emerge from these characteristics and the implications for the welfare of manufacturers, aftermarket service providers and drivers. Car manufacturers face competition in car markets and aftersales services. However, they can design the car data architecture to ensure their exclusive access to the data. That would give them a monopoly in the market for car data from their brand. They can use this to increase their leverage on aftersales services markets. Our baseline scenario is the Extended Vehicle proposal that manufacturers prefer. This ensures their data access monopoly and enables them to maximize revenue from data and data-driven aftersales services. It reduces welfare for drivers and aftersales service providers. Two technical variations on the baseline scenario reduce manufacturers' leverage over data server governance and their monopolistic power. That could reduce social welfare losses and transfer more surplus to drivers and service providers, compared to the baseline scenario. Other scenarios examine alternative data access gateways, for instance by keeping the OBD plug open and by applying real time data portability under the GDPR. These scenarios may offer some scope for regulators if they wish to keep alternative data access channels open in order to stimulate competition in aftersales services markets. However, they entail additional hardware and switching costs for consumers, compared to the baseline and are therefore partial and imperfect substitutes. In two final scenarios we examine the market position of B2B data marketplaces and consumer media services platforms. The potential for data aggregation across car brands and other sources creates some possibilities for these platforms to provide a counterweight to monopolistic behaviour by the manufacturers. However, manufacturers' control over the data supply and access to the in-car human interface ensures that they retain substantial leverage over these platforms. Regulators may consider creating the conditions for a more level playing field between OEM services and third-party aftersales service providers.

Competition and Firm Productivity: Evidence from Portugal

Pedro Carvalho discusses Competition and Firm Productivity: Evidence from Portugal.

ABSTRACT: This paper presents empirical evidence on the impact of competition on firm productivity for the Portuguese economy. To that effect, firm-level panel data comprising information between 2010 and 2015 gathered from the Integrated Business Accounts System (Portuguese acronym: SCIE) is used. The database enables the construction of economic and financial indicators, which allow for isolating the impact of competition on firm-level productivity. We find a positive relationship between competition and both total factor productivity and labor productivity. This relationship is found to be robust to different specifications and in accordance with the results in the literature obtained for other countries.

Mixed bundling may hinder collusion

Edmond Baranes (CREDEN - Centre de Recherche en Economie et Droit de l'ENergie - UM1 - Université Montpellier 1); Marion Podesta (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); and Jean-Christophe Poudou (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) argue Mixed bundling may hinder collusion.

ABSTRACT: We study the incentives to collude when firms use mixed bundling or independent pricing strategies for the sale of two components of a composite good. The main finding is that collusion is less sustainable under mixed bundling, because this increases the profitability of deviations from the collusive path. The result is robust to extensions with an endogenous choice of the mode of competition (with bundling or independent pricing) and to competition in quantities. These results offer a novel argument against a per se rule concerning bundling in antitrust policy.

Most Favoured Nation Clauses: Towards an Assessment Framework Under EU Competition Law

Friso Bostoen, KU Leuven - Institute for Consumer, Competition & Market describes Most Favoured Nation Clauses: Towards an Assessment Framework Under EU Competition Law.

ABSTRACT: It is often argued that most favoured nation clauses (‘MFNs’) should be assessed on a case-by-case basis given the perceived lack of a coherent theory guiding their assessment. This article asks whether this is the case: do we lack an assessment framework of MFNs under EU competition law? In answering this question, regard is had to both older case law and the most recent developments. Taken together, most of the issues in assessing MFNs do appear to be generally agreed upon. Moreover, legal scholarship complements the theory where the courts and authorities did leave a question open. Thus, it is offered that we are indeed well on our way to a clear assessment framework of MFNs under EU competition law.

Monetary Policy, Product Market Competition, and Growth

Philippe Aghion, College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER), Emmanuel Farhi, Harvard University - Department of Economics; National Bureau of Economic Research (NBER), and Enisse Kharroubi, Bank for International Settlements (BIS)study  Monetary Policy, Product Market Competition, and Growth.

ABSTRACT: In this paper we argue that monetary easing fosters growth more in more credit-constrained environments, and the more so the higher the degree of product market competition. Indeed when competition is low, large rents allow firms to stay on the market and reinvest optimally, no matter how funding conditions change with aggregate conditions. To test this prediction, we use industry-level and firm-level data from the Euro Area to look at the effects on sectoral growth and firm-level growth of the unexpected drop in long-term government bond yields following the announcement of the Outright Monetary Transactions program (OMT) by the ECB. We find that the monetary policy easing induced by OMT, contributed to raising sectoral (firm-level) growth more in more highly leveraged sectors (firms), and the more so the higher the degree of product market competition in the country (sector).

Statement of Assistant Attorney General Makan Delrahim Before the U.S. House of Representatives Subcommittee on Regulatory Reform, Commercial and Antitrust Law

See here.

Measuring Airline Networks: Comprehensive Indicators

Chantal Roucolle (ENAC - Ecole Nationale de l'Aviation Civile); Tatiana Seregina (ENAC - Ecole Nationale de l'Aviation Civile, Toulouse Business School - ESC Toulouse); Miguel Urdanoz (Toulouse Business School - Toulouse Business School) are Measuring Airline Networks: Comprehensive Indicators.

ABSTRACT: The literature on airlines presents few studies analyzing the airlines network evolution and its impact on prices, costs or profitability. We believe that this gap is due to the difficulty of capturing the network complexity in a simple manner. This paper proposes new simple and continuous indicators to measure the airlines network structure. The methodology to build them is based on graph theory and principal component analysis. We apply this approach to the US domestic market for 2005-2015, and obtain three network indicators. The first one measures how close the network is to a hub-and-spoke structure. The second indicator measures the airline's ability to provide alternative routes. The third indicator captures the network size. We analyze how the carriers' network evolution can be described by those indicators. We show that low-cost carriers (LCCs) and legacy carriers' network choices differ for the second indicator, while our results exhibit no difference in strategies for the other two indicators. We also show that economic conditions affect differently the three indicators and the magnitude of the impact depends on the airline type. Highlights: ● Combine graph theory and principal component analysis ● Obtain three indicators to characterize airline network structure for US domestic market ● Compare these indicators for low-cost and legacy carriers ● Estimate evolution in the indicators over time ● Analyze the impact of the main US mergers on the network structure

Endogenous Sunk Cost, Scale Economies, and Market Concentration

Yuichiro Matsumoto (Osaka University) theorizes Endogenous Sunk Cost, Scale Economies, and Market Concentration.

ABSTRACT: This paper offers a theoretical explanation of the recent sales concentration in the U.S. economy. The model is based on in-house R&D, which is involved in scale economies. An R&D subsidy helps the expansion of larger firms and allows them to take higher markups. Thus, it induces a concentrated market structure.

Efficiency Wages in a Cournot-Oligopoly

Marco de Pinto (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) and Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) describe Efficiency Wages in a Cournot-Oligopoly.

ABSTRACT: In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises

Optimal Cross-Licensing Arrangements: Collusion versus Entry Deterrence

Choi, Jay Pil (Michigan State University, Department of Economics) and Gerlach, Heiko (University of Queensland) identify Optimal Cross-Licensing Arrangements: Collusion versus Entry Deterrence.

ABSTRACT: This paper analyzes optimal cross-licensing arrangements between incumbent firms in the presence of potential entrants. The optimal cross-licensing royalty rate trades off incentives to sustain a collusive outcome vis-a-vis incentives to deter entry with the threat of patent litigation. We show that a positive cross-licensing royalty rate, which would otherwise relax competition and sustain a collusive outcome, dulls incentives to litigate against entrants. Our analysis can shed light on the puzzling practice of royalty free cross-licensing arrangements between competing firms in the same industry as such arrangements enhance incentives to litigate against any potential entrants and can be used as entry-deterrence mechanism.

Managing Competition on a Two-Sided Platform

Paul Belleflamme and Martin Peitz are Managing Competition on a Two-Sided Platform.

ABSTRACT: On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.

Antitrust Analysis of Vertical Mergers: Recent Developments and Economic Teachings

Koren Wong-Ervin, Director of IP & Competition Policy at Qualcomm Incorporated and Senior Scholar at China's University of International Business & Economics describes Antitrust Analysis of Vertical Mergers: Recent Developments and Economic Teachings.

ABSTRACT: The generally well-accepted belief motivating modern antitrust analysis of vertical mergers—i.e., acquisitions that combine companies in different levels of the same supply chain—is that they are generally procompetitive or neutral. That belief is based upon a significant body of empirical evidence. Indeed, as former U.S. Federal Trade Commission (FTC) Bureau of Economics head Francine Lafontaine and Margaret Slade concluded, “[c]onsistent with the large set of efficiency motives for vertical mergers . . ., the [empirical] evidence on the consequences of vertical mergers suggests that consumers mostly benefit from mergers that firms undertake voluntarily.” That view of the empirical evidence is consistent with other meta-studies of the empirical evidence by leading industrial organization economists from academia and the U.S. antitrust agencies. Consistent with this evidence, the U.S. antitrust agencies typically have rarely challenged vertical mergers. When they have challenged vertical mergers, they have tended to resolve concerns with narrowly tailored behavioral remedies, such as firewalls to prevent the sharing of rivals’ competitively sensitive information, non-discrimination clauses to eliminate incentives to disfavor rivals, and requirements to supply and/or license competitors.

Square and Round Customers: Defining Geographic Markets with Willingness to Travel Circles

Shawn W. Ulrick, U.S. Federal Trade Commission (FTC), Seth B. Sacher, Federal Trade Commission, Paul R. Zimmerman, U.S. Federal Trade Commission - Bureau of Economics, and John M. Yun, George Mason University - Antonin Scalia Law School, Faculty study Square and Round Customers: Defining Geographic Markets with Willingness to Travel Circles.

ABSTRACT: Issues of spatial competition play a key role in many antitrust matters in terms of both defining relevant markets and evaluating competitive effects. One area where this is particularly important is in retail competition. While detailed data for conducting empirical analyses is available in many retail industries, it is often the case that practitioners must define markets, at least preliminarily, under limited information. In this paper, we develop techniques for aiding in defining markets involving spatial competition under limited information.

Joint Venture Agreements and EU Competition Law: The Case of the Construction Industry in Particular

Luis Silva Morais, University of Lisbon - School of Law. Jean Monnet Chair – Economic Regulation in the EU explores Joint Venture Agreements and EU Competition Law: The Case of the Construction Industry in Particular.

ABSTRACT: The first and significant hurdle in joint venture competition law analysis has to do with its rigorous definition. No consensual definition of the concept of joint venture in the field of competition law (including EU competition law) has ever been provided. On the contrary, multiple definitions have been proposed, but despite such widespread discussion ambiguity reins in this area.

Essential Principles for the Design of Antitrust Analysis for Multisided Platforms

David Evans, Global Economics Group determines Essential Principles for the Design of Antitrust Analysis for Multisided Platforms.

ABSTRACT: This paper presents some basic principles for conducting the antitrust analysis of multi-sided platforms in light of the economic learning that courts could adapt to the particulars of their jurisdictions and case laws. It has a particular focus on measuring consumer surplus for platform businesses and the implications of that for the design of sound antitrust rules. It shows how multi-sided platforms increase welfare by reducing transactions costs and resolving externalities among economic agents. Its presents normative principles for policy interventions the first of which involves considering the joint surplus for both group of customers shows how these principles apply to recent debates over privacy. The paper then develops a framework for considering antitrust rules in light of these principles given the objectives of antitrust law, error costs, and developing administrable rules. It lastly considers the competing approaches to analyzing multi-sided platforms that were presented to the Supreme Court in the American Express litigation and the court’s decision.

The Pursuit of Justice: Lessons in Competition from Judaism

Makan Delrahim delivered a speech The Pursuit of Justice: Lessons in Competition from Judaism. I was hoping that he would cover the Talmudic discussion over ruinous competition but he did not.

 

Parker v. Brown, the Eleventh Amendment, and Anticompetitive State Regulation

William H. Page, University of Florida - Levin College of Law and John E. Lopatka, Pennsylvania State University, Penn State Law have an interesting paper on Parker v. Brown, the Eleventh Amendment, and Anticompetitive State Regulation.

ABSTRACT: The Parker v. Brown (or “state action”) doctrine and the Eleventh Amendment of the Constitution impose differen limits on antitrust suits challenging anticompetitive state regulation. The Supreme Court has developed these two versions of state sovereign immunity separately, and lower courts usually apply the immunities independently of each another (even in the same cases) without explaining their relationship. Nevertheless, the Court has derived the two immunities from the same principle of sovereign immunity, so it is worth considering why and how they differ, and what the consequences of the differences are for antitrust policy. The state action immunity is based on statutory interpretation of the Sherman Act; the Court has shaped the shaped the doctrine over seventy-five years, guided by both considerations of state sovereignty and antitrust policy, so it should reflect a balance of the two critical variables. The Eleventh Amendment immunity, by contrast, has nothing specifically to do with antitrust policy; it is a general constitutional doctrine based on state sovereignty, with some acknowledgment of the demands of general federal authority. Our concern is that the application of the broader immunity is can thwart the balance between state sovereignty and antitrust policy reflected in the antitrust-specific immunity.

Attention Platforms, the Value of Content, and Public Policy

David Evans, Global Economics Group identifies Attention Platforms, the Value of Content, and Public Policy.

ABSTRACT: This paper shows that two related aspects of attention platforms are important for the sound economic analysis of public policy including antitrust. First, attention platforms generate valuable content. Even though people often don’t pay for content we know by revealed preference that content is valuable because people spend a considerable amount of time, which has an opportunity cost, consuming it. Second, there are pecuniary interdependencies between the demand for advertising and the supply of content. A decrease in the demand for advertising reduces the returns to supplying content and therefore the amount of content provided. Accounting for the value of content and these positive feedbacks cannot determine optimal interventions but failing to do so can result in policies that reduce consumer, as well as advertiser, welfare. The paper then considers the implications of these considerations for public policy, particularly privacy regulation and antitrust enforcement. From the standpoint of promoting consumer welfare, failure to account for the value of content and the pecuniary interdependencies increases the chances that authorities do not intervene when they should and do intervene when they should not.