Antitrust & Competition Policy Blog

Remembering Regulatory Misadventures: Taking a Page from Edmund Burke to Inform Our Approach to Big Tech

Christine Wilson (FTC) has a speech on Remembering Regulatory Misadventures: Taking a Page from Edmund Burke to Inform Our Approach to Big Tech. See here.

Article 102 and Exclusivity Rebates in a Post-Intel World: Lessons from the Qualcomm and Google Android Cases

Massimiliano Kadar, European Commission - Directorate General for Competition; King's College London surveys Article 102 and Exclusivity Rebates in a Post-Intel World: Lessons from the Qualcomm and Google Android Cases.

ABSTRACT: The paper summarises the state of the law on exclusivity rebates after the Court of Justice’s ruling on Intel. It concludes that the Intel judgment sets out a framework for the appraisal of exclusivity rebates within the European Union but leaves a margin of appreciation for enforcing authorities in deciding which tools to use to prove an infringement. The recent decisions by the European Commission in Qualcomm (Exclusivity Payments) and Google Android provide good illustrations of which tools enforcement agencies can use to prove the capability of exclusivity rebates to foreclose competition.

Life after Menarini: The Conformity of the Hungarian Competition Law Enforcement System with Human Rights Principles

Tihamer Toth, Peter Pazmany Catholic University - Faculty of Law; Competition Law Research Centre, Hungary discusses Life after Menarini: The Conformity of the Hungarian Competition Law Enforcement System with Human Rights Principles.

ABSTRACT: The corporate human rights development was fueled by the increasing amount of fines imposed on both European and national level. For many years, the jurisprudence of the ECtHR has classified administrative, including competition law enforcement as a quasi-criminal process during which human rights shall be respected to a certain extent. This paper strives to explain the evolution of competition law enforcement in Hungary, with procedural safeguards protecting undertakings having come close to the level of protection provided under criminal law. Of the numerous human rights relevant in competition law enforcement the paper will focus on institutional check-and-balances, and the appropriate level of judicial review. The thoroughness of the judicial review of administrative decisions resulting in fines is critical to the analysis of whether the traditional continental European structure of administrative law enforcement is in conformity with the principles of the ECHR. The narrow interpretation of the prohibition of judicial re-evaluation and judicial deference to competition authorities exhibiting significant expert knowledge is of central importance in this debate.

Private Enforcement and Opt-out System Risks, Rewards and Legal Safeguards

Maria Ramos, Universidade de Coimbra - Faculty of Economics discusses Private Enforcement and Opt-out System Risks, Rewards and Legal Safeguards.

ABSTRACT: The EU Antitrust Damages Actions Directive does not include provisions for collective redress. Each EU member state is free to provide national regulation on this matter. The Portuguese legal system provided regulation on actio popularis since 1995. The ‘rational apathy’ of individual consumers may lead to non-reparation of damage and be of significant benefit for the company that is in breach of the law. The opt-out models solve the crucial economic problem caused by a large number of consumers or clients who have suffered a small loss because of competition law infringements. Under those circumstances, it is rational to be apathetic, because it can be foreseen that the cost of filing for compensatory damages will exceed the recovery obtained from the defendant. Such rational apathy of the parties injured by competition law infringements favours the wrongfully acting companies by not extracting their illegal gains from them. By not requiring the active consent of each of the claimants, the opt-out model is able to override rational apathy of consumers.

Chicago and Its Discontents

Timothy J. Muris, George Mason University, Antonin Scalia Law School and Jonathan E. Nuechterlein, Sidley Austin LLP survey Chicago and Its Discontents. Worth reading!

ABSTRACT: This symposium began with a call for papers “re-assessing the validity of the Chicago School’s assumptions about competition and considering whether a more aggressive approach to antitrust enforcement is now warranted.” That framing uncritically accepts the premises of antitrust’s new populist movement: first, that “the Chicago School” marked an abrupt break from prior academic analysis of antitrust law, and, second, that its adherents shared a common positive agenda fundamentally at odds with robust antitrust enforcement. Both of those premises are false. The Chicago School represented a logical continuation of the antitrust analysis developed over the preceding decades, and its members shared no positive doctrinal agenda. Instead, they shared a commitment only to promoting consumer interests by means of rigorous economics. Of course, that commitment influenced how the economics profession and antitrust policymakers thought, and progressive “post-Chicago” scholarship today shares the same commitment to consumer welfare and economic rigor. Post-Chicago scholarship thus has far more in common with Chicago School scholarship of the 1960s and 1970s than with today’s populist movement, which abandons any coherent framework altogether.

2018 Antitrust Annual Report: Class Action Filings in Federal Court

Joshua P. Davis, University of San Francisco - School of Law and Rose Kohles, The Huntington National Bank offer 2018 Antitrust Annual Report: Class Action Filings in Federal Court.

ABSTRACT: Little empirical work has been done to analyze the filing and resolution of private antitrust class action lawsuits. This Report takes an important step toward rectifying that situation. It relies on data that is newly accessible in part through artificial intelligence. Some of the issues it addresses relate only to 2018 and others relate to the years 2013 through 2018. Topics include the number of antitrust class action complaints that are filed each year, the amount of time they took on average to reach a settlement, the mean and median recoveries, the attorney’s fees and costs awarded, and the total settlement amounts in each year and overall. The report also analyzes the law firms that represented plaintiffs and defendants in antitrust class action settlements, describing particular cases as well some cumulative results, and also tabulates cumulative totals for claims administrators involved in the settlement process. The plan is to continue providing similar information on an annual basis. The hope is that this data will prove of interest to the academy and the public and private sectors, and that the data will provide a firmer empirical basis than would otherwise be possible for private decisions and for public policy discussions and actions related to enforcement of the antitrust laws through private class actions.

What’s in Your Wallet (and What Should the Law Do About It?)

Natasha Sarin, University of Pennsylvania Law School asks What’s in Your Wallet (and What Should the Law Do About It?

ABSTRACT: In traditional markets, firms can charge prices that are significantly elevated relative to their costs only if there is a market failure. However, this is not true in a two-sided market (like Amazon, Uber, and Mastercard), where firms often subsidize one side of the market and generate revenue from the other. This means consideration of one side of the market in isolation is problematic. The Court embraced this view in Ohio v. American Express, requiring that anticompetitive harm on one side of a two-sided market be weighed against benefits on the other side.

Legal scholars denounce this decision, which, practically, will make it much more difficult to wield antitrust as a tool to rein in two-sided markets. This inability is concerning as two-sided markets are growing in importance. Furthermore, the pricing structures used by platforms can be regressive, with those least well-off subsidizing their affluent and financially-sophisticated counterparts.

In this Article, I argue that consumer protection, rather than antitrust, is best suited to tame two-sided markets. Consumer protection authority allows for intervention on the grounds that platform users create unavoidable externalities for all consumers. The Consumer Financial Protection Bureau (“CFPB”) has broad power to curtail “unfair, abusive, and deceptive practices.” This authority can be used to restrict practices that decrease consumer welfare, like the anti-steering rules at issue in Ohio v. American Express.

Non-Horizontal Mergers with Investments into Compatibility

Gregor Langus, European Union - European Commission and Jorge Padilla, Compass Lexecon identify Non-Horizontal Mergers with Investments into Compatibility.

ABSTRACT: We set up a model to analyze the effects of mergers between sellers of complementary components where firms invest in compatibility and can engage in bundling. We consider the impact of merger on prices, investment and consumer surplus. We also analyse when the merged firm may have an incentive and ability to foreclose rivals.

Call for papers: 2020 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference

2020 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference

The NYU School of Law and the American Bar Association Section of Antitrust Law proudly announce the 6^th Next Generation conference, which has expanded beyond Antitrust to include Data Privacy and Data Protection, on January 31, 2020.  The purpose of this day-long conference is to provide an opportunity for professors who began their full time tenure track career in or after 2012 to present their latest research. Senior scholars and practitioners in the field will comment on the papers.  Participants pay for their own travel and accommodations.  Papers are due by September 15, 2019 and decisions of accepted papers will be made by October 10. Please send submissions to Danny Sokol ([email protected]). To see prior versions of the conference see the 2018, 2016, 2014, 2012, and 2010 conference agendas.

 

Sincerely,

Ned Cavanagh, St. John’s
Harry First, NYU
Danny Sokol, University of Florida
Kathy Strandburg, NYU

Are Industries Becoming More Concentrated? The Canadian Perspective

Ray Bawania, Schulich School of Business, York University and Yelena Larkin, York University - Schulich School of Business ask Are Industries Becoming More Concentrated? The Canadian Perspective.

ABSTRACT: Since the late 1990s, U.S. industries have experienced an increase in concentration levels. In this paper, we try to understand the drivers of this trend by asking whether this phenomenon has been echoed in Canada – a large and developed economy with geographic proximity and economic ties to the U.S. We find that Canadian firms have also exhibited signs of consolidation. First, large firms have become more dominant, and the number of TSX publicly traded firms has dropped. Second, firms in industries with the largest increases in product market concentration started to generate higher profit margins. Third, the volume of M&A deals, and horizontal deals in particular, has increased. We argue that the recent changes in concentration can be attributed to an increase in market power, and cannot be fully explained by changes in financial market regulations. We posit that both the U.S. and Canadian economies were affected by two crucial factors that have led to product market consolidation: one, weak antitrust legislation and practices; and two, increasing barriers to entry.

OECD Competition Committee Roundtable on “Licensing of IP Rights and Competition Law”

Koren Wong-Ervin, Director of IP & Competition Policy, Qualcomm Incorporated has written on OECD Competition Committee Roundtable on “Licensing of IP Rights and Competition Law”.

Abstract: This note provides an economic approach to antitrust analysis of differential pricing (here, used synonymously with “price discrimination”) and discriminatory refusals to license; grantbacks and cross-licenses; and no-challenge clauses. The analysis applies to both intellectual property rights (IPRs) in general, as well as to standard-essential patents (SEP) as to which the holder has made a commitment to license on fair, reasonable, and nondiscriminatory (FRAND) terms. This note also addresses the alleged “patent thicket” problem and the ex-ante incremental (or “inherent”) value approach to SEP valuation.

The Effects of Regulating the Housing Short-Term Rental Market: Evidence From New Orleans

Maxence Valentin, Pennsylvania State University - Department of Insurance & Real Estate describes The Effects of Regulating the Housing Short-Term Rental Market: Evidence From New Orleans.

Abstract: This study exploits the enactment of regulations targeting Airbnb and other short-term rental (STR) suppliers in New Orleans to identify its effects on market participants' behavior and housing values. I show that although new regulations reduced participation in the STR market as intended, STR usage increased in the neighborhoods adjacent to the properties the most affected by the amendments. I subsequently show that the new regulations depressed property values within the neighborhoods facing the tightest regulations implying that homeowners factor the option to participate in the STR market into their housing purchasing decision.

Ridesourcing Systems: A Framework and Review

Hai Wang, Singapore Management University - School of Information Systems and Hai Yang, Hong Kong University of Science & Technology (HKUST) - Department of Civil Engineering address Ridesourcing Systems: A Framework and Review.

Abstract: With the rapid development and popularization of mobile and wireless communication technologies, ridesourcing companies have been able to leverage an internet-based platform to operate e-hailing services that connect passengers and drivers in real time and are disruptively changing the transportation industry. As pioneers in a general sharing economy context, these shared transportation platforms consist of a typical two-sided market. On the demand side, passengers are sensitive to the prices and quality of the service. On the supply side, drivers, as freelancers, flexibly make their working decisions based on their income from the platform and many other factors. Diverse variables and factors in the system are strongly endogenous and interactively dependent. How to design and operate ridesourcing platforms is vital — and challenging — for all stakeholders: passengers/users, drivers/service providers, platforms, policy makers, and the general public. In this paper, we propose a general framework to describe the ridesourcing systems. The framework can help understand the interactions of endogenous and exogenous variables, their changes in response to system decisions, platform operating strategies and objectives, and the market equilibria in a dynamic manner. Under the proposed general framework, we summarize important research problems and the corresponding methodologies that have been and are being developed and implemented to address these problems. We conduct a comprehensive review of the literature on these problems in different areas from diverse perspectives, including (1) demand and pricing, (2) supply and incentives, (3) platform operations, and (4) competition, impacts, and regulations. The proposed framework and the review also suggest many avenues worth exploring in future research.

Revisiting Frank H. Knight's 'The Ethics of Competition'

Ross B. Emmett, Arizona State University (ASU) - Center for the Study of Economic Liberty; PERC - Property and Environment Research Center is Revisiting Frank H. Knight's 'The Ethics of Competition.

Abstract: James M. Buchanan revisited his mentor’s famous 1923 essay “The Ethics of Competition” in an essay written for the centenary celebration of Frank Knight’s birth in 1985. Buchanan’s paper focused on the first section of Knight’s essay, and outlined why it provided an inadequate criticism of a competitive market economy. Essentially, the essay was flawed by what Buchanan understood to be a methodological ambiguity which formed the basis for Knight’s ethical critique. A year later, in Buchanan’s Nobel Lecture, he made no reference to Knight, despite have widely acknowledged in other ways his general indebtedness to Knight’s appreciation for competitive markets in forming his own approach to public choice. After reviewing the structure of Buchanan’s criticism, the paper turns to examine what Knight did with his views on ethics, economics, and social/political organization after the mid-1920s. Knight’s Weberian turn led him to abandon the “successive approximation” method he had argued in favor of in Risk, Uncertainty and Profit (1921), and instead seek an economics that provided general insights from an ideal type analysis of market interaction, combined with a) a comparative social and political institutional analysis; and b) a comparative study of ethical systems to evaluate which was appropriate to the problems of a liberal, democratic society. At the end, a brief look at Buchanan’s movement toward Knight on methodological issues after his Nobel Lecture is examined. Buchanan’s changes come from a new appreciation for increasing cost and social ideas and norms, as well as his growing appreciation for Knight’s notion of democracy as “government by discussion.”

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.

Independence of Competition Authorities: The Example of the EU and its Member States

Wouter P. J. Wils, King's College London – The Dickson Poon School of Law; European Union - European Commission address Independence of Competition Authorities: The Example of the EU and its Member States.

Abstract: At the end of 2018, the European Parliament and Council adopted Directive (EU) 2019/1, often referred to as the 'ECN+ Directive', which, among other things, contains provisions ensuring the independence of the competition authorities of the EU Member States (national competition authorities or NCAs), which are, together with the European Commission, responsible for the enforcement of the EU antitrust rules laid down in Articles 101 and 102 TFEU. In early 2019, the European Commission visibly showed its own independence by prohibiting Siemens' takeover of Alstom's rail transport business, a proposed merger publicly backed by the German and French governments. This paper gives an overview of the independence guarantees in EU law and discusses more in general the notion of independence of competition authorities and its rationale.

Algorithmic Opacity and Exclusion in Antitrust Law

Mark R. Patterson, Fordham University School of Law explores Algorithmic Opacity and Exclusion in Antitrust Law.

ABSTRACT: Traditionally evidence of exclusion was available to those injured by it. If a dominant firm refused to deal with a competitor, perhaps denying an important input, or priced predatorily, there was no difficulty in presenting evidence of the conduct at issue. As means of exclusion became subtler, such as with rebate structures, the conduct was less public, but still evidence was typically available. Rebate terms were often incorporated in contracts, for example, and copies could be obtained from customers. Exclusion by online platforms is very different. When a competitor is injured by, say, a disadvantageous position in search results, the cause is often an algorithm whose function is entirely internal to the dominant firm. In such instances, a private plaintiff may not have access to evidence that would allow it to allege satisfactorily, let alone prove, a violation. This brief note sets out the difficulty this issue poses for competition law.

Occupational Licensing and the Limits of Public Choice Theory

Gabriel Scheffler, University of Pennsylvania and Ryan Nunn, Brookings Institution address Occupational Licensing and the Limits of Public Choice Theory.

ABSTRACT: Public choice theory has long been the dominant lens through which economists and other scholars have viewed occupational licensing. According to the public choice account, practitioners favor licensing because they want to reduce competition and drive up their own wages. This essay argues that the public choice account has been overstated, and that it ironically has served to distract from some of the most important harms of licensing, as well as from potential solutions. We emphasize three specific drawbacks of this account. First, it is more dismissive of legitimate threats to public health and safety than the research warrants. Second, it places disproportionate emphasis on those professions for which the justification for licensing seems weakest, rather than on those for which the justification is stronger. Third, it puts an inordinate focus on whether an occupation is licensed, rather than how it is licensed. Judges and policymakers should bear these limitations in mind when evaluating legal challenges or proposed reforms to licensing laws.

Assessing Buyer Power in Syndicated Loans

Emin Köksal, Bahcesehir University and Sahin Ardiyok, BASEAK are Assessing Buyer Power in Syndicated Loans.

ABSTRACT: The main purpose of this study is to examine the buyer power of the borrowers at the multilateral loan market including the syndicated and club loans. Although there has not been a formal definition yet for the buyer power concept in the antitrust economics literature, it may be described as the power that is exercised by the buyers on market transactions. In some markets, it is observed that not the sellers but the buyers may exercise their power on market prices and/or quantities. Corporate multilateral loan market is one of those markets, mostly because of the characteristics of the borrowers which are large and financially sound companies.

In this study, the analysis done for the multilateral loan market are based on the assessment of the borrowers’ buyer power and the lenders’ market power. While on one side the competitive conditions in the market and market power of lenders have been elaborated, on the other side factors that determine the buyer power of borrowers have been assessed. The study also provides a specific analysis for Turkish companies in multilateral loan market and their buyer power.

Through reviewing the relevant scientific literature and based on the data, the study put the following findings concerning the buyer power of borrowers in multilateral (syndicated/club) loans:

• Company characteristics -such as, company size, publicly available information and domestic/foreign ownership- are the most important determinants for the choice of debt instruments. Companies and financial institutions may reach alternative borrowing tools based on their characteristics.

• Credit quality of some large companies -called blue-chips- enable them to directly access to the international capital markets and gives them bargaining power over lenders in multilateral loan market. This proves the significance buyer power of such companies in multilateral loan market.

• Our analysis for the Turkish borrowers in multilateral loan market shows that Turkish companies have considerable buyer power because of the following reasons: (1) In Turkey the demand side of the multilateral loan market is shallow and concentrated, (2) the number of potential buyers for multilateral loans have been stable, (3) Turkish companies may switch to other debt instruments in case of cost increases.

Based on the above findings and facts, we argue that a proper competition analysis which assesses the multilateral loan market -including syndicated and club loans- should consider the buyer power of borrowers as a significant factor.

Digital Platforms and Antitrust Law

Keith Hylton, BU has written on Digital Platforms and Antitrust Law.

ABSTRACT: This is a paper about “big data” and antitrust law. For my purposes, big data refers to digital platforms that enable the discovery and sharing of information by consumers, and the harvesting and analysis of data on those consumers by the platform. The obvious example of such a platform is Google. The big platforms owe their market dominance not to anticompetitive conduct but to economies of scale. I discuss three types of anticompetitive conduct associated with digital platforms: kill zone expropriation, acquisition of nascent rivals, and denial of access to data. There is nothing so unusual about digital platforms that would require a reform of the antitrust laws. Some are described as two-sided markets, but this designation, even after Ohio v. Amex, should not present an obstacle to the application of antitrust law.