Tuesday, June 23, 2020
|By:||Hellwig, Michael; Laser, Falk Hendrik|
|Abstract:||We analyze a large merger in the Dutch banking market during the financial crisis using disaggregated data. Based on a merger simulation model, we evaluate merger-induced changes in the interest rates for savings accounts. We find that the merging banks decreased interest rates by 3 to 5 percent and competitors by up to 1 percent. These anti-competitive effects translate into a loss of consumer welfare by roughly 69 million euros in 2010. We identify heterogeneous effects indicating that less educated consumers with lower savings are most affected. Our findings highlight the important role of competition policy during financial crisis mitigation.|
|By:||Meng-Yu Liang (Institute of Economics, Academia Sinica, Taipei, Taiwan)|
|Abstract:||Deneckere and Liang (2008) show that Swanís independent result fails when the monopolist cannot commit to a price schedule. The ratio between the rate of depreciation and the discount rate affects monopolist's market power when there is a frictionless secondhand market. This paper analyzes the same underlying model, except that resale is not allowed, and the existence of a second-hand market enlarges the range of parameters for the monopolist equilibrium. The presence of substitutes from the second-hand market after selling to the low valuation consumers may make the freshly release price less competitive in the first place.|
|By:||Donja Darai; Catherine Roux; Frédéric Schneider (Cambridge Judge Business School, University of Cambridge)|
|Abstract:||We study whether firms' collusive ability influences their incentives to merge: when tacit collusion is unsuccessful, firms may merge to reduce competitive pressure. We run a series of Bertrand oligopoly experiments where the participants decide whether, when, and to whom they send merger bids. Our experimental design allows us to observe (i) when and to whom mergers are proposed, (ii) when and by whom merger offers are accepted, and (iii) the effect on prices when mergers occur in this way. Our findings suggest that firms send more merger offers when prices are closer to marginal costs. Maverick firms that cut prices and thereby fuel competition are the predominant (but reluctant) receivers of these offers.|
Monday, June 22, 2020
Makan Delrahim - Changes in Latitudes, Changes in Attitudes: Enforcement Cooperation in Financial Markets Washington, DC ~ Monday, June 22, 2020
NBER Working Paper No. 27338
Issued in June 2020
NBER Program(s):Productivity, Innovation, and Entrepreneurship
Information technology (IT) matters to prosperity. The top patenters are increasingly IT companies. We use data on US patents to document four trends in IT patenting. First, firm-level concentration in IT patenting is increasing over time. Second, geographic concentration in IT patenting is increasing over time. Third, most technology classes experienced a decline in new patenters from 1980 to 2000. This was not true of new IT patents. Since 2000, the trend in new IT patenters looks like other classes and is declining over time. Fourth, there is increased geographic concentration of new IT patenters. We do not identify the reasons behind these trends nor whether they are related to overall changes in industry concentration, agglomeration, or prosperity.
Fake Antitrust?: Fact Checking on the Alleged Competition Law Case Against Social Media (Facebook) for the Proliferation of Fake News
Andres Calderon, Universidad del Pacifico Law School; Universidad del Pacifico Research Center (CIUP) asks Fake Antitrust?: Fact Checking on the Alleged Competition Law Case Against Social Media (Facebook) for the Proliferation of Fake News.
ABSTRACT: In this paper, we analyze the antitrust arguments against social media platforms such as Facebook for the alleged prioritization of fake news.
After addressing some imperative questions in a rigorous antitrust analysis, we find that the claim that social media platforms have some kind of antitrust responsibility for the proliferation of fake news is not strongly supported on evidence. Based on several national and multinational studies, the data suggests that Facebook does not have enough market power in the online news referral market to independently favor fake news and negatively affect real news organizations. Furthermore, it is quite unlikely that Facebook or any current social media platform would, intentionally or not, engage in a strategy to benefit fake news, and several indicators show that fake news has not caused a significant harm to news businesses. Nevertheless, news organizations do face the risk of resembling fake news publishers and losing their added value if they follow a counterproductive commoditization strategy.
Wenzhi Ding, The University of Hong Kong - Faculty of Business and Economics, Ross Levine, University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER), Chen Lin, The University of Hong Kong - Faculty of Business and Economics, and Wensi Xie, The Chinese University of Hong Kong (CUHK) - CUHK Business School address Competition Laws, Norms and Corporate Social Responsibility. Worth downloading!
ABSTRACT: Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that (1) intensifying competition induces firms to increase CSR activities, (2) the competition-CSR effect depends positively on society’s prioritization of the environment and treating others fairly, and (3) less financially-constrained firms boost CSR activities more in response to competition. The results are consistent with the stakeholder value maximization view that intensifying competition induces firms to invest in strengthening bonds with non-shareholder stakeholders (e.g., customers, workers, and suppliers).
List of Tables
List of Figures
Preface: Contents and Main Lessons Learnt
EU Competition Policy and Ex Post Evaluation: Key Concepts
Fabienne Ilzkovitz & Adriaan Dierx
THE EX POST EVALUATION OF MERGER INTERVENTIONS
A Review of Merger Decisions in the EU
Richard Havell, Franco Mariuzzo & Peter Ormosi
The Impact of Mobile Telecom Mergers on Prices and Quality: Evidence from Quantitative Studies
Luca Aguzzoni & Luca Di Martile
The T-Mobile/Orange UK Merger Case
Paolo Buccirossi, Alessia Marrazzo & Salvatore Nava
THE EX POST EVALUATION OF ANTITRUST DECISIONS
The Telekomunikacja Polska Antitrust Case
Alessia Marrazzo, Paolo Buccirossi & Salvatore Nava
Alleged Abuse by E.ON of Its Dominant Position in the German Wholesale Electricity Market
Veit Böckers, Tomaso Duso & Florian Szücs
EX POST EVALUATION OF STATE AID
The Role of Evaluation in the EU State Aid Control
Penelope Papandropoulos, Rodrigo Peduzzi & Cornelius Schmidt
Ex Post Assessment of the Impact of State Aid on Competition: The Case of Newquay Airport in the UK
The Impact of State Aid Schemes to Bring Basic Broadband to Rural Areas in Germany
The Impact of State Aid on the Survival and Financial Viability of Aided Firms
Sven Heim, Kai Hüschelrath, Philipp Schmidt-Dengler & Maurizio Strazzeri
THE BROADER IMPACT OF EU COMPETITION POLICY
How to Measure the Direct Effects of Competition Policy Interventions?
Adriaan Dierx & Fabienne Ilzkovitz
The Deterrent Effects of Competition Policy
Adriaan Dierx, Fabienne Ilzkovitz, Yannis Katsoulacos & David Ulph
The Macroeconomic and Sectoral Impact of EU Competition Policy
Fabienne Ilzkovitz, Mattia Cai, Roberta Cardani, Adriaan Dierx & Filippo Pericoli
Sunday, June 21, 2020
Please join us for Café con Leche, the first ever meeting of Latinos and Latinas (and allies) in antitrust, with introductory remarks on the state of digital competition by Patricia Galvan, FTC (Assistant Director of the Technology Enforcement Division of the Bureau of Competition). We will then shift to virtual tables for general discussion.
June 25, 2020
Café con Leche Steering Committee (and table hosts)
Deb Garza, Covington
Rosie Lipscomb, Google
Edith Ramirez, Hogan Lovells
Maria Salgado, Cornerstone
Daniel Sokol, University of Florida and White & Case
Jaime Taronji, FTC
Friday, June 19, 2020
Frank P. Maier-Rigaud, IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods; NERA Economic Consulting, C.-Philipp Heller, NERA Economic Consulting and Slobodan Sudaric, NERA Economic Consulting offer A Primer on Pass-on.
ABSTRACT: The quantification of damage due to price overcharges necessarily involves the estimation of pass-on. This paper clarifies that pass-on is simply another way of describing the optimal reaction of firms to changes in their environment. It also addresses common misconceptions about a firms’ ability to pass-on changes in cost and the magnitude at which price adjustments take place both in an unregulated and in a regulated context.
Julius Caesar, Keanu Reeves, Nicholas Cage, and Econometrics? Four Analytical Insights for Antitrust Counsel
Ai Deng, NERA Economic Consulting; Johns Hopkins University asks Julius Caesar, Keanu Reeves, Nicholas Cage, and Econometrics? Four Analytical Insights for Antitrust Counsel.
ABSTRACT: I discuss four powerful insights in statistics and econometrics that antitrust practitioners can learn and apply, all without any deep understanding of the underlying mathematics. Unlike many existing treatises on econometrics for antitrust practitioners, my discussion in this article focuses entirely on the intuition. Using a series of everyday life examples and analogies, my goal is to convince the readers that you do not need an advanced degree in economics or statistics to become more than dangerous when it comes to econometric analysis in the antitrust domain.
Adam Candeub, Michigan State University - College of Law identifies The American Board of Medical Specialties: Certification and the Need for Antitrust Enforcement.
ABSTRACT: Certification functions as medicine’s gatekeeper. Certifying organizations ensure that their physicians meet the appropriate professional standards. Traditionally, numerous organizations have provided certification services, which often involve costly testing and exams. Competition among these organizations drove innovation and lowered healthcare costs. The domination of the American Board of Medical Specialists (ABMS) over certification is dramatically raising certification costs and indirectly accreditation costs throughout medicine, decreasing access to physicians, increasing already exploding medical budgets, and reducing healthcare innovation.
Thursday, June 18, 2020
Ross Levine, Chen Lin, Lai Wei, Wensi Xie have an interesting paper on Competition Laws and Corporate Innovation.
ABSTRACT: A central debate in economics concerns the relationship between competition and innovation, with some stressing that competition discourages innovation by reducing post-innovation rents and others emphasizing that more contestable markets spur currently dominant and other firms to invest more in innovation. We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.4 million firm-year observations, across 68 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws are associated with increases in firms’ number of self-generated patents and the citation-impact and explorative nature of those patents. We also conduct the first examination of the relationship between competition laws and firms’ acquisition of patents from other firms. We find that competition increases patent acquisitions but lowers the ratio of acquired to self-generated patents. The results hold when using country-industry data on 186 countries over the 1888-2015 period.
Thomas G. Wollmann argues How to Get Away with Merger: Stealth Consolidation and Its Real Effects on US Healthcare.
ABSTRACT: Most US mergers are not reported to the government on the basis of their size, which can effectively exempt them from antitrust scrutiny, thereby leading to anticompetitive behavior. This paper studies premerger notification exemptions in the US dialysis industry. Over two decades, dialysis providers attempted over 4,000 facility acquisitions, half of which were not reported to the nation’s competition authorities. I estimate the effect of premerger notification exemptions on antitrust enforcement rates, and then I estimate the impact of the resulting market structure changes on patient health outcomes. First, I find that exemptions severely limit enforcement. Most striking, proposed facility acquisitions that would result in monopoly are blocked more than 80% of the time when apart of reportable mergers but less than 2% of the time when apart of exempt ones. Second, I find that the resulting market structure changes reduce the quality of care, evidenced by higher hospitalization rates and lower survival rates.
Yifei Wang, Toni M. Whited, Yufeng Wu, Kairong Xiao address Bank Market Power and Monetary Policy Transmission: Evidence from a Structural Estimation.
ABSTRACT: We quantify the impact of bank market power on monetary policy transmission through banks to borrowers. We estimate a dynamic banking model in which monetary policy affects imperfectly competitive banks’ funding costs. Banks optimize the pass-through of these costs to borrowers and depositors, while facing capital and reserve regulation. We find that bank market power explains much of the transmission of monetary policy to borrowers, with an effect comparable to that of bank capital regulation. When the federal funds rate falls below 0.9%, market power interacts with bank capital regulation to produce a reversal of the effect of monetary policy.
John M. Yun, George Mason University - Antonin Scalia Law School asks Does Antitrust Have Digital Blind Spots?
ABSTRACT: Antitrust law is at a crossroad. Over the past forty years, following the consumer welfare standard as its guiding principle, it has evolved into a coherent and evidence-based approach to adjudication of individual disputes and the shaping of antitrust institutions. While calls to reform or reshape the antitrust enterprise are not new, the rise and influence of digital markets and “multisided platforms” have spawned new calls for antitrust reformation from academia and politicians across the political divide. The premise shared by antitrust reformers in both chambers of Congress and academia is that reformation is needed to cure “blind spots” in antitrust’s ability to identify and remedy anticompetitive conduct in digital markets. The embodiment of these concerns is found in high-profile digital reports produced by think tanks and competition agencies, which target a number of economic features and practices of digital platforms to illustrate how current antitrust jurisprudence has failed to properly constrain monopolistic behavior. Central to the reformers’ claim that antitrust suffers from blind spots in digital markets are a number of key presumptions. First, that digital platforms are characterized by impenetrable network effects which lead to and preserve “winner takes all” or “winner takes most” outcomes. These effects allegedly prevent competitors with better products and technology from competing. Second, that self-preferencing, such as with private label products, and setting defaults on digital devices are harmful to consumers when used by platforms with large market shares. The idea is that users are improperly steered away from rival products to those of dominant platforms. Relatedly, there is a view that the recent Supreme Court decision in Ohio v. American Express is indicative of the inability of U.S. courts to properly assess the intricacies of network effects and platform conduct within the current framework. The stakes are high. The costs of getting it wrong can lead to considerable economic harm, as platforms represent an increasingly important part of the global economy and improper antitrust condemnation of potentially procompetitive behavior will stifle innovation and deprive consumers of features and products that they enjoy. To date, there has been no systematic response to these key presumptions driving the conclusions in the influential digital reports. I examine each of these presumptions and explain why they are not well-grounded. I examine how network effects can differ in nature and scope depending on the context and type of platform. Further, I explicitly develop a framework to assess platform defaults to guide reform discussions. Finally, I explain the Supreme Court’s decision in American Express as properly melding the rule of reason approach with economic learning on multisided platforms. I conclude with what appears to be the most radical proposal in the current debate: that current antitrust law and enforcement actually are sufficient to properly assess and adjudicate conduct involving digital platforms, with unclouded vision.
Wednesday, June 17, 2020
Byeong‐Il Ahn and Daniel A. Sumner, University of California, Davis - Department of Agricultural and Resource Economics study Political Market Power Reflected in Milk Pricing Regulations.
ABSTRACT: We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government‐set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits.