Antitrust & Competition Policy Blog

Competition Law and Competition Policy in India: How the Competition Commission has Dealt with Anticompetitive Restraints by Government Entities

Aditya Bhattacharjea, Oindrila De & Geeta Gouri discuss Competition Law and Competition Policy in India: How the Competition Commission has Dealt with Anticompetitive Restraints by Government Entities.

ABSTRACT: Can adoption of an antitrust/competition law substitute for a formal competition policy that lays down principles for reforming other government policies that affect competition? We address this question in the context of India, which has a track record of antitrust enforcement as well as a history of extensive controls over the private sector and domination of key sectors by state owned firms. After briefly summarizing these features, we argue that several clauses of the Competition Act, 2002, allow the Competition Commission of India (CCI) to challenge public restraints on competition. We then undertake a detailed review of several cases that have addressed public restraints and that have gradually extended the jurisdiction of the Act. We also identify some areas that remain beyond its reach—government policies that violate competitive neutrality, and discretionary purchases by public buyers—and we note possible social or business justifications for such restraints. Finally, we briefly discuss conflicts between the CCI and other regulatory agencies. We suggest that these remaining challenges can be addressed without laying down a broader policy.

Tracking Giants: Professor Hovenkamp and Impact Metrics

Jane O'Connell, University of Florida Levin College of Law, Barak Orbach, University of Arizona, and D. Daniel Sokol, University of Florida Levin College of Law are Tracking Giants: Professor Hovenkamp and Impact Metrics.

ABSTRACT: Professor Herbert Hovenkamp is the most cited and most decorated antitrust scholar of our time. We explore what the commonly used scholarly impact metrics say about Professor Hovenkamp’s position of influence, recognizing that traditional metrics do not capture his full impact as a scholar, thinker, and intellectual. Professor Hovenkamp has influenced the evolution of antitrust law.

What the Sabre-Farelogix Case Tells Us About the Future Of Antitrust Law

Sean Heather, US Chamber analyzes What the Sabre-Farelogix Case Tells Us About the Future Of Antitrust Law.

Structural vs. Behavioural Remedies

Frank P. Maier-Rigaud, IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods; NERA Economic Consulting and Benjamin Lörtscher NERA Economic Consulting address Structural vs. Behavioural Remedies.

ABSTRACT: The European Commission’s remedial practice displays important differences in the type of remedies accepted in merger as opposed to antitrust cases. This paper briefly reviews the Commission’s remedies practice over the last 14 years highlighting the differences and discussing inconsistencies. It raises the question why predominantly behavioural remedies are chosen in antitrust cases and how this practice could be reconciled with the approach in merger control where the risks to effective competition are viewed as deriving from changes in the structure of the market and where therefore structural remedies are typically considered necessary.

CPI Event Around John Kwoka's new merger book

See here.

Vertical Restraints Under Indian Competition Law: Whither Law and Economics

Vikas Kathuria, Max Planck Institute for Innovation and Competition explains Vertical Restraints Under Indian Competition Law: Whither Law and Economics.

ABSTRACT: The correct welfare assessment of vertical agreements in competition law is a difficult craft. The more mature jurisdictions such as the EU and the US have struggled to develop the optimal framework. This paper scrutinises the vertical agreements cases of the Competition Commission of India (CCI) that is now ten years old. The objective is to understand the overall level of legal and economic analysis in the competition case, and also to assist the CCI in strengthening its legal and economic framework vis-à-vis vertical agreements. The scrutiny of some leading cases reveals that there are some legal ambiguities in the interpretation. More problematic, however, is the economic analysis that is incoherent and truncated. The scrutiny also reveals overreliance on the EU jurisprudence that does not go along with the legislative scheme of the Indian Act. The paper draws out some lessons towards the end.

New Issue of CPI Antitrust Chronicle - Killer Acquisitions

See here.

Using Big Data to Expand Financial Services: Benefits and Risks

Facundo Abraham, World Bank, Sergio L. Schmukler World Bank - Development Research Group (DECRG), José Tessada, Business School, Pontificia Universidad Católica are Using Big Data to Expand Financial Services: Benefits and Risks.

ABSTRACT: Big data is transforming financial services around the world. Advances in data analytics and computational power are allowing firms to exploit data in an easier, faster, and more reliable manner, and at a larger scale. By using big data, financial firms and new entrants from other sectors are able to provide more and better financial services. Governments are also exploring ways to use big data collected by the financial sector more systematically to get a better picture of the financial system as a whole and the overall economy. Despite its benefits, the wider use of big data has raised concerns related to consumer privacy, data security, discrimination, data accuracy, and competition. Hence, policy makers have started to regulate and monitor the use of big data by financial institutions and to think about how to use big data for the benefit of all.

Oliver Williamson 1932-2020

It is with great sadness that I write that Nobel Laureate Oliver Williamson has passed away.  His work on understanding transaction costs and the organization of firms was path-breaking and continues to have tremendous influence.  He also fundamentally shaped the field of antitrust.  Much of his early work was specific to antitrust economics.  Even his famous 1974 book is titled Markets and Hierarchies: Analysis and Antitrust Implications.  His 1968 paper in the American Economic Review, “Economies as an Antitrust Defense: The Welfare Trade-Offs,”  framed merger analysis.  His Williamsonian trade-off articulated in that article also was the basis for Robert Bork's "consumer" welfare standard for antitrust.

The Cooperation on Competition Policy under the African Continental Free Trade Area

Vellah Kedogo Kigwiru explains The Cooperation on Competition Policy under the African Continental Free Trade Area.

ABSTRACT: The dream of establishing an African common market that would lead to an African Economic Community begun in the 1980s, when the Lagos Plan of Action for the Economic Development of Africa was adopted. The establishment of the African Continental Free Trade Area (AfCFTA) which came into force on 30th May 2019 provides the most recent, and perhaps the most critical milestone in the integration process because it provides a foundation upon which an African Customs Union can materialise. It is recognised that for the AfCFTA to meet its general objectives under Article 3 of the AfCFTA Framework Agreement; States Parties need to cooperate on competition policy which is part of the second phase of the negotiations that will culminate into a Protocol on Competition Policy. At the time of writing this paper, the negotiations on the cooperation on competition policy are on the horizon. As such, this paper seeks to inform the design and implementation of the proposed competition policy under the AfCFTA by espousing the benefits, potential and challenges of adopting a continental competition policy framework. More importantly, building upon the literature on competition policy under free trade areas (FTAs), this paper also seeks to answer a pertinent question on the mind of the majority of stakeholders which is: how should a competition policy under the AfCFTA be fashioned?

Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition?

Angela Zheng, HKU asks Should China wield antitrust laws to counter US attacks on Huawei amid global tech competition?

Blockchain Neutrality

Sam Weinstein, Yeshiva has written on Blockchain Neutrality.

ABSTRACT: Blockchain technology is transforming how markets work. Blockchains eliminate the need for trusted gatekeepers like banks to execute, verify, and record transactions. In the financial markets, their disruptive potential threatens Wall Street and Silicon Valley venture capitalists. How blockchain technology is regulated will determine whether it encourages or inhibits competition. Some blockchain applications present serious fraud and systemic risks, complicating regulation. This Article explores the antitrust and competition policy challenges blockchain presents and it proposes a regulatory strategy to unlock blockchain’s competitive potential, modeled on Internet regulation and net neutrality principles. It contends that financial regulators should promote blockchain competition — and the resulting market decentralization — except in cases where specific applications are shown to harm consumers or threaten systemic safety. Regulators also should ensure open access and non-discrimination on blockchain networks. This approach will serve not only traditional antitrust goals of lowering prices and promoting innovation, but also might achieve broader economic and social reform by reducing the power and influence of the biggest financial institutions.

The Paramount Decrees: Lessons for the Future

Barak Orbach, Arizona offers The Paramount Decrees: Lessons for the Future.

ABSTRACT: There are some striking similarities between the tech giants of the 21st century and the powerful Hollywood studios in the second quarter of the 20th century. In their respective eras, each group of companies symbolized the acquisition of economic power by innovative firms and inspired calls to use antitrust law to break up large corporations, deconcentrate the economy, and protect small businesses.

In their pursuit of growth, each group of companies harnessed efficiencies and acted aggressively to exclude competition. The studios developed supply chains for mass production and mass distribution of entertainment products. Their success devastated less efficient entertainment industries, such as the “legitimate theater,” vaudevilles, and nickelodeons. They also acted to eliminate competition from rivals in the motion picture industry. The tech giants developed digital platforms, whose success devastated brick-and-mortar industries. They have also acted to eliminate competition from other tech companies.

The studios were the target of the most ambitious campaign to reform markets through antitrust enforcement. The story of this campaign could benefit contemporary debates about the future of antitrust law, including assessments of antitrust policy in periods of rapid technological change, vertical arrangements, conspiracy inference, divestitures, and behavioral remedies. This paper summarizes this episode in antitrust history and lessons that it offers.

Exclusionary Contracts and Incentives to Innovate

Simen A. Ulsaker, Norwegian School of Economics (NHH) offers Exclusionary Contracts and Incentives to Innovate.

ABSTRACT: The article considers a situation where several firms have the opportunity to sell an identical product to a set of buyers, and where each seller can invest in R&D to develop a higher quality version of the product in question. I consider the possibility of allowing the sellers to offer exclusionary contracts, prior to deciding how much to invest in R&D. In equilibrium every buyer will sign an exclusionary contract with the same seller. Since all buyers are locked to one seller, only this seller will have an incentive to invest in R&D. Whether or not banning exclusionary contracts increases the aggregate probability of successful innovation depends on the R&D technology. More specifically, banning exclusionary contracts will increase the aggregate probability of innovation and joint surplus of buyers and sellers only when the R&D technology exhibits sufficient diseconomies of scale.

Steering Incentives of Platforms: Evidence from the Telecommunications Industry

Steering Incentives of Platforms: Evidence from the Telecommunications Industry Brian McManus, Aviv Nevo, Zachary Nolan, and Jonathan W. Williams #27083 Abstract: We study the trade-offs faced by Internet Service Providers (ISPs) that serve as platforms through which consumers access both television and internet services. As online streaming video improves, these providers may respond by attempting to steer consumers away from streaming video toward their own TV services, or by attempting to capture surplus from this improved internet content. We augment the standard mixed bundling model to demonstrate the trade-offs the ISP faces when dealing with streaming video, and we show how these trade-offs change with the pricing options available to the ISP. Next, we use unique household-level panel data and the introduction of usage-based pricing (UBP) in a subset of markets to measure consumers' responses and to evaluate quantitatively the ISP's trade-offs. We find that the introduction of UBP led consumers to upgrade their internet service plans and lower overall internet usage. Our findings suggest that while steering consumers towards TV! services is possible, it is likely costly for the ISP and therefore unlikely to be profitable. This is especially true if the ISP can offer rich pricing menus that allow it to capture some of the surplus generated by a better internet service. The results suggest that policies like UBP can increase ISPs' incentive to maintain open access to new internet content.

GDPR and the Importance of Data to AI Startups

James E. Bessen, Technology & Policy Research Initiative, BU School of Law, Stephen Michael Impink, New York University (NYU) - Leonard N. Stern School of Business, Lydia Reichensperger, Technology & Policy Research Initiative, BU School of Law, and Robert Seamans, New York University (NYU) - Leonard N. Stern School of Business have an interesting paper on GDPR and the Importance of Data to AI Startups.

ABSTRACT: What is the impact of the European Union’s General Data Protection Regime (“GDPR”) and data regulation on AI startups? How important is data to AI product development? We study these questions using unique survey data of commercial AI startups. AI startups rely on data for their product development. Given the scale and scope of their business models, these startups are particularly susceptible to policy changes impacting data collection, storage and use. We find that training data and frequent model refreshes are particularly important for AI startups that rely on neural nets and ensemble learning algorithms. We also find that firms with customers in Europe are significantly more likely to create a new position to handle GDPR-related issues or to reallocate firm resources due to GDPR.

České dráhy, a.s. v European Commission: No Obligation for the Commission to Assess Exculpatory Evidence If There Is Already Sufficient Incriminating Evidence to Order an Inspection

Emily Xueref-Poviac identifies České dráhy, a.s. v European Commission: No Obligation for the Commission to Assess Exculpatory Evidence If There Is Already Sufficient Incriminating Evidence to Order an Inspection.

ABSTRACT: České dráhy is the Czech state-owned railway operator, active in markets for (i) the supply of passenger transport services and (ii) the provision of railway infrastructure management in the Czech Republic.

In January 2012, the Czech Competition Office opened an investigation into České dráhy due to suspicions of predatory pricing on the Prague–Ostrava train line. 

The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration

Robert H. Lande, University of Baltimore - School of Law and Richard O. Zerbe, University of Washington - Daniel J. Evans School of Public Affairs; University of Washington - School of Law advocate The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration.

ABSTRACT: Section 2 of the Sherman Act was designed to impose sanctions on all monopolies and attempts to monopolize regardless whether the firm had engaged in anticompetitive conduct. This conclusion emerges from the first ever textualist analysis, a form of statutory interpretation vigorously championed by Justice Scalia, of the language in Section 2. This article analyzes contemporaneous dictionaries, legal treatises, and cases, and demonstrates that when the Sherman Act was passed, the word “monopolize” simply meant that someone had acquired a monopoly. The term was not limited to monopolies acquired through anticompetitive conduct. A textualist analysis therefore demonstrates that Section 2 was designed to impose sanctions on all monopolies and attempts to monopolize.

A textualist approach to statutory construction does not imply or create unstated exceptions. Since Section 2 of the Sherman Act contains no explicit exception for a monopoly acquired without proof of anticompetitive conduct, none should be implied or created. Current case law requiring plaintiffs to prove the corporation involved had engaged in improper conduct must be overturned.

This article then briefly analyzes the practical economic implications likely to follow from adopting a “no-fault” approach to monopolization law. The overall economic effects will be shown to be uncertain, and to depend upon empirical issues whose net effect is speculative or ambiguous. They nevertheless are likely to be beneficial on the whole, and they provide some support for the no-fault position, and a fortiori demonstrate that the article’s textualist conclusions should be implemented.

Imposing sanctions on all monopolies could improve economic welfare in many ways. It should increase innovation and international competitiveness. It should prevent the allocative inefficiency effects of monopoly pricing and the form of exploitation that arises when monopolies acquire wealth from consumers. It would be likely to decrease the inefficiencies that result from monopolies enjoying a “quiet life”. It should avoid the waste that can arise as a firm struggles to attain and protect its monopoly, and some of the time and cost of Section 2 litigation. It should tend to improve privacy and decrease income inequality.

The new standard would admittedly also cause some costs and difficulties. For example, imposing sanctions on all monopolies could sometimes send a confusing or perverse signal to firms engaging in hard but fair competition, especially as a firm’s market share neared the ambiguous level required for a violation. It could enable competitors to file baseless lawsuits. The transaction costs involved in imposing sanctions on monopolies could be significant. It also could lead to difficult remedy issues in cases involving natural and patent monopolies. We believe, however, that the benefits of no-fault are likely to outweigh the costs.

In recent years there have been many calls, from very different parts of the political spectrum, for imposing sanctions on, and even breaking up, monopolies without inquiring whether they engaged in anticompetitive conduct. This issue has not, however, been analyzed seriously either from a legal or an economic perspective in roughly a half century. The purpose of this article is not to resolve all the relevant questions. Rather, its goal is to re-kindle debate about the legal and economic issues involved in imposing sanctions on all monopolies and attempts to monopolize under the Sherman Act and also, a fortiori, under Section 5 of the FTC Act. And to demonstrate that the textualist conclusion also constitutes a reasonable policy option.

Libra: A Concentrate of 'Blockchain Antitrust'

Thibault Schrepel, Utrecht University School of Law describes Libra: A Concentrate of 'Blockchain Antitrust'.

ABSTRACT: Mark Zuckerberg introduced Libra to the world in June 2019 with the goal of “enabl[ing] a simple global currency and financial infrastructure that empowers billions of people.” Two months after, and without waiting for the project to be launched, the European Commission sent a questionnaire to various parties connected to Libra in order to investigate “potential anti-competitive behaviors.” The U.S. House of Representatives also conducted a series of hearings at the end of October 2019 questioning the intentions behind Libra.

Against this background, Part I of this Essay analyzes the type of governance that Libra is aiming for, as it indicates the nature and frequency of certain anti-competitive risks. Part II offers an assessment of the anti-competitive collusion and monopolization that Libra governance might yield. The discussion concludes by assessing the desirability of the adversarial approach adopted by antitrust agencies and governments thus far.

State Cartels

James W. Coleman, Southern Methodist University - Dedman School of Law identifies State Cartels.

ABSTRACT: The United States is emerging from history’s biggest commodity boom as the meteoric rise of fracking has made America the center of global oil production and the engine of the world’s economy. But haste makes waste. These new American oil wells are releasing natural gas as well, which is prized as a clean and reliable fuel around the world, but must be simply burned off or “flared” if there are no pipelines to bring it to the customers that need it. The pace of the oil boom, and the challenges of building new gas pipelines have forced oil companies to flare staggering quantities of natural gas. In recent months, Texas and North Dakota have both flared — that is, wasted — more natural gas than many states or even nations consume. This Article shows that to stop this tremendous economic and environmental waste, states must develop a new approach to antitrust law. It makes the case for state energy cartels.

One of the few consensus grounds for regulation is combating market power — preventing dominant suppliers from increasing their profits by selling less at higher prices. States break up producer cartels so that competition provides consumers with lower prices. But what happens when a state’s interest coincides with producers rather than consumers? The economic health of major energy exporters depends on the price of the products they export. That is, these states, provinces, and countries can benefit by increasing the price of the oil and gas that they export. For the first half of the twentieth century, the United States was the world’s premier oil exporter; during that time, U.S. states cooperated as a de facto cartel to ensure higher oil prices. When other countries overtook the U.S. as the world’s premier oil producers, they formed the Organization of Petroleum Exporting Countries to play a similar role.

This article establishes a new theory of market regulation — state cartels. It explains how these cartels offer the best solution to the flaring crisis and a unique opportunity for productive global cooperation to address climate change. It shows how states can slow production, protect the environment, and increase their industry’s profits by adapting and perfecting tools that the United States stumbled upon in the first half-century of oil production. And it shows how these tools can be tailored to protect consumers, industry, and the environment.