Wednesday, April 24, 2019

Competition policy, trade and the global economy: Existing WTO elements, commitments in regional trade agreements, current challenges and issues for reflection

By: Anderson, Robert D.Kovacic, William E.Müller, Anna CarolineSporysheva, Nadezhda
Abstract: Competition policy, today, is an essential element of the legal and institutional framework for the global economy. Whereas decades ago, anti-competitive practices tended to be viewed mainly as a domestic phenomenon, most facets of competition law enforcement now have an important international dimension. Examples include: the investigation and prosecution of price fixing and market sharing arrangements that often spill across national borders and, in important instances, encircle the globe; multiple recent, prominent cases of abuses of a dominant position in high-tech network industries; important current cases involving transnational energy markets; and major corporate mergers that often need to be simultaneously reviewed by multiple jurisdictions. Beyond competition law enforcement per se, increasingly, major issues of competition policy (e.g., the impact on competition of the structure and scope of intellectual property rights or the role of state-owned enterprises) implicate the interests of multiple jurisdictions. [...]
Keywords: competition policy,anti-competitive practices,international trade policy,WTO agreements,regional trade agreements,state-owned enterprises,competitive neutrality,the digital economy
JEL: F02 F13 F23 F53 L40 L44 L49 N40
Date: 2018
URL: http://d.repec.org/n?u=RePEc:zbw:wtowps:ersd201812&r=com

April 24, 2019 | Permalink | Comments (0)

Tuesday, April 23, 2019

Impact of Technical Progress on the relationship between Competition and Investment

By: Jeanjean, François
Abstract: This paper investigates the impact of technical progress on the relationship between competition an investment. Using a model of oligopoly competition with di¤erentiated products where firms invest to reduce their marginal cost of production, I find that technical progress, which increases the impact of investment on cost reduction, decreases the level of competition that maximizes investment of the industry. This feature holds also for consumer surplus and Welfare. In the model, competition is measured either by the number of competitors or by the degree of substitutability between o¤ers. Result holds for both measures.Two parametric examples illustrate these features.
Keywords: Market structure,Investment,technical progress,competition
JEL: D21 D43 D92 L13 O31
Date: 2018
URL: http://d.repec.org/n?u=RePEc:zbw:itse18:184948&r=com

April 23, 2019 | Permalink | Comments (0)

12th Annual Junior Competition Conference (JCC) 10th May 2019

12th Annual Junior Competition Conference (JCC)
10th May 2019

 

The Editors of the Competition Law Journal invite you to attend the 12th Annual Junior Competition Conference (JCC), which will take place on the 10th May 2019 at the Competition Appeal Tribunal, London. The JCC provides junior members of the competition law community, from all professional backgrounds, with a unique forum to express views, exchange ideas and get to know one another. 

The 2019 JCC will have two themes: Recent developments in competition litigation and Vertical restraints in the online age: where next? Please see below for the full Conference programme.

If you wish to attend the conference, please email journals@e-elgar.co.uk with your name, position and organisation. Admission is free, but places are limited so we encourage you to register your interest as soon as possible and no later than 5pm on 3rd May.

 

 

April 23, 2019 | Permalink | Comments (0)

Patterns of Competition with Captive Customers

By: Armstrong, MarkVickers, John
Abstract: We study mixed-strategy equilibrium pricing in oligopoly settings where consumers vary in the set of suppliers they consider for their purchase---some being captive to a particular firm, some consider two particular firms, and so on. In the case of "nested reach" we find equilibria, unlike those in more standard models, in which firms are ranked in terms of the prices they might charge. We characterize equilibria in the three-firm case, and contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer interaction with firms matter for competitive outcomes.
Keywords: Oligopoly, Bertrand competition, Bertrand-Edgeworth competition, Consideration sets, Mixed strategies
JEL: C72 D43 D83 L1 L15
Date: 2018–12–03
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:90362&r=com

April 23, 2019 | Permalink | Comments (0)

Why Has Antitrust Law Failed Workers?

Ioana Elena Marinescu, University of Pennsylvania - School of Social Policy & Practice; National Bureau of Economic Research (NBER) and Eric A. Posner, University of Chicago - Law School ask Why Has Antitrust Law Failed Workers?

ABSTRACT: In the last several years, economists have learned about an antitrust problem of vast scope. Far from approximating the conditions of perfect competition as long assumed, most labor markets are characterized by monopsony — meaning that employers pay workers less than their productivity because workers lack a credible threat to quit and find a higher-paying job in the same market. Yet while antitrust law regulates labor monopsony in the same way as it regulates monopoly on the product market side, antitrust litigation against employers is rare. We document both the magnitude of labor monopsony and the paucity of cases, and argue that this “litigation gap” exists because antitrust case law, which has developed through product-side litigation, is poorly tailored to labor-side problems. We conclude with four proposals for reform of antitrust law so it can better deter labor monopsony.

April 23, 2019 | Permalink | Comments (0)

Digital Economics

Avi Goldfarb (Toronto) and Catherine Tucker (MIT) have created a great overview paper on Digital Economics.  Worth downloading!

ABSTRACT: Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether and how digital technology changes economic activity. In this review, we emphasize the reduction in five distinct economic costs associated with digital economic activity: search costs, replication costs, transportation costs, tracking costs, and verification costs.

 

April 23, 2019 | Permalink | Comments (0)

Don’t Break Up Big Tech Firms: Former Antitrust Regulator

Five Principles for Vertical Merger Enforcement Policy

Jonathan B. Baker, American University - Washington College of Law, Nancy L. Rose, Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER), Steven C. Salop, Georgetown University Law Center, Fiona M. Scott Morton, Yale School of Management; National Bureau of Economic Research (NBER), offer Five Principles for Vertical Merger Enforcement Policy.

Abstract: There seems to be consensus that the Department of Justice’s 1984 Vertical Merger Guidelines do not reflect either modern theoretical and empirical economic analysis or current agency enforcement policy. Yet widely divergent views of preferred enforcement policies have been expressed among agency enforcers and commentators. Based on our review of the relevant economic literature and our experience analyzing vertical mergers, we recommend that the enforcement agencies adopt five principles: (i) The agencies should consider and investigate the full range of potential anticompetitive harms when evaluating vertical mergers; (ii) The agencies should decline to presume that vertical mergers benefit competition on balance in the oligopoly markets that typically prompt agency review, nor set a higher evidentiary standard based on such a presumption; (iii) The agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers, and require the merging parties to show that the efficiencies are verifiable, merger-specific and sufficient to reverse the potential anticompetitive effects; (iv) The agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable, except perhaps when both firms compete in unconcentrated markets; (v) The agencies should consider adopting rebuttable anticompetitive presumptions that a vertical merger harms competition when certain factual predicates are satisfied. We do not intend these presumptions to describe all the ways by which vertical mergers can harm competition, so the agencies should continue to investigate vertical mergers that raise concerns about input and customer foreclosure, loss of a disruptive or maverick firm, evasion of rate regulation or other threats to competition, even if the specific factual predicates of the presumptions are not satisfied.

April 23, 2019 | Permalink | Comments (0)

Monday, April 22, 2019

Platforms and the Rule of Reason: The American Express Case

Herb Hovenkamp, Penn explores Platforms and the Rule of Reason: The American Express Case.

Abstract: In Ohio v. American Express Co., the Supreme Court applied antitrust’s rule of reason to a two-sided platform. The challenge was to an “anti-steering” rule, a vertical restraint preventing merchants from shifting customers who offered an AmEx card from to a less costly alternative such as Visa or Mastercard. 

A two-sided platform is a business that depends on relationships between two different, noncompeting groups of transaction partners. For example, a printed periodical such as a newspaper earns revenue by selling both advertising and subscriptions to the paper itself. Success depends on a platform’s ability to maintain the appropriate balance between participation on one side and the other. For example, if Uber, a two-sided platform offering transportation services, sets too high a fare it will have enough drivers but too few passengers. If the price is too low, it will have too many passengers in relation to available drivers.

Administering antitrust under the rule of reason depends on careful fact finding. Under antitrust’s per se rule, once a practice is proven little evidence of anticompetitive effects is relevant. By contrast, the rule of reason requires a searching factual examination of a record, enabling the court to understand the effects of the defendant’s activities. This obliges appellate courts to review the record, and the Supreme Court’s AmExopinion should be tested against this requirement. The Court ignored specific district court fact findings to the effect that AmEx’s anti-steering rule imposed higher costs on everyone, including customers who purchased with cash.

The Court also concluded that AmEx’s anti-steering rule combatted free riding, because otherwise competing card issuers could profit from AmEx’s business model. That might be true if one could obtain AmEx’s perks merely by owning the card, but here one received the perks only for transactions actually made with the card, so there was no free riding.

More generally, the Court’s analysis assumed that costs on one side of a two-sided platform are offset by gains on the other side. In some situations, such as the Uber example above, that may be true. But in the AmEx case both sides of the platform were harmed by the anti-steering rule. Both customers and merchants lost an opportunity to bargain around Amex’s higher fees. In addition, competing platforms were also worse off because whey were denied the opportunity to offer a lower cost substitute transaction.

Competition always exists at the margin. One cannot evaluate the competitive effects of a particular restraint by considering whether the overall costs of a defendant’s business practices exceed the benefits. The AmEx challengers were not trying to tear down AmEx’s entire business, but only to enjoin its anti-steering rule. That requires assessing the marginal costs and benefits of the anti-steering rule. The record was clear that at the margin each merchant affected by the steering rule was worse off, and each cardholder was worse off as well.

The Court’s assumption about offsetting cost and benefits also led it to conclude that in a qualifying two-sided platform, both sides should be included in the market definition. The two sides are, of course, complements in production, not substitutes. This holding is thus in conflict with an idea that is central to antitrust analysis, which is that relevant markets consists of a “collusive group,” or substitutes.

Further, the Court exacerbated this problem by holding that in a case involving a vertical restraint a relevant market must be defined, even if market power is based on direct effects. That conclusion, which was never briefed or argued and never cited any of the economic literature on the question, flies in the face of decades of progress toward more accurate methodologies for assessing power. Further, it turns into a question of law something that is clearly an issue of fact – namely whether the defendant has sufficient power to produce an anticompetitive restraint.

The Court did limit the scope of its holding to situations involving a simultaneous one-to-one transaction across the two sides of the platform. That would include credit card networks as well as other direct transactional networks such as Uber. However, it would exclude situations where there is not a simultaneous one-to-one relationship between transactions on the two sides, such as Netflix or music streaming services, periodicals or search engines partially supported by advertising, or most exchanges on sports networks. Neither would it include situations where the relationship between the transactions on the two sides is actuarial, such as health insurance networks.

April 22, 2019 | Permalink | Comments (0)

Disclosure Incentives When Competing Firms Have Common Ownership

Jihwon Park, Harvard Business School, Jalal Sani, Penn State University, Nemit Shroff, Massachusetts Institute of Technology (MIT) - Sloan School of Management, and Hal D. White, Penn State University discuss Disclosure Incentives When Competing Firms Have Common Ownership.

Abstract: This paper examines whether common ownership – i.e., instances where investors simultaneously own significant stakes in competing firms – affects voluntary disclosure. We argue that common ownership (i) reduces proprietary cost concerns of disclosure, and (ii) incentivizes firms to “internalize” the externality benefits of their disclosure for co-owned peer firms. Accordingly, we find a positive relation between common ownership and disclosure. Evidence from cross-sectional tests and a quasi-natural experiment based on financial institution mergers help mitigate concerns that our results are explained by an omitted variable bias or reverse causality. Finally, we find that common ownership is associated with increased market liquidity.

April 22, 2019 | Permalink | Comments (0)

How Prediction Builds Better Business Insights - Monday, April 29, 2019 | Noon - 1:00 PM US ET

How Prediction Builds Better Business Insights

 

Featuring Avi Goldfarb, Professor of Marketing and Rotman Chair in Artificial Intelligence and Healthcare at the University of Toronto, and co-author of Prediction Machines: The Economics of Artificial Intelligence 

 

Monday, April 29, 2019 | Noon - 1:00 PM US ET

 
Complimentary Audio Webinar
 
11:00 AM - 12:00 PM US Central
10:00 AM - 11:00 AM US Mountain
9:00 AM - 10:00 AM US Pacific
4:00 PM - 5:00 PM GMT

April 22, 2019 | Permalink | Comments (0)

Big Data and Firm Dynamics

Maryam Farboodi, Massachusetts Institute of Technology (MIT) - Sloan School of Management, Roxana Mihet, New York University (NYU) - Department of Economics, Thomas Philippon, New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER), Laura Veldkamp, New York University - Stern School of Business; National Bureau of Economic Research (NBER), theorize about Big Data and Firm Dynamics.

Abstract: We study a model where firms accumulate data as a valuable intangible asset. Data accumulation affects firms’ dynamics. It increases the skewness of the firm size distribution as large firms generate more data and invest more in active experimentation. On the other hand, small data-savvy firms can overtake more traditional incumbents, provided they can finance their initial money-losing growth. Our model can be used to estimate the market and social value of data.

April 22, 2019 | Permalink | Comments (0)

Does Common Ownership Really Increase Firm Coordination?

Katharina Lewellen, Dartmouth College - Tuck School of Business, and Michelle Lowry, Drexel University ask Does Common Ownership Really Increase Firm Coordination?

ABSTRACT: A growing body of evidence concludes that common ownership has caused cooperation among firms to increase and competition to decrease. We take a closer look at four different approaches the literature has used to identify these effects. We find that the effects the literature has attributed to common ownership are caused by other factors, such as differential responses of firms (or industries) to the financial crisis. We propose a modification to one of the previously used instruments, which is less sensitive to these issues. Using this to re-evaluate the link between common ownership and multiple firm outcomes, we find little robust evidence that common ownership affects firm behavior.

April 22, 2019 | Permalink | Comments (0)

Sunday, April 21, 2019

Competition Lore newest episode

The latest Competition Lore podcast episode, on The Distinctive DNA of EU Antitrust, with Ariel Ezrachi (Oxford) is now available: https://competitionlore.com/podcasts/europe/.

April 21, 2019 | Permalink | Comments (0)

Friday, April 19, 2019

Collusion by Blockchain and Smart Contracts

Thibault Schrepel, Utrecht University School of Law; University Paris 1 Panthéon-Sorbonne examines Collusion by Blockchain and Smart Contracts.

ABSTRACT: Blockchain may transform transactions the same way Internet altered the dissemination and nature of information. If that were to be the case, all relationships between companies would change, including prohibited ones such as collusive agreements. For that reason, the stakes are fundamental and the absence of academic studies entirely dedicated to the issue must be remedied.

To this end, this article introduces the first taxonomy of collusion on blockchain. The discussion then moves on to explore their functioning, their robustness and their limits through the three fundamental stages of the existence of collusive agreements: their birth, life and death. The article further highlights how companies may use smart contracts and sophisticated algorithms to collude in the blockchain environment, thus contributing to the literature solely focused on algorithms.

Using empirical studies, economic analyses and existing case law, we draw legal conclusions that we extend beyond the sole blockchain technology. Along the way, we propose methods of action for antitrust and competition agencies.

April 19, 2019 | Permalink | Comments (0)

The Impact of Price Adjustment Costs on Price Dispersion in E-Commerce

René Böheim, Johannes Kepler University, Franz Hackl, Johannes Kepler University Linz - Department of Economics, and Michael Hölzl-Leitner, Johannes Kepler University study The Impact of Price Adjustment Costs on Price Dispersion in E-Commerce.

ABSTRACT: We analyze price dispersion using panel data from a large price comparison site. We use past pricing behavior to instrument for potential endogeneity that might result from the selection of firms to certain product markets. We find that greater price adjustment costs result in greater price dispersion. Although the impact of price adjustment costs on price dispersion became weaker over time, the causal effect of price adjustment costs on price dispersion is still present at the end of the period. Our results are robust to many alternative empirical specifications. We also test a range of alternative explanations of price dispersion, such as search cost, service differentiation, obfuscation, vertical restraints, and market structure.

April 19, 2019 | Permalink | Comments (0)

The new media economics of video-on-demand markets: Lessons for competition policy

By: Budzinski, OliverLindstädt-Dreusicke, Nadine
Abstract: The markets for audiovisual content are subject to dynamic change. Where once "traditional" (free-to-air, cable, satellite) television was dominating, i.e. linear audiovisual media services, markets display nowadays strong growth of different types of video-on-demand (VoD), i.e. nonlinear audiovisual media services, including both Paid-for VoD like Amazon Prime and Netflix and Advertised-financed VoD like YouTube. Competition policy decisions in such dynamic markets are always particularly challenging. The German competition authority was presented such a challenge when, at the beginning of the 2010s, German television providers sought to enter online VoD markets with the help of cooperative platforms. We review the antitrust concerns that were raised back then in an ex post analysis. In doing so, we first discuss the dynamic development of the German VoD markets during the last decade. In the second part of this paper, we derive four aspects, in which the previous antitrust analysis cannot be upheld from today's perspective. First, relevant implications of modern platform economics were neglected. Second, some inconsistencies in the assessment of the two projects appear to be inappropriate. Third, the emerging competitive pressure of international VoD providers was strongly underestimated. Fourth, the question of market power in online advertising markets looks very different at the end of the decade.
Keywords: video-on-demand,media economics,two-sided markets,competition,platform economics,commercial television,public service broadcasters,antitrust policy,YouTube,Amazon,Netflix
JEL: L40 L82 K21 L13 D40
Date: 2018
URL: http://d.repec.org/n?u=RePEc:zbw:tuiedp:116&r=com

April 19, 2019 | Permalink | Comments (0)

Thursday, April 18, 2019

Monopsony and Two-part Tariffs

By: Roger D. BlairChristina DePasquale
Abstract: In his classic article, Walter Oi (1971) analyzed two-part tariffs by a monopolist. We adapt his analysis to the case of monopsony. We show that the resulting offer is that the seller pays its producer surplus as an access fee in exchange for the buyers promise to buy everything that the seller wants to sell when price equals marginal cost. In addition, we show that this is equivalent to the surplus that the buyer captures with first-degree price discrimination as well as an all-or-nothing offer. We also extend this analysis to the case of uncertainty for a risk-averse monopsonist.
Date: 2018–10
URL: http://d.repec.org/n?u=RePEc:emo:wp2003:1803&r=com

April 18, 2019 | Permalink | Comments (0)

Article 101 TFEU and market integration

By: Ibáñez Colomo, Pablo
Abstract: Market integration is an objective of Article 101 TFEU. As a result, agreements aimed at partitioning national markets are in principle restrictive of competition by object. The case law on this point has been consistent since Consten-Grundig. Making sense of it, however, remains a challenge. The purpose of this piece is to show, first, how the methodological approach followed by the Court of Justice changes when market integration considerations are at stake. Secondly, it explains why and when restrictions on cross-border trade have been found not to restrict competition by object within the meaning of Article 101(1) TFEU. An agreement aimed at partitioning national markets is not as such contrary to Article 101(1) TFEU if the analysis of the counterfactual reveals that it does not restrict inter-brand and/or intra-brand competition that would have existed in its absence. It is possible to think of three scenarios in this regard: (i) an agreement may be objectively necessary to achieve the aims sought by the parties; (ii) a clause may be objectively necessary for an agreement and (iii) competition is precluded by the underlying regulatory context (as is the case, in particular, when the exercise of intellectual property rights is at stake).
JEL: K21 L42 L82 L86 O34
Date: 2016–12–13
URL: http://d.repec.org/n?u=RePEc:ehl:lserod:66502&r=com

April 18, 2019 | Permalink | Comments (0)

Patent Pools, Vertical Integration, and Downstream Competition

By: Markus ReisingerEmanuele Tarantino
Abstract: Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and non-linear tariffs. We find that the impact of pools on welfare depends on the industry structure: Whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade-off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information-free policies to screen anticompetitive pools.
Keywords: patent pools and horizontal pricing agreements, complementary patents, vertical integration and restraints, antitrust policy
JEL: K11 L41 L42 O34
Date: 2018–11
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_057_2018&r=com

April 18, 2019 | Permalink | Comments (0)