Wednesday, July 31, 2019
New from Caron Beaton-Wells
The latest Competition Lore podcast episode: “More on digital mergers”, with Paolo Buccirossi: https://competitionlore.com/podcasts/digital-2/.
She also has written an op-ed “ACCC Doubles Down on Digital Platforms”: https://pursuit.unimelb.edu.au/articles/accc-doubles-down-on-digital-platforms.
July 31, 2019 | Permalink | Comments (0)
7th Bill Kovacic Antitrust Salon: Monday, September 9, 2019 1:00 PM – 6:00 PM EDT
Description
July 31, 2019 | Permalink | Comments (0)
Beyond Internal Documents: The Commission’s Recent Assessment of Conglomerate Mergers
Joan de Solà-Morales looks Beyond Internal Documents: The Commission’s Recent Assessment of Conglomerate Mergers.
ABSTRACT: In 2018, Commissioner Vestager highlighted how internal documents have shaped the Commission’s assessment in recent cases, and announced her intention to publish a set of best practices on requests for internal documents in merger investigations. The Commission has indeed shown an increasing reliance on internal documents in its recent merger practice, and now seems to devote a substantial part of its investigation efforts to the gathering and review of these.
July 31, 2019 | Permalink | Comments (0)
New Antitrust Regime in Argentina
and describe the New Antitrust Regime in Argentina.
July 31, 2019 | Permalink | Comments (0)
Challenges and Prospects for Merger Control in China in the Digital Economy
Han Wei Ph.D., University of Chinese Academy of Social Sciences and Yajie Gao, Queen Mary, University of London address Challenges and Prospects for Merger Control in China in the Digital Economy.
ABSTRACT: Internet brings not only efficiency and convenience, but also challenges to competition authorities all over the world. In obvious contrast to vibrant concentrations in the digital economy in China, the Chinese competition authority has only officially reviewed few cases, due to the variable interest entity structure, incompetence of the turnover-based notification threshold, and lack of experiences in solving new competition concerns brought by access to certain data set, privacy protection, innovation competition and leveraging effect. With establishment of the State Administration for Market Regulation, due attention has been and will continue to be paid to specific characteristics of digital economy from perspectives of both legislation and enforcement. Whether the SAMR would keep open to behavioral remedies deserves further observations. In order to facilitate the SAMR applying anti-monopoly laws and regulations to concentrations in the digital economy more properly and efficiently, the authors of this paper would suggest empowering qualified local competition agencies to review certain concentrations, amending anti-monopoly rules, strengthening knowledge management, establishing independent technical expert group and maintaining international communications.
July 31, 2019 | Permalink | Comments (0)
The (Anti-)Competitive Effect of Intellectual Property Rights
Michael R. Peneder, Austrian Institute of Economic Research (WIFO), Mark Thompson, Austrian Institute of Technology, and Martin Woerter, Swiss Federal Institute of Technology Zurich (ETH) - Swiss Institute for Business Cycle Research (KOF) suggest The (Anti-)Competitive Effect of Intellectual Property Rights.
ABSTRACT: We test whether intellectual property rights foster or hinder innovation by estimating IV structural equations for a large sample of Swiss firms. We find that better appropriability conditions at the industry level raise the number of competitors. However, conditional on the given industry structure, individual firms face fewer competitors, if they actually use intellectual property rights. The further impact of fewer competitors is to raise R&D, when initial competition is strong, but to reduce it, when initial competition is weak ("inverted U").
July 31, 2019 | Permalink | Comments (0)
Tuesday, July 30, 2019
Legal Tests in EU Competition Law: Taxonomy and Operation
Pablo Ibáñez Colomo, London School of Economics - Law Department offers Legal Tests in EU Competition Law: Taxonomy and Operation.
ABSTRACT:
• There is not a unique legal test in EU competition law. There is conduct that is prima facie unlawful irrespective of its effects, and conduct that is lawful. In between, some practices are prohibited where actual or likely effects can be shown.
• This paper seeks to map the various tests by which conduct is assessed under Articles 101 and 102 TFEU and to explain the rationale and operation in practice of these tests.
• The analysis explains, inter alia, how firms can rebut the presumption that practices are capable of having restrictive effects in light of the relevant economic and legal context of which they are a part.
• The paper also explains why indispensability is an element of the legal test in the context of some practices (for instance, refusals to deal) but not others (for instance, 'margin squeeze' and tying conduct). In this sense, it is submitted that, as the law stands, the nature of the remedy determines the application of one test or the other.
July 30, 2019 | Permalink | Comments (0)
Antitrust and Innovation: Welcoming and Protecting Disruption
Giulio Federico, Chief Economist Team, DG Competition, European Commission, Fiona M. Scott Morton, Yale School of Management; National Bureau of Economic Research (NBER), and Carl Shapiro, University of California, Berkeley - Haas School of Business explore Antitrust and Innovation: Welcoming and Protecting Disruption.
ABSTRACT: The goal of antitrust policy is to protect and promote a vigorous competitive process. Effective rivalry spurs firms to introduce new and innovative products, as they seek to capture profitable sales from their competitors and to protect their existing sales from future challengers. In this fundamental way, competition promotes innovation. We apply this basic insight to the antitrust treatment of horizontal mergers and of exclusionary conduct by dominant firms.
A merger between rivals internalizes business-stealing effects arising from their parallel innovation efforts and thus tends to depress innovation incentives. Merger-specific synergies, such as the internalization of involuntary spillovers or an increase in the productivity of R&D, may offset the adverse effect of a merger on innovation. We describe the possible effects of a merger on innovation by developing a taxonomy of cases, with reference to recent U.S. and E.U. examples.
A dominant firm may engage in exclusionary conduct to eliminate the threat from disruptive firms. This suppresses innovation by foreclosing disruptive rivals and by reducing the pressure to innovative on the incumbent. We apply this broad principle to possible exclusionary strategies by dominant firms.
July 30, 2019 | Permalink | Comments (0)
Forward trading and collusion in supply functions
| By: | Wölfing, Nikolas |
| Abstract: | This paper studies the effect of forward contracts on the stability of collusion among firms, competing in supply functions on the spot market. A forward market can increase the range of discount factors which allow to sustain collusion. On the contrary, collusion is destabilised when a potential deviator sells a significant amount forward. Results do not depend on the type (financial or physical) of contract fulfilment and are robust to different levels of demand uncertainty. As a policy implication, the study finds that liquid and anonymous forward markets are incompatible with collusion. |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:19003&r=com |
July 30, 2019 | Permalink | Comments (0)
Market power, efficiency and welfare performance of banks: evidence from the Ghanaian banking industry
| By: | Adeabah, David; Andoh, Charles |
| Abstract: | The study analyses the welfare performance of banks’ lending services in the Ghanaian banking industry with emphasis on the role of market power and efficiency. We made use of pooled OLS regression with fixed effect model. For robustness, we adopted Prais–Winsten (1954) regression and two-stage least squares (2SLS) instrumental variables procedures on an unbalanced panel data of 24 banks for years 2009 through 2017. The results reveal that during our study period, there was a welfare loss of about 0.433 percent of observed total loans. Encouragingly, cost efficiency in the banking system fits well within the world’s mean efficiency but has been decreasing over time. Further, there is evidence that prices have not moved toward a competitive level. Cost efficiency estimates are found to be negatively associated with loss of consumer surplus estimates. Market power is found to be positively related to a loss in consumer surplus. Additional analysis shows that the market power effect is dominant in both domestic and large banks. Overall, the results indicate that market power and bank efficiency are competing interests for policymakers in their consideration of policy reforms geared toward an efficient and well-functioning banking system. An additional implication of these results suggests that antitrust enforcement may be socially beneficial to provide an incentive for competitive pricing in the lending business segment of banking. Other implications are also discussed. |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:192967&r=com |
July 30, 2019 | Permalink | Comments (0)
Monday, July 29, 2019
Quality Regulation and Competition: Evidence from Pharmaceutical Markets
| By: | Atal, Juan Pablo; Cuesta, Jose Ignacio; Sæthre, Morten |
| Abstract: | We study the equilibrium effects of quality regulation on market outcomes by exploiting the staggered phase-in of bioequivalence requirements for generic drugs in Chile. While the objective of the regulation was to increase the perceived quality of generics to reduce vertical differentiation and enhance price competition, we find mostly adverse effects. Even if a large number of drugs obtained the quality certification mandated by the regulation, we estimate that the number of drugs in the market decreased by 13% as a result of the policy. Moreover, we find that prices increased on average by 13% as well as no significant effects on the market share of generics. These adverse effects were mostly concentrated in molecules with small market size. Put together, our results suggest that the intended effects of the regulation on competition through increased (perceived) quality of generics were overturned by adverse competitive effects arising from the costs of complying with the regulation. |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1211&r=com |
July 29, 2019 | Permalink | Comments (0)
What drives pricing behavior in Peer-to-Peer markets? Evidence from the carsharing platform blablacar
| By: | Mehdi Farajallah (ESC Rennes School of Business - ESC Rennes School of Business); Robert Hammond (NCSU - North Carolina State University [Raleigh]); Thierry Pénard (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We examine how price and demand are determined on peer-to-peer platforms and whether experience and reputation have the same impact as in traditional markets. We use data from the world's leading intercity carsharing platform, BlaBlaCar, which connects drivers with empty seats to riders. We find that pricing decisions evolve as drivers gain experience with the platform. More-experienced drivers set lower prices and, controlling for price, sell more seats. Our interpretation is that more-experienced drivers on BlaBlaCar learn to lower their prices as they gain experience; accordingly, more-experienced drivers earn more revenue per trip. In total, our results suggest that peer-to-peer markets such as BlaBlaCar share some characteristics with other types of peer-to-peer markets such as eBay but remain a unique and rich setting in which there are many new insights to be gained. |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02012097&r=com |
July 29, 2019 | Permalink | Comments (0)
Monopsony Power and Guest Worker Programs
| By: | Gibbons, Eric M. (Ohio State University); Greenman, Allie (University of Nevada, Reno); Norlander, Peter (Loyola University); Sorensen, Todd A.(University of Nevada, Reno) |
| Abstract: | Guest workers on visas in the United States may be unable to quit bad employers due to barriers to mobility and a lack of labor market competition. Using H-1B, H-2A, and H-2B program data, we calculate the concentration of employers in geographically defined labor markets within occupations. We find that many guest workers face moderately or highly concentrated labor markets, based on federal merger scrutiny guidelines, and that concentration generally decreases wages. For example, moving from a market with an HHI of zero to a market comprised of two employers lowers H-1B worker wages approximately 10 percent, and a pure monopsony (one employer) reduces wages by 13 percent. A simulation shows that wages under pure monopsony could be 47 percent lower, suggesting that employers do not use the extent of their monopsony power. Enforcing wage regulations and decreasing barriers to mobility may better address issues of exploitation than antitrust scrutiny. |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12096&r=com |
July 29, 2019 | Permalink | Comments (0)
Do Research Joint Ventures Serve a Collusive Function?
| By: | Helland, Eric; Sovinsky, Michelle |
| Abstract: | Every year thousands of firms are engaged in research joint ventures (RJV), where knowledge gained through R&D is shared among members. Many members are rivals leaving open the possibility that firms form RJVs to facilitate product collusion. We exploit variation in RJV formation generated by a policy change that affects the collusive benefits but not the research synergies of a RJV. Estimates from our RJV participation equation indicate participation is impacted by the policy change. The magnitude is significant with an average drop in the probability of joining of 30%. Our results are consistent with RJVs serving a collusive function. |
July 29, 2019 | Permalink | Comments (0)
Friday, July 26, 2019
Competitors In Merger Control: Shall They Be Merely Heard Or Also Listened To?
| By: | Giebe, Thomas; Lee, Miyu |
| Abstract: | There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is our question. The competition authority applies some welfare standard while the competitor cares about its own profit. In general, but not always, this implies a conflict of interest. We formally model this setting with cheap talk signaling games, where hearing the competitor might convey valuable information to the authority, but also serve the competitor's own interests. We find that the authority will mostly have to ignore the competitor but, depending on the authority's own prior information, strictly following the competitor's selfish recommendation will improve the authority's decision. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US. |
| Keywords: | merger control, antitrust, European Commission, signaling, efficiency, competitors, rivals, competition |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62428&r=com |
July 26, 2019 | Permalink | Comments (0)
Competitors In Merger Control: Shall They Be Merely Heard Or Also Listened To?
| By: | Giebe, Thomas; Lee, Miyu |
| Abstract: | There are legal grounds to hear competitors in merger control proceedings, and competitor involvement has gained significance. To what extent this is economically sensible is our question. The competition authority applies some welfare standard while the competitor cares about its own profit. In general, but not always, this implies a conflict of interest. We formally model this setting with cheap talk signaling games, where hearing the competitor might convey valuable information to the authority, but also serve the competitor's own interests. We find that the authority will mostly have to ignore the competitor but, depending on the authority's own prior information, strictly following the competitor's selfish recommendation will improve the authority's decision. Complementary to our analysis, we provide empirical data of competitor involvement in EU merger cases and give an overview of the legal discussion in the EU and US. |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62428&r=com |
July 26, 2019 | Permalink | Comments (0)
Organizing Competition for the Market
| By: | Iossa, Elisabetta; Rey, Patrick; Waterson, Michael |
| Abstract: | The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms. |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13461&r=com |
July 26, 2019 | Permalink | Comments (0)
Thursday, July 25, 2019
Vertical Integration and Foreclosure: Evidence from Production Network Data
| By: | Johannes Boehm (Département d'économie); Jan Sonntag (Département d'économie) |
| Abstract: | This paper studies the prevalence of vertical market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers’ competitors than when they vertically integrate with an unrelated firm. This relationship holds also, among other things, when conditioning on mergers that follow exogenous downward pressure on the supplier’s stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place. |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/44gofgf80399mp5fq5q50vv5t6&r=com |
July 25, 2019 | Permalink | Comments (0)
Modernising European Competition Policy: A Brief Review of Member States’ Proposals
Matthiew Heim has a nice piece out for Bruegel on Modernising European Competition Policy: A Brief Review of Member States’ Proposals.
July 25, 2019 | Permalink | Comments (0)
Media Competition, Information Provision and Political Participation: Evidence from French Local Newspapers and Elections, 1944-2014
| By: | Julia Cage (Département d'économie) |
| Abstract: | This paper investigates the impact of increased media competition on the quantity and quality of news provided and, ultimately, on political participation. Drawing upon existing literature on vertical product differentiation, I explore the conditions under which an increase in the number of newspapers can decrease both the quantity and quality of news provided. I build a new county-level panel dataset of local newspaper presence, newspapers' newsrooms, costs and revenues and political turnout in France, from 1944 to 2014. I estimate the effect of newspaper entry by comparing counties that experience entry to similar counties in the same years that do not. Both sets of counties exhibit similar trends prior to newspaper entry, but those with entry experience substantial declines in the average number of journalists (business-stealing effect). An increased number of newspapers is also associated with fewer articles and less hard news provision. These effects are stronger in counties with more homogeneous populations, as predicted by my simple theoretical framework, whereas there is little impact in counties with more heterogeneous populations. Newspaper entry, and the associated decline in information provision, is ultimately found to decrease voter turnout at local elections. |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/478a1feno18otpdr60lclo4fuq&r=com |
July 25, 2019 | Permalink | Comments (0)
