Friday, November 13, 2020

From ‘Carries on a Business’ to ‘in Trade or Commerce’: Efficiency in Government or Semantic Endeavour?

From ‘Carries on a Business’ to ‘in Trade or Commerce’: Efficiency in Government or Semantic Endeavour?

Deborah Healey

University of New South Wales (UNSW) - Faculty of Law

Jack Coles

University of New South Wales (UNSW) - Faculty of Law

Abstract

The Competition and Consumer Act 2010 (Cth) applies to the Crown in right of the Commonwealth, State and Territory governments, and local government, in so far as government ‘carries on a business’. The Harper Review recommended amendment to apply the CCA instead to government in so far as it undertakes activity ‘in trade or commerce’. This article examines this proposal, setting out the historical context in which the CCA has applied to government, reform processes, and current jurisprudence on the meaning of ‘carries on a business’. It examines in detail the High Court’s decision in NT Power Generation Pty Ltd v Power and Water Authority, and finds that many activities of government, including some procurement, are currently subject to the CCA. The article reviews the interpretation of ‘in trade or commerce’ in existing provisions of the CCA and concludes that its meaning is unclear and that adoption of it in the context of the Crown may have unintended consequences. It considers Commerce Act 1986 (NZ) jurisprudence on which the Harper Review’s recommendation was based and finds that ‘engages in trade’ in that context mainly distinguishes between the commercial and regulatory roles of government, has an additional sub-definition which expressly includes procurement, and appears to give NZ competition law a relatively narrow application to government. The article concludes by questioning whether the adoption of ‘in trade or commerce’ will extend the application of the CCA beyond the range of government conduct already captured, finding that more surgical changes may be appropriate.

November 13, 2020 | Permalink | Comments (0)

Unfair Pricing and Standard Essential Patents

Unfair Pricing and Standard Essential Patents

Marco Botta

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Abstract

Technical standards that are agreed within a Standard Development Organization (SDO) often cover several ‘essential’ patents for the implementation of a standard (i.e., Standard Essential Patents, SEPs). In order to allow for the standard implementation, the SEP holder commits to license its patents to any potential licensee on the basis of Fair and Reasonable and Non-Discriminatory (FRAND) conditions. In view of the recent ruling of the UK Supreme Court in Unwired Planet and the judgement of the German Bundesgerichtshof in Sisvel v. Haier, the paper assumes that the FRAND commitment implies a ‘range’ rather than a ‘single’ royalty rate. On the other hand, a royalty rate ‘beyond the outer boundary of the range’ should be considered ‘unfair’, and thus incompatible with the FRAND commitment. Besides representing a breach of the FRAND commitment, an ‘unfair’ royalty rate might also be considered an abuse of a dominant position by the SEP holder, in breach of Art. 102(a) TFEU. This paper analyses whether, and under what circumstances, Art. 102(a) TFEU can be relied upon by a competition authority in Europe to sanction a case where an ‘unfair’ royalty rate has been set by the SEP holder. To this regard, the paper provides a detailed analysis of the EU Court of Justice’s jurisprudence on Art. 102(a) TFEU. In particular, the latter jurisprudence is relied as a ‘yardstick’ to assess ‘when’ competition policy should sanction a request of unfair royalty rate by the SEP holder, ‘how’ a competition agency should assess the case and, eventually, ‘what’ remedies the competition authority might adopt.
Economists have elaborated a number of ‘filters’ to define ‘when’ EU competition policy should sanction unfair pricing cases. In particular, antitrust intervention would be justified only in markets that are characterized by high and stable entry barriers, in which a firm enjoys a super-dominant position. Due to the phenomenon of over-declaration, not every SEP is indeed ‘essential’; the market power of the SEP holder thus requires a case-by-case analysis of the ‘essentiality’ of every SEP. A number of authors have also argued that excessive pricing cases should not be sanctioned in industries characterized by dynamic efficiencies. The paper argues that innovation considerations could be considered as efficiency defences in the context of antitrust investigations, rather than in excluding a priori competition policy enforcement in this field.
The paper argues that a competition agency should rely on the case law of the Court of Justice of the European Union (CJEU) on Art. 102(a) TFEU to analyse a case of unfair royalty rate. In particular, United Brands cost/price test is not suitable for assessing an unfair royalty rate requested by the SEP holder, since it is de facto impossible to determine the ‘costs of production’ of individual SEPs. On the other hand, in accordance with the CJEU case law, the competition agency might rely on a number of benchmark methods with which to assess the alleged unfairness of the rate. In particular, the agency should verify its findings under multiple benchmark tests, in order to minimize the risk of false negative errors. Finally, the SEP holder could argue that the requested royalty rate is justified by its past R&D investments.
In terms of remedies, the paper argues that a competition agency could require the SEP holder to license its ‘essential’ patent; such behavioral remedy is well established in the practice of the European Commission. In light of the recent Broadcom interim decision, if the competition authority was confident about its preliminary findings of unfair pricing, the agency might require the SEP holder to license its ‘essential’ patents via an interim decision; the scope, duration and exact obligations of such a duty would later be refined in the final commitment decision.

November 13, 2020 | Permalink | Comments (0)

Empirical Models of Industry Dynamics with Endogenous Market Structure

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Giovanni Compiani

University of Chicago Booth School of Business

Abstract

This article reviews recent developments in the study of industry dynamics, with a special emphasis on the econometric endogeneity of market structure. Endogeneity of market structure follows from the presence of serially correlated unobservable shocks to the profitability of firms’ dynamic decisions, a feature common to many empirical settings. We particularly focus on extensions of standard two-step methods that leverage instrumental variables to address endogeneity, in both single-agent and oligopoly models.

November 13, 2020 | Permalink | Comments (0)

Thursday, November 12, 2020

Deputy Assistant Attorney General Alexander Okuliar Delivers Remarks Before the United States Council for International Business Washington, DC ~ Wednesday, October 28, 2020

See here.

November 12, 2020 | Permalink | Comments (0)

Assistant Attorney General Makan Delrahim Delivers Remarks on the Future of Antitrust Washington, DC ~ Thursday, November 12, 2020

See here.

November 12, 2020 | Permalink | Comments (0)

Merger, Product Repositioning and Firm Entry: The Retail Craft Beer Market in California

 

University of Michigan

Chenyu Yang

University of Maryland - Department of Economics

Abstract

We study the effects of merger on firm entry, product repositioning and prices in the retail craft beer market in California. To deal with selection on unobserved fixed cost shocks, we develop a new method to estimate multiple-discrete choice models. The method is based on bounds of conditional choice probabilities and does not require solving the game. Using the estimated model, we simulate a counterfactual merger where a large brewery acquires multiple craft breweries. In most markets, we find that new firms enter, non-merging incumbents add products, and merging firms drop products. However, the net effects of product variety from firm entry and product repositioning differ considerably across markets. Larger markets are more likely to see an increase in product variety, which moderates the loss of consumer surplus from the merger's price effects. In a majority of smaller markets, product variety decreases, exacerbating the welfare loss from the price effects.

November 12, 2020 | Permalink | Comments (0)

Merger Control in Latin America A Jurisdictional Guide

Merger Control in Latin America A Jurisdictional Guide

Following significant reforms over the last 20 years, merger control regimes in Latin America now constitute around 20% of merger regimes worldwide. In regard to global transactions that may trigger the notification thresholds in many of these jurisdictions, it became necessary that an up-to-date book analyzing current legislation and case law be available for practitioners. This book compiles for the first time the applicable law governing merger control in Latin America. More than 30 distinguished authors, from both private and enforcement backgrounds, cover 17 jurisdictions and the Caribbean Community (CARICOM). For each jurisdiction, the reader will find:

  • a presentation of the merger control system;
  • a description of the applicable procedures and;
  • an analysis of the most relevant case law on the subject.

In addition, the editors, Paulo Burnier da Silveira and Pamela Sittenfeld, provide an overview of the merger regimes in Latin America, as well as a synthesis of the particularities of the regimes addressed in the book.

Read the Foreword by Cani Fernández
Read the Presentation by Ivo Gagliuffi
Browse the Table of Contents
See full List of Contributors.

November 12, 2020 | Permalink | Comments (0)

EU Competition Law: On the Evolutionary Path

November 12, 2020 | Permalink | Comments (0)

The Market for Fake Reviews

Sherry He

University of California, Los Angeles (UCLA), Anderson School of Management

Brett Hollenbeck

University of California, Los Angeles (UCLA) - Anderson School of Management

Davide Proserpio

Marshall School of Business, University of Southern California

Abstract

We study the market for fake product reviews on Amazon.com. These reviews are purchased in large private internet groups on Facebook and other sites. We hand-collect data on these markets to characterise the types of products that buy fake reviews and then collect large amounts of data on the ratings and reviews posted on Amazon for these products, as well as their sales rank, advertising and pricing behavior. We use this data to assess the costs and benefits of fake reviews to sellers and evaluate the degree to which they harm consumers. The theoretical literature on review fraud shows there exist conditions when they harm consumers and conditions where they function as simply another type of advertising. Using detailed data on product outcomes before and after they buy fake reviews we can directly determine if these are low-quality products using fake reviews to deceive and harm consumers or if they are possibly high-quality products who solicit reviews to establish reputations. We find that a wide array of products purchase fake reviews including products with many reviews and high average ratings. Soliciting fake reviews on Facebook leads to a significant increase in average rating and sales rank but the effect disappears after roughly 1 month. After firms stop buying fake reviews their average ratings fall significantly and the share of one-star reviews increases significantly, indicating fake reviews are mostly used by low quality products and are deceiving and harming consumers. We also observe that Amazon deletes large numbers of reviews and we document their deletion policy.

November 12, 2020 | Permalink | Comments (0)

Wednesday, November 11, 2020

The Price Effects of Shaming Oligopolists: A Study of the COVID-19 Oil Price Shock

Aaron Barkley

University of Melbourne

David P. Byrne

University of Melbourne

Xiaosong (Andy) Wu

The University of Melbourne

Abstract

Governments often make public announcements that call into question oligopolistic behavior. Yet little is known about how firms respond to them. We study gasoline retailers' price responses to antitrust announcements shaming them for price gouging during the COVID-19 pandemic. Price effects are identified through a high-frequency event-study that leverages unique real-time station level price data and well-identified, discrete antitrust announcements. We find evidence of announcement effects that depend on firms' pre-announcement margins and hence exposure to being publicly shamed. Our results provide evidence against a "cheap talk" interpretation of government antitrust announcements.

November 11, 2020 | Permalink | Comments (0)

Competition Laws, Norms and Corporate Social Responsibility

Competition Laws, Norms and Corporate Social Responsibility

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

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

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 intensifying competition induces firms to increase CSR activities. Analyses indicate that (a) intensifying competition spurs firms to invest more in CSR as a strategy for strengthening relationships with workers, suppliers, and customers and (b) the competition-CSR effect is stronger in economies where social norms prioritize CSR-type activities, e.g., treating others fairly, satisfying implicit agreements, protecting the environment, etc.

November 11, 2020 | Permalink | Comments (0)

Price-Discrimination Driven Algorithmic Collusion: Platforms for Durable Cartels

Price-Discrimination Driven Algorithmic Collusion: Platforms for Durable Cartels

Salil K. Mehra

Temple University - James E. Beasley School of Law

Abstract

Algorithmic competition has arrived. With it has come the specter of algorithmic collusion – rapid detection of co-conspirators’ defection via technologically enhanced price monitoring and setting capability can encourage anticompetitive collusion. Strikingly, the ability to track consumers’ willingness-to-pay and price discriminate among them may synergize with algorithmic collusion into something antitrust scholars had previously thought impossible: stable cartels.

In particular, consumer-facing digital platforms increasingly can determine consumers’ individual willingness to pay. Doing this allows them to deploy sophisticated forms of price discrimination, and thereby effect large welfare transfers from consumers to producers. This Article is the first to describe and analyze the potential interaction between price discrimination and algorithmic collusion. Algorithm-driven platforms now knit together large numbers of previously-independent firms and agents; some platforms set the price these participating firms and agents will charge. Crucially, if the gains to producers from collusive price discrimination are big enough, a qualitative change may take place: participants may find that they are no longer are in a Prisoner’s Dilemma tempting them to undercut each other on price, but rather in a coordination game with a single, rational choice: keep their collusion going. This Article sets forth how this dynamic can produce agreements by competitors, facilitated by price-discriminating, price-setting platforms that transfer wealth from consumers to producers – arguably a violation of Section 1 of the Sherman Act. Indeed, in contrast to the traditional view that firms need to first obtain Section 2 monopoly power, and only then can implement price discrimination, the model presented here shows the causation can run the other way: The ability to price discriminate effectively can drive the joint maintenance of monopoly power by colluding competitors. This dynamic takes on new urgency as more and more commerce shifts to the Internet and smartphone apps, a trend that has been accelerated by the COVID-19 pandemic and its associated acceleration of the shift to e-commerce.

Potential solutions to this problem will be complicated by antitrust law’s current relegation of price discrimination to the dead letter office – no Federal Trade Commission complaint under the Robinson-Patman Act, the main relevant statute, has been brought this century. Indeed, during the past decade, the most recent edition of the leading antitrust casebook in the U.S. deleted its section on price discrimination and the Act. This Article proposes three actions: (i) revive some enforcement against price discrimination, (ii) prioritize action against price discriminating platforms that inhibit switching by participants, including scrutinizing mergers between firms whose Big Data-based ability to gauge willingness-to-pay may, if combined, have negative ramifications for consumers, and (iii) factor price discrimination-driven algorithmic collusion into the current reevaluation of vertical restraints.

November 11, 2020 | Permalink | Comments (0)

Competition or Coopetition? Technology Strategies for Incumbent and Entrant Firms

Chao Ding

The University of Hong Kong - School of Business

Guofang Nan

Tianjin University - College of Management and Economics; Tianjin University

Shengli Li

Xi'an Jiaotong University (XJTU)

Abstract

Many incumbent firms, when facing increasing threats from newcomers, choose to license their proprietary technologies to competitors. This paper investigates the motivation behind an incumbent firm’s strategy to open up its technology to a new entrant and the entrant’s decision to adopt the technology. We derive conditions under which the two firms compete or form a coopetition relationship. We find that, when both the technology-development capacity of the entrant and the technology-transformation rate in the technology-adoption process are high, the incumbent opens its proprietary technology, and the entrant adopts it. In the case of high technology-development capacity and relatively low transformation rate, however, the entrant should develop its own technological product. Further, given a low technology-development capacity and a high technology-transformation rate, the incumbent keeps its core technology closed, although the entrant prefers to adopt. We further verify the robustness of our results in an extension in which there are two potential entrants with differentiated technology-developing capacities.

November 11, 2020 | Permalink | Comments (0)

Tuesday, November 10, 2020

Antitrust Analysis with Upward Pricing Pressure and Cost Efficiencies

Antitrust Analysis with Upward Pricing Pressure and Cost Efficiencies

 

Jessica Dutra

University of Kansas

Tarun Sabarwal

University of Kansas

Abstract

We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include model-based, merger-specific cost efficiencies in a tractable manner and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results support the inclusion of model-based cost efficiencies in the standard UPP formulation for more accurate antitrust decision-making.

November 10, 2020 | Permalink | Comments (0)

Mixed signals? Where does the Hutchison Judgment Leave Economic Analysis of Non-Coordinated Effects?

Mixed signals? Where does the Hutchison Judgment Leave Economic Analysis of Non-Coordinated Effects?

Pascale Déchamps, Maurice de Valois Turk

On 28 May 2020, the General Court (the ‘Court’) published its judgment in case T-399/16 Hutchison versus Commission (the ‘judgment’). The case relates to Hutchison’s appeal of the Commission’s 2016 decision (the ‘contested decision’) prohibiting the proposed merger

of Hutchison’s UK (mobile) activities and O2 UK (the ‘H3G/O2 Merger’).

November 10, 2020 | Permalink | Comments (0)

ALBERT A. FOER LIBER AMICORUMA CONSUMER VOICE IN THE ANTITRUST ARENA

ALBERT A. FOER LIBER AMICORUMA CONSUMER VOICE IN THE ANTITRUST ARENA

Nicolas Charbit, Sonia Ahmad (Editors)

At a time of reckoning for the future of antitrust, this Liber Amicorum brings together a diverse collection of today’s leading thinkers to pay tribute to Albert Allen (Bert) Foer, founder of the American Antitrust Institute (AAI). In doing so, it illustrates the intellectual landscape of the antitrust debate, with articles that go to the heart of its goals, and others that light a path forward towards reform. Others yet delve into the pressing issues of enforcement and remedies. The variety of voices included characterize the breadth of perspectives that Bert cultivated at the AAI, from lawyers and academics to enforcers and journalists. In providing a platform for multidisciplinary discourse through the AAI, Bert helped create the foundation on which today’s movement rests, a public citizen’s voice spotlighting competition as the basis of diversity and dynamism.

With contributions from: Richard BrunellMichael CarrierPeter CarstensenCecilia (Yixi) ChengHarry FirstFranklin FoerEleanor FoxDouglas GinsburgWarren GrimesJohn KirkwoodJohn KwokaRobert LandeKexin LiRobert LitanBarry LynnJulián PeñaChristopher SagersJonathan SalletSteve ShadowenMaurice StuckeRandy StutzSandeep Vaheesan and Spencer Weber Waller.

November 10, 2020 | Permalink | Comments (0)

EU Cartel Law and Economics

EU Cartel Law and Economics

Cedric ArgentonDamien Geradin, and Andreas Stephan

  • The first book to offer an integrated legal and economic perspective on EU cartel law
  • Written in a clear, non-technical style that makes material accessible to readers from both legal and economic backgrounds
  • Provides a useful primer on the law and economics of cartels and their underlying mechanics, with a strong conceptual emphasis
  • Includes timely coverage of practices at the intersection of anti-competitive collusion and pro-competitive agreements, such as information exchanges; and of civil damages, which are increasingly important in EU cartel law enforcement

November 10, 2020 | Permalink | Comments (0)

Monday, November 9, 2020

The ‘ECN Plus-Plus’: How Could it Look Like?

Looking at the OECD 2014 Recommendation concerning International Cooperation on Competition Investigations and Proceedings (the ‘OECD 2014 Recommendation’), and the extensive work done by the OECD Competition Division in recent years on fostering international cooperation, this paper looks at options that could help to improve the effectiveness of the European Competition Network (ECN).

November 9, 2020 | Permalink | Comments (0)

Work in Progress: Hong Kong’s Competition Law Five Years On

ABSTRACT

The last 12 months has seen Hong Kong come into intense focus in the headlines of international media. Amidst the ongoing social and political turbulence and defending against a pandemic on our doorstep, the dramatic developments in Hong Kong’s competition regime may easily have slipped past even the most attentive observer of overseas competition laws.

November 9, 2020 | Permalink | Comments (0)

Venture into the Unknown? The Exchange of Information Within Joint Ventures Under Article 101 TFEU

From 6 November 2019 to 12 February 2020, the European Commission (the ‘Commission’) ran a public consultation (the ‘Public Consultation’)1 to gather stakeholders’ views on the Block Exemption Regulations (the ‘BERs’) for horizontal cooperation agreements2 and the Commission guidelines on such agreements (the ‘HGL’).3

November 9, 2020 | Permalink | Comments (0)