Antitrust & Competition Policy Blog

A 'Primarily Property' Presumption Is – Still – Really Needed for the IP/Antitrust Interface

A 'Primarily Property' Presumption Is – Still – Really Needed for the IP/Antitrust Interface

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Abstract

Antitrust discussions in the U.S. have a long tradition of describing intellectual property (IP) – primarily patents and copyrights – in unqualified terms of “monopoly”. Although there have been substantial efforts over the past two decades to pull back from this automatic association, the presumption of unqualified monopoly continues to appear in important legal decisions -- as well as in legal and social sciences academic discussions -- that involve IP.

There is another place where these decisions and discussions might start: with a presumption that any IP is “primarily property” – albeit with some important distinctions that separate IP from “garden variety” tangible property and that raise the possibility of market power in some instances.

This paper explores the important similarities – and differences – between “garden variety” property, such as real estate, and IP; it concludes that the similarities are substantial, so that the presumption that IP is “primarily property” is a reasonable alternative starting point for antitrust/IP discussions. It then discusses some beneficial differences that this alternative starting point could have made and/or could still make.

Implications of Privateering Under EU Competition Law

Implications of Privateering Under EU Competition Law

Camila Albornoz Isla

King's College London - The Dickson Poon School of Law, LLM Graduate

Abstract

Nowadays, there is an increasingly and dynamic market for patent rights, especially in the technology sector. Operating companies may transfer a whole or part of a patent portfolio for many different reasons. When those transfers involve SEP portfolios and PAEs, some competition concerns may arise. In this paper, I will discuss from a competition law perspective those concerns, how the case law had coped with them, and what possible solutions could be implemented.

Anticompetitive Vertical Merger Waves

Anticompetitive Vertical Merger Waves

Johan Hombert

HEC Paris - Finance Department

Jerome Pouyet

ESSEC Business School

Nicolas Schutz

University of Mannheim

Abstract

We develop a model of vertical merger waves and use it to study the optimal merger policy. As a merger wave can result in partial foreclosure, it can be optimal to ban a vertical merger that eliminates the last unintegrated upstream firm. Such a merger is more likely to worsen market performance when the number of downstream firms is large relative to the number of upstream firms, and when upstream contracts are non‐discriminatory, linear and public. On the other hand, the optimal merger policy can be non‐monotonic in the strength of synergies or in the degree of downstream product differentiation.

Sustainable Competition Policy

Sustainable Competition Policy

Maurits Dolmans

Cleary Gottlieb Steen & Hamilton LLP

Abstract

After a general introduction on climate change concerns, this paper discusses market failures involving products and services with an environmental footprint including in particular negative externalities. It argues that a consumer welfare analysis under competition or antitrust policy should take account of these environmental externalities, in all all areas of competition policy, including merger control, and antitrust assessment of horizontal and vertical agreements under Article 101(3) TFEU. The paper concludes that we can no longer afford to turn a blind eye to competition that exploits externalities that hurt the environment and the climate. Nor can we ignore the coordination problems that hamper solutions. Antitrust should be a part of an integrated climate policy, and the social cost of carbon emissions should be taken into account when assessing an agreement or conduct’s impact on consumer welfare.

License to All or Access to All? A Law and Economics Assessment of Standard Development Organizations’ Licensing Rules

License to All or Access to All? A Law and Economics Assessment of Standard Development Organizations’ Licensing Rules

Anne Layne-Farrar

Charles River Associates; Northwestern University

Richard Stark

Cravath, Swaine & Moore LLP

Date Written: May 18, 2020

Abstract

In the continuing debate over licensing standard essential patents (SEPs) with FRAND commitments (to license on fair, reasonable, and non-discriminatory terms and conditions), one of the most heated topics is whether FRAND commitments should be interpreted to require licensing all comers, or whether access to standards can be achieved through other, less rigid means. This article evaluates both the legal and the economic arguments underlying this debate. This article concludes that neither the law nor economic welfare justifies a “license to all” interpretation of FRAND commitments. To the contrary, such a regime is not supported by patent, contract or antitrust law, and likely would be harmful to social welfare.

The CMA’s Assessment of Customer Detriment in the UK Retail Energy Market

The CMA’s Assessment of Customer Detriment in the UK Retail Energy Market

Stephen C. Littlechild

University of Cambridge - Judge Business School

Abstract

In 2016, the UK Competition and Markets Authority (CMA) found that “weak customer response” enabled incumbent UK energy retailers to set higher and discriminatory prices to residential customers. The CMA estimated the associated higher prices constituted a customer detriment in the range £1.4 bn to £2 bn per year. Although the CMA recommended against a price cap on most domestic energy tariffs, the size of the detriment and public concern about “rip-off energy tariffs” nonetheless led the Government to impose a price cap as from January 2019. This paper examines the CMA’s calculation of customer detriment and suggests that it is inconsistent with CMA Guidelines and unprecedented with respect to its nature, magnitude and policy impact. Alternative more realistic calculations suggest that any detriment would have been nearly an order of magnitude lower, so that a price cap was inappropriate. This raises a number of questions about the CMA’s approach.

Gun-Jumping in European Union Merger Control: The Law and Practice

Gun-Jumping in European Union Merger Control: The Law and Practice

Vincent Power

University College Cork; Dalhousie University - Schulich School of Law

Abstract

This article considers the law and practice relating to "gun-jumping" in EU merger or concentration control. It considers (a) the failure to notify concentrations to the European Commission and (b) the improper implementation of the transaction before Commission clearance. The article describes the legislation and then traces the evolution of the case law. It also advocates the need for further analysis aimed at (a) seeking to bring precision to the circumstances in which notification is necessary, (b) giving more exact guidance about what constitutes proper and improper implementation and (c) focusing on whether the level of Commission fines for gun-jumping are appropriate in all the circumstances.

Antitrust and the Corporate Tax, 1909–1928

Antitrust and the Corporate Tax, 1909–1928

Reuven S. Avi-Yonah

University of Michigan Law School

Abstract

Between the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, the question of what to do about “trusts” dominated American political life. Before 1889, the dominant form of amalgamating competing businesses was the trust, because corporations could not hold shares in other corporations, and instead the shareholders would exchange their shares for trust certificates. But in 1889 New Jersey (the “traitor state”, according to muckraking journalist Lincoln Steffens) changed its corporate law to allow for holding company structures, setting of a great wave of amalgamations in areas like oil, tobacco, sugar and steel.

This paper will focus on one attempt to address the “trust problem” by means other than the Sherman Act (which faced some resistance in the courts, as the government lost the E.C. Knight case in the Supreme Court in 1895 and barely won the Northern Securities case in 1905). This was the corporate tax act of 1909, which as will be seen below, was primarily intended as an antitrust measure. However, after the enactment of the Clayton Act and the creation of the FTC in 1914, the corporate tax was less needed as an antitrust measure, and between 1919 and 1928 its antitrust features were largely eliminated.

Public Goods Provision by a Private Cartel

Public Goods Provision by a Private Cartel

By:	Maarten Pieter Schinkel (University of Amsterdam); Lukas Toth (University of Amsterdam)
Abstract:	To stimulate companies to take corporate social responsibility collectively, for example for fair trade or the environment, their agreements may be exempted from cartel law. To qualify, the public benefits must compensate consumers for higher prices of the private good. We study the balancing involved in assessing a public interest-cartel in a public goods model. The required compensating public good level decreases in each consumer's willingness to pay, which is contrary to the Samuelson condition. The cartel will provide minimal public good for maximal overcharges. Nevertheless it is typically not sustainable, since those consumers that are damaged most by the cartel price increase, by self-selection also have the lowest appreciation for the public good. The information necessary to tell the rare genuine public interest-defense from cartel greenwashing allows the government to provide first-best itself.
URL:	http://d.repec.org/n?u=RePEc:tin:wpaper:20190086&r=com

Endogenous Quality and Firm Entry

Endogenous Quality and Firm Entry

By:	Rui Faustino
Abstract:	During economic expansions the net product creation and average product quality increase as firms introduce new products with higher quality.The introduction of new products with higher quality producesa quality bias in price level measures. In this paper I develop a firm-entry model with endogenous qualityof consumer goods. Following a TFP shock, the price level increases not only due to a larger number of varieties but also due to a higher average quality.Simultaneously, the channel of endogenous quality actsas a propagation mechanism to other variables in the economy, amplifying their response to shocks. This channel can also be either contractionary or shut down, depending on how consumers derive utility from quality.
URL:	http://d.repec.org/n?u=RePEc:ise:remwps:wp01072019&r=com

Compatible Mergers: Assets, Service Areas, and Market Power

Compatible Mergers: Assets, ServiceAreas, and Market Power

By:	Tetsuji OKAZAKI; Ken ONISHI; Naoki WAKAMORI
Abstract:	This paper empirically examines the discrepancy between the incentive of firms to merge and the social value of mergers using detailed data on merger waves in the pre-WWII Japanese electricity industry when a competition authority did not yet exist. We find that firms could enjoy cost synergies when merging with firms with greater differences in production asset composition and/or reachable customers. Such mergers resulted in increases in capital utilization and total output. However, the sources of these cost synergies did not affect the merger decision of firms; instead, geographical proximity increased the likelihood of mergers. These results imply that the merger incentive may not align with social welfare and thus policy intervention to allow selective mergers for particular combinations of firms may help increase social welfare.
URL:	http://d.repec.org/n?u=RePEc:cnn:wpaper:19-007e&r=com

 

Quality Selection in Two-Sided Markets: A Constrained Price Discrimination Approach

Quality Selection in Two-Sided Markets: A Constrained Price Discrimination Approach

By:	Ramesh Johari; Bar Light; Gabriel Weintraub
Abstract:	Online platforms collect rich information about participants, and then share this information back with participants to improve market outcomes. In this paper we study the following information disclosure problem of a two-sided market: how much of its available information about sellers' quality should the platform share with buyers to maximize its revenue? One key innovation in our analysis is to reduce the study of optimal information disclosure policies to a {\em constrained price discrimination} problem. The information shared by the platform induces a "menu" of equilibrium prices and sellers' expected qualities. Optimization over feasible menus yields a price discrimination problem. The problem is constrained because feasible menus are only those that can arise in the equilibrium of the two sided-market for some information disclosure policy. We analyze this constrained price discrimination problem, and apply our insights to two distinct two-sided market models: one in which the platform chooses prices and sellers choose quantities (similar to ride-sharing), and one in which sellers choose prices (similar to e-commerce). We provide conditions under which a simple information structure of banning a certain portion of sellers from the platform, and not sharing any information about the remaining participating sellers maximizes the platform's revenue.
URL:	http://d.repec.org/n?u=RePEc:arx:papers:1912.02251&r=com

Assistant Attorney General Makan Delrahim Delivers Opening Remarks at the Antitrust Division’s Public Workshop on Competition in Licensing Music Public Performance Rights

See here.

Modeling market power on a constrained electricity network

Modeling market power on a constrained electricity network

By:	Dahlke, Steven
Abstract:	A closed electricity network with three markets is modeled to illustrate the impacts of transmission constraints and market power on prices and economic welfare. Four scenarios are presented, the first two assume perfect competition with and without transmission constraints, while the second two model market power with and without transmission constraints. The results show that transmission constraints reduce total surplus relative to the unconstrained case. When firms exercise market power their profits increase, while consumer surplus and total surplus decrease. Some results are counter intuitive, such as price exceeding the marginal cost of the most inefficient generator in a market with perfect competition, caused by transmission constraints and Kirchoff’s voltage law governing power flows. The GAMS code used to solve the models is included in the appendix. Next steps for research involve building the model to replicate a real-world market, to simulate impacts of proposed market restructuring or to identify areas of deregulated markets at high-risk of market power abuse.
URL:	http://d.repec.org/n?u=RePEc:osf:osfxxx:9vep7&r=com

Collusion through market sharing agreements: Evidence from Quebec's road paving market

Collusion through market sharing agreements: Evidence from Quebec's road paving market

By:	de Leverano, Adriano
Abstract:	I study a case of market sharing agreements to provide evidence of coordination between colluding firms on the degree to which they compete against each other (henceforth referred to as head-to-head competition) and their bidding behavior. I also quantify the impact that coordinating head-to-head competition has on procurement costs. My focus is on the two largest rms bidding in provincial road paving procurement auctions in Quebec between 2007 and 2015. I use the police investigation into collusion and corruption in the Quebec construction industry launched in October 2009 to capture the end of this cartel. I find that after this date, the two suspected firms i) were more likely to bid in the same auction and ii) submitted significantly lower bids when they competed in the same auction. A structural model of entry and bidding shows that if the firms had kept competing head-to-head at the same rate as in the collusive period but had stopped colluding on bids, bids would have increased by about 3.86% with respect to the competitive scenario observed after the police investigation began. This finding suggests that there were additional procurement costs associated with firms coordinating on the degree of head-to-head competition.
URL:	http://d.repec.org/n?u=RePEc:zbw:zewdip:19053&r=com

Don't Divorce Antitrust Law from Economic Reality

Neil Bradley, US Chamber explains Don't Divorce Antitrust Law from Economic Reality.

Cartel Formation with Quality Differentiation

Cartel Formation with Quality Differentiation

By:	Bos, Iwan; Marini, Marco A.; Saulle, Riccardo
Abstract:	Research on collusion in vertically differentiated markets is conducted under one or two potentially restrictive assumptions. Either there is a single industry-wide cartel or costs are assumed to be independent of quality or quantity. We explore the extent to which these assumptions are indeed restrictive by relaxing both. For a wide range of coalition structures, profit-maximizing cartels of any size price most of their lower quality products out of the market as long as production costs do not increase too much with quality. If these costs rise sufficiently, however, then market share is maintained for all product variants. All cartel sizes may emerge in equilibrium when exclusively considering individual deviations, but the industry-wide cartel is the only one immune to deviations by coalitions of members. Overall, our findings suggest that firms have a strong incentive to coordinate prices when the products involved are vertically differentiated.
URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:97820&r=com

The Independence of Colombia’s Competition Authority: Still a Pending Task

Alfonso Miranda Londoño discusses The Independence of Colombia’s Competition Authority: Still a Pending Task.

Should Amazon be allowed to sell on its own marketplace?

Should Amazon be allowed to sell on its own marketplace?
Andrei Hagiu, Tat-How Teh, Julian Wright
May 6, 2020
Abstract
A growing number of intermediaries (e.g. Amazon, Apple's Appstore, and Walmart) act
as resellers on their own marketplaces. We build a model of dual marketplace and reseller
intermediation to explore the implications of this practice, and the call to ban it, taking
into account an intermediary's optimal choice of mode. Our analysis shows that an outright
ban tends to benet third-party sellers at the expense of consumer surplus or welfare, even
after allowing for innovation by third-party sellers. Rather than an outright ban, we show
that policies that limit the imitation of highly innovative third-party products and prevent
steering of buyers to the intermediary's own products would lead to preferable outcomes.

Missing Missingness in Merger Analysis

Missing Missingness in Merger Analysis

Susan Smelcer Georgia State University - College of Law

Abstract: Data and statistical modeling have played an increasingly important role in analysis across disparate areas of law. But courts’ ability to assess the validity and reliability of the analyses that rely on these data has not kept apace. This mismatch between the law’s reliance on data and an ability to appropriately evaluate analyses using these data is especially acute in antitrust challenges to horizontal mergers by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC). Whereas enforcement agencies and courts once applied relatively simple rules about the structure of a market, the analytical landscape has become more dependent on sophisticated economic theories and data analysis techniques. Increased reliance on such models presents opportunities for creating better economic outcomes on average. But the use of observational data also carries with it often unacknowledged hazards. This is a problem. Observational data often suffer from missingness, meaning these data may be randomly or systematically incomplete. Whereas random missingness creates imprecision, systematic missingness results in bias, which may lead a court or agency to improperly enjoin or allow a merger. This Article explores the conditions under which data vital to merger analysis may be missing, as well as its effects. As an illustration, this Article evaluates the court’s discussion of data in F.T.C. v. Sysco through the lens of missingness and conducts simulations to examine how more complete data would have altered the court’s analysis. Finally, this Article offers changes to current practice to both increase transparency of and public confidence in the courts’ use of these data in merger review.