Thursday, September 5, 2019

Another episode of Competition Lore

“Law unto themselves”, with Frank Pasquale, at https://competitionlore.com/podcasts/law-unto-themselves/.

September 5, 2019 | Permalink | Comments (0)

Antitrust and Tech: Europe and the United States Differ, and It Matters

Luke Froeb, Vanderbilt and Greg Werden have a new short paper Antitrust and Tech: Europe and the United States Differ, and It Matters.

ABSTRACT: European enforcers have brought high-profile antitrust cases against the tech giants, and both activists and members of Congress are calling for action in the United States. This short note identifies ten hard-wired differences between the European and American enforcement regimes that make very it difficult for the US antitrust enforcement agencies to emulate their European counterparts. This note also identifies a few other points of contrast between Europe and the United States that affect antitrust enforcement against tech giants going forward.

September 5, 2019 | Permalink | Comments (0)

Intellectual Property for Breakfast: Market Power and Informative Symbols in the Marketplace

P. Sean Morris, University of Helsinki - Faculty of Law discusses Intellectual Property for Breakfast: Market Power and Informative Symbols in the Marketplace.

ABSTRACT: This paper continues to examine an important question: are trademarks a source of market power, or, when, put differently, are trademarks an antitrust problem? This fundamental question is a cause of division among antitrust and intellectual property law scholars, however, by raising it and presenting some scenarios that can provide answers, it is hoped that contemporary antitrust and intellectual property scholars can explore some of its implications. As part of my own quest in addressing this question, I explore in this paper the proposition that creative deception and the wealth generating capacity of trademarks are (unorthodox) elements that when considered against the backdrop of case law, then, not only is creative deception a part of the process of product differentiation but also trademarks are in fact an antitrust problem. Some of my earlier arguments are set out in the previous papers, and one aim of the current paper is to explore the implication of product differentiation for evading antitrust rules.

September 5, 2019 | Permalink | Comments (0)

Pairing Public and Private Antitrust Remedies

Harry First, New York University School of Law and Spencer Weber Waller, Loyola University Chicago School of Law are Pairing Public and Private Antitrust Remedies.

ABSTRACT: Today’s conversation about antitrust civil remedies generally, and the private action specifically, focuses most often on optimal deterrence and effectiveness. Lost in conversation is the basic idea that antitrust violations cause economic harm and that those victimized by that harm should be entitled to damages from those who have violated the law. This is the underappreciated compensatory function of antitrust.

The article begins with a discussion of federal government suits under Section 4A of the Clayton Act for damages that the United States has suffered from antitrust violations. We trace the history of this important but little used provision and argue that the federal government should follow up on its pledge to bring this type of damage suit on a more regular basis. We then argue for a more robust public-private partnership to enforce the treble damages provision of the Clayton Act. The enforcement of Section 4A can be the beginning of such a productive partnership and perhaps the impetus for the solution of the many challenges posed by the Illinois Brick doctrine.

September 5, 2019 | Permalink | Comments (0)

Wednesday, September 4, 2019

The Interplay Between Upstream and Downstream Price Floors in Preventing Exclusionary Conduct

Dennis Weisman, Kansas State University - Department of Economics explores The Interplay Between Upstream and Downstream Price Floors in Preventing Exclusionary Conduct.

ABSTRACT: This paper integrates two separate branches of the law and economics literature to demonstrate the two-sided risk of market exclusion by a vertically-integrated firm (VIF) with upstream and downstream market power. The ratio of retail to wholesale price-cost margins is key. A margin ratio that is “too low” results in a vertical price squeeze, whereas one that is “too high” creates incentives for the VIF to engage in non-price discrimination. Displacement ratios delineate the range of safe harbor margin ratios within which neither form of market exclusion arises. The admissible range of these margin ratios is decreasing in the degree of product substitutability and reduces to a single ratio in the limit as the competing products become perfect substitutes. The challenge for policymakers is to apply these pricing constraints judiciously to prevent market exclusion in accordance with a consumer-welfare standard while recognizing the risk that these protections can be appropriated and used strategically in the errant pursuit of a competitor-welfare standard.

September 4, 2019 | Permalink | Comments (0)

The Health Impacts of Hospital Delivery Practices

David Card University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER), Alessandra Fenizia, UC Berkeley, Department of Economics, and David Silver Princeton University - Department of Economics, explores The Health Impacts of Hospital Delivery Practices.

ABSTRACT: Hospital treatment practices vary widely, often with little connection to the medical needs of patients. We assess the impact of these differences in the context of childbirth. We focus on low-risk first births, where c-section rates vary enormously across hospitals, and where policymakers have focused much of their attention in calls for reducing unnecessary c-sections. We find that proximity to hospitals with high c-section rates leads to more cesarean deliveries, fewer vaginal births after prolonged labor, and higher average Apgar scores. Infants born in these hospitals are less likely to be readmitted in the year after birth, but more likely to visit the emergency department for a respiratory-related problem. They also have lower mortality rates, driven by a reduction in the joint probability of prolonged labor and subsequent death. A stylized cost benefit analysis suggests that re-allocating births to high c-section hospitals could lead to net social benefits.

September 4, 2019 | Permalink | Comments (0)

Consumer Use of Multiple Payment Methods

Oz Shy, Federal Reserve Bank of Atlanta explores Consumer Use of Multiple Payment Methods.

ABSTRACT: I investigate the degree to which buyers choose to diversify their use of payment methods for in-person purchases. Some buyers use only one payment instrument. All others combine the use of mostly cash, credit, and debit cards, and a few paper checks and prepaid cards. To each survey respondent, I apply the Herfindahl-Hirschman concentration index over the use of payment instruments. This index exhibits almost no correlation with any consumer demographics, payment volume or value. This motivates the theoretical model which explains the observed multiple and single use of payment methods based on heterogeneous consumer preferences.

September 4, 2019 | Permalink | Comments (0)

Off-Label Use of Medicines Under Scrutiny: Between Competition Law and Pharma Regulations

Alexandr Svetlicinii, University of Macau - Faculty of Law discusses Off-Label Use of Medicines Under Scrutiny: Between Competition Law and Pharma Regulations.

ABSTRACT: The off-label use of medicines was discussed from various angles including sector-specific regulations, pharmacovigilance obligations, organization of the national health care systems and professional ethics. The recourse to off-label use of medicinal products is gaining importance as national health budgets are shrinking and governments are looking for more affordable means to supply health care to their citizens. Any relevant legislation or judicial interpretation should be analyzed in the light of the public health objectives. The present paper deals with the off-label use of medicines under EU competition law, through the discussion of the F. Hoffman-La Roche et al v Autorità garante della concorrenza e del mercato case, which the European Court of Justice (ECJ) has recently addressed in its explanatory ruling. The case originated from the investigation of the Italian competition authority prosecuting the anti-competitive collusion related to the suppression of the off-label use. The paper addresses the regulatory framework for off-label use in the EU and the likely effects of the ECJ’s interpretation concerning pharma companies’ involvement in monitoring and reporting possible health risks related to the off-label use. It demonstrates that the differences in regulatory approaches, across EU Member States, could lead to the diverging competitive conditions on the national markets for prescription drugs, reimbursed under the national health insurance systems. As a result, the competition law cases, concerning off-label use of medicinal products, would have to take into account the national specifics of these markets.

September 4, 2019 | Permalink | Comments (0)

Tuesday, September 3, 2019

Influence in the International Competition Network (Icn): Who Seeks It, How Do They Do This and Why?

Christopher Townley, King's College London – The Dickson Poon School of Law; A Dickson Poon Transnational Law Institute, Mariana Tavares, and Mattia Guidi, University of Siena have a paper on Influence in the International Competition Network (Icn): Who Seeks It, How Do They Do This and Why?

ABSTRACT: It “…is an important and growing…” phenomenon that businesses, and their manufacturing and distribution chains, often affect several countries. The same applies to anti-competitive arrangements that they adopt. Private barriers to market access are increasingly obvious as the public ones fall. More than 120 legal systems now have competition rules; this number exploded in the 1990s, accompanied by the establishment of competition agencies worldwide. This can create a bewildering array of substantive and procedural competition rules for businesses to follow. This has costs, in terms of a loss of efficiency, for companies operating across different countries. It can also have benefits from a democratic and public interest perspective, as each jurisdiction can (try to) protect the values that it holds dear.

Jurisdictions have sought influence through extra-territorial application of their competition rules. Another approach is to develop hard and/or soft international rules. Sometimes this happened through bilateral discussions, such as between the US and the EU in the 1990s. There were also several (unsuccessful) attempts to develop international competition ‘laws’; for example, the EU inspired effort to introduce competition rules into the WTO. Many international organisations have entered the competition arena (such as the Organisation for Economic Co-operation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD)) too. However, each had limitations. For example, the OECD did not include many countries with competition laws; and UNCTAD was seen as producing work that is too vague and pitched at the lowest common denominator. These initiatives encouraged dialogue between competition authorities (NCAs), but they were not always sufficient to remove tensions; think of the aborted mergers of GE/ Honeywell or Boeing/ McDonnell Douglas. Although infrequent, such tensions were high profile.

In 1997, the US Attorney General established a committee, the International Competition Policy Advisory Committee (ICPAC), to pay particular attention to three things:

“…multijurisdictional merger review; the interface of trade and competition issues; and future directions in enforcement co-operation between US antitrust authorities and their counterparts around the world…”

ICPAC delivered its report in February 2000. It sought to provide an environment conducive to the expansion of international trade, to be tolerant to different nations, and to enhance world welfare. Having said that, as one might expect from a US report, it also sought to remove barriers to market access stemming from anti-competitive private barriers to trade. To do this, it advised pushing nations to apply their competition rules in a non-discriminatory manner, to not apply non-competition factors in merger review (with limited exceptions), and to establish independent NCAs. This advice is likely indirectly discriminatory in favour of major firms penetrating new markets (exposing incumbents). Given the preponderance of US firms in the Fortune 500, they are likely to be major beneficiaries of such a strategy. A key recommendation of the ICPAC report was that the US should, amongst other things, explore the creation of a new global competition initiative (a transgovernmental network) where:

“…government officials, private firms and non-governmental organisations could consult on antitrust matters. ICPAC recommended that this Global Competition Initiative be directed toward ‘greater convergence of competition law and analysis, common understanding, and common culture.’”

The ICPAC report proved highly influential. US and EU competition officials expressed their support for a transgovernmental network in September 2000. In February 2001 the International Bar Association called a meeting of over 40 of the world’s senior competition officials and practitioners which supported the idea of “…establishing a new organisation directed exclusively at international antitrust enforcement.” From an early stage, it was clear that major businesses and law firms were prepared to offer money and analytical resources to support this initiative. The International Competition Network (ICN) was established in October 2001 by a group of competition authorities from around the world:

“In October 2001, competition authorities from 14 jurisdictions launched the International Competition Network (ICN) as an international forum of enforcement authorities exclusively devoted to competition issues.”

When we think of influence and the ICN, there are two stages that we need to be mindful of. First, certain actors (both ICN members and non-members) might seek to have influence in the ICN, and particularly on its recommended practices. Secondly, one might assess how the ICN recommended practices influence the laws and regulatory processes of its members, and also non-members. This paper describes the first stage, charting who influences things in the ICN, why they do this, and how. This paper is part of a larger book project that also looks at the second stage (ICN influence on states’ laws and regulatory processes).

We believe that it is important to describe these processes. We argue that the ICN’s formally neutral structures, on closer examination reveal powerful mechanisms of influence and control for strong NCAs and non-governmental advisors (NGAs), over the weak; and ‘technical competition experts’ over general state interests. We hypothesise that there will be a general lack of constitutional control exercised by states over the outcomes of these processes in their own legal orders. A third part of our book project goes on to question the legitimacy of this state of affairs.

The structure of this paper is as follows: we start by describing the ICN, its members, procedures, and impact. In particular, we focus on the Unilateral Conduct Working Group (UCWG), which we take as a case study (Section 2). Then, we discuss different regulatory theories to describe who is likely to seek influence in such a body (Section 3), why they will do this (Section 4) and how (Section 5). Finally, we conclude.

The methodology that we have adopted primarily uses the materials available on the ICN’s own website (www.internationalcompetitionnetwork.org). We have supplemented these with library-based reading of the theoretical approaches in political science that predict what is likely to happen and why. In addition, we have tested these readings with a survey conducted between May and August 2018 among members of competition authorities participating in the ICN and ICN NGAs. Finally, one of the authors has been present in many of these meetings and has an intimate knowledge of the ICN from the inside, from a time when she was a representative of the Portuguese Competition Authority there. We hope that this combination leads to useful insights.

September 3, 2019 | Permalink | Comments (0)

Post-Cartesian Antitrust

Justin (Gus) Hurwitz, University of Nebraska at Lincoln - College of Law has written on Post-Cartesian Antitrust.

Abstract

The Supreme Court’s 2018 opinion in American Express v. Ohio is among the most important – and divisive – antitrust opinions in the modern era of antitrust law. The simplest statement of Justice Thomas’s opinion for the majority is that it saw a 5 Justice majority of the Court fully embrace the relatively new economic understanding of two-sided markets. Supporters of the majority opinion almost uniformly view it as an obviously-correct application of important and generally-accepted recent development in economic theory. Those more amenable to Justice Breyer’s dissenting opinion do not necessarily reject the theory of two-sided markets but instead would treat arguments premised on this theory as a pro-competitive justification (that is, a defense) to what could reasonably be understood as potentially anticompetitive conduct under prevailing antitrust economics.

The central argument of this paper is that both perspectives miss the forest for the trees. The Court’s American Express opinion is not narrowly about whether (or how) antitrust law should embrace the theory of two-sided markets. Rather, I argue, this opinion is part of the Court’s ongoing efforts to understand how antitrust law should evaluate markets that are not neatly “horizontal” or “vertical."

I call these efforts to understand competition in markets that are not clearly horizontal or vertical “post-Cartesian” antitrust, and describe these markets as “messy markets.”

The important antitrust cases today do not fit neatly into the mold of either horizontal or vertical conduct. Simple horizontal or vertical market structures are not often the subject of antitrust litigation today. We see this in cases ranging from Apple v. Pepper (and the earlier Apple e-books litigation), to the AT&T-Time Warner merger litigation, from Leegin to Actavis, and of course in American Express. Indeed, the market structures in these cases are so different from horizontal and vertical markets that the tools developed for analysis of horizontal and vertical markets are as inapposite to them as SCP methodologies are to markets for differentiated products, markets characterized by rapid innovation, entry, or network effect, and high fixed costs.

September 3, 2019 | Permalink | Comments (0)

Mergers between Backward Integrated Firms: Insights from BASF/Solvay’s Polyamide Business

Frank Maier-Rigaud and Nicola Tosini discuss Mergers between Backward Integrated Firms: Insights from BASF/Solvay’s Polyamide Business.

ABSTRACT: On 19 September 2017, BASF publicly announced that it had agreed to purchase Solvay’s polyamide business, and the transaction was notified to the European Commission on 22 May 2018.1 After opening an in-depth investigation on 26 June 2018 and receiving an offer for commitments on 10 October 2018, the Commission conditionally cleared the transaction on 18 January 2019. In announcing the approval of the deal, Commissioner for Competition Margrethe Vestager hailed the ‘creation of a significant European player’ in the polyamide industry.

September 3, 2019 | Permalink | Comments (0)

Indian Competition Authority Rules that Uber Does not Facilitate Hub and Spoke Arrangements

Devika Agarwal describes Indian Competition Authority Rules that Uber Does not Facilitate Hub and Spoke Arrangements.

ABSTRACT: On 6 November 2018, the Competition Commission of India (the ‘CCI’) delivered its order in Samir Agrawal v. ANI Technologies and ors.1 (‘Samir Agrawal v. Ola & Uber’). The CCI ruled on whether the use of algorithmic pricing for determining ride fares amounted to a cartel (namely, a hub and spoke arrangement) between a taxi aggregator and the drivers using the platform. The article gives a background of online ride sharing services which are popular in India and abroad, the facts of the instant case, the key findings of CCI and the importance of the order in the context of European competition law.

September 3, 2019 | Permalink | Comments (0)

Monday, September 2, 2019

Competition between Offline and Online Retailers with Heterogeneous Customers

Stefano Colombo, Catholic University of the Sacred Heart of Milan and Noriaki Matsushima, Osaka University - Institute of Social and Economic Research (ISER) discuss Competition between Offline and Online Retailers with Heterogeneous Customers.

ABSTRACT: We consider the spatial competition between two traditional physical (or offline) retailers and an Internet (or online) retailer where the efficiency of the latter differs from that of the former. We assume consumers are heterogeneous across two dimensions: (i) the costs of traveling to either of the offline retailers and (ii) the costs of purchasing from the online retailer. Both dimensions depend on the spatial location of consumers and are independent of each other. We show that the online retailer maximizes its profit at an intermediate level of the consumer disutility of online purchase when its efficiency is low.

September 2, 2019 | Permalink | Comments (0)