Thursday, September 30, 2021

Value Preserving Platform Regulation: Network effects, platform value and regulatory remedies

Value Preserving Platform Regulation: Network effects, platform value and regulatory remedies

 

Carmelo Cennamo

Copenhagen Business School - Department of Strategy and Innovation; SDA Bocconi

 

Abstract

The digitization of the economy is transforming not just the internal firms’ operational processes but entire sectors by redefining how firms create and deliver value. This is achieved through new ways of organizing firms’ value chains and interfirm relationships, which now increasingly occur not in isolation but in digital ecosystems and digital marketplaces. Digital platforms represent the engine of this transformation: they enable new structures of economic relationships, facilitate and manage interactions among multiple groups of users, and create new roles and innovation opportunities by empowering value-adding contributions by external firms and users. While this market orchestration power has produced large benefits for consumers and the economy at large, those benefits may hide risks associated with market power concentration. This report explores these implications by revisiting first the role of network size for network effects, then discusses when data can lead to network effects dynamics and create entry barriers or when they might stimulate greater innovation and competition. It concludes with a brief account of the challenges and issues with the writing of effective competition law.

September 30, 2021 | Permalink | Comments (0)

Wednesday, September 29, 2021

OECD Gender Inclusive Competition Policy Project: Ways Forward

FROM 16H00 TO 18H00 CET TIME

The fight for gender equality is one of the defining challenges of our age. While progress has been made in many areas, the relationship between gender and competition policy remains largely unexplored. After producing a series of blogs, papers, interviews and discussions, the OECD launched its Gender Inclusive Competition Policy project in the summer of 2020 with the support of the Canadian Government. As part of the project, the OECD asked research teams from around the world to generate new evidence to inform the debate and help us to develop guidance on how to develop a more gender inclusive competition policy.
More info on the project: www.oecd.org/daf/competition/gender-inclusive-competition-policy.htm

Oct 7, 2021 04:00 PM in Amsterdam, Berlin, Rome, Stockholm, Vienna

September 29, 2021 | Permalink | Comments (0)

Leveling the Playing Field in the Standards Ecosystem: Principles for A Balanced Antitrust Enforcement Approach to Standards-Essential Patents

Vertical Control

Vertical Control

NYU Law Review Online (2021)

Herbert Hovenkamp

University of Pennsylvania Carey Law School; University of Pennsylvania - The Wharton School; University College London

Abstract

Antitrust litigation often requires courts to consider challenges to vertical “control.” How does a firm injure competition by limiting the behavior of vertically related firms? Competitive injury includes harm to consumers, labor, or other suppliers from reduced output and higher margins.

Historically antitrust considers this issue by attempting to identify a market that is vertically related to the defendant, and then consider what portion of it is “foreclosed” by the vertical practice. There are better mechanisms for identifying competitive harm, including a more individualized look at how the practice injures the best placed firms or bears directly on a firm’s ability to reduce output and increase its price without losing so many sales that the price increase is unprofitable.

One important consequence of these new approaches is that the market share numbers that the antitrust case law traditionally attaches to foreclosure percentages are not particularly meaningful. The tying and exclusive dealing case law generally aggregates the market subject to foreclosure concerns and considers foreclosure as a percentage of an undifferentiated whole. In general, it proclaims minimum market foreclosure percentages in the range of 30% - 40% as a condition for illegality. When we focus more accurately on marginal effects and the possibility of raising rivals’ costs, however, these numbers are much less significant. For example, if the lowest cost firm in a market is subject to an exclusivity agreement, anticompetitive results, particularly RRC, could obtain even if the percentage of total sales is far less than 30%. By contrast, if only the least efficient firm or firms in a market were made subject to such an agreement, even aggregate foreclosure percentages higher than 40% might result in no competitive harm.

September 29, 2021 | Permalink | Comments (0)

Tuesday, September 28, 2021

Reforming Merger Reviews to Preserve Creative Destruction

Aurelien Portuese, ITIF has written on Reforming Merger Reviews to Preserve Creative Destruction.

September 28, 2021 | Permalink | Comments (0)

Can Self-Regulation Save Digital Platforms?

Can Self-Regulation Save Digital Platforms?

 

Michael Cusumano

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Annabelle Gawer

University of Surrey

David Yoffie

Harvard University - Strategy Unit

Abstract

This article explores some of the critical challenges facing self-regulation and the regulatory environment for digital platforms. We examine several historical examples of firms and industries that attempted self-regulation before the Internet. All dealt with similar challenges involving multiple market actors and potentially harmful content or bias in search results: movies and video games, radio and television advertising, and computerized airline reservation systems. We follow this historical discussion with examples of digital platforms in the Internet era that have proven problematic in similar ways, with growing calls for government intervention through sectoral regulation and content controls.
We end with some general guidelines for when and how specific types of platform businesses might self-regulate more effectively. Although our sample is small and exploratory, the research suggests that a combination of self-regulation and credible threats of government regulation may yield the best results. We also note that effective self-regulation need not happen exclusively at the level of the firm. When it is in their collective self-interest, as occurred before the Internet era, coalitions of firms within the same market and with similar business models may agree to abide by a jointly accepted set of rules or codes of conduct

September 28, 2021 | Permalink | Comments (0)

Monday, September 27, 2021

Monopoly and Monopsony: Antitrust Standing, Injury, and Damages

Monopoly and Monopsony: Antitrust Standing, Injury, and Damages

 

Tirza Angerhofer

University of Florida - Warrington College of Business Administration - Department of Economics; Duke University - Department of Economics

Roger D. Blair

University of Florida

Abstract

This article examines the economic consequences of collusion in both the output market and one of the input markets. We examine the results of sequential collusion, which leads to complications and inconsistencies in measuring antitrust damages. We also examine simultaneous collusion in both the input and output markets. Ultimately, the profit maximizing equilibrium are identical but there are complications along the way to the final collusive equilibrium. The article explores the private plaintiff problems involving antitrust standing, proving antitrust injury, and estimating antitrust damages.

September 27, 2021 | Permalink | Comments (0)

Friday, September 24, 2021

Vertical Mergers with Bilateral Contracting and Upstream and Downstream Investment

Vertical Mergers with Bilateral Contracting and Upstream and Downstream Investment

 

 

Mark A. Israel

Compass Lexecon

Daniel P. O'Brien

Compass Lexecon

Abstract

We extend the theory of bilateral vertical contracting to a double moral hazard setting where upstream and downstream firms make complementary investments that enhance demand, downstream firms make fixed investments to enter the downstream market, and contracts are private information and determined through simultaneous bilateral bargaining. We show that vertical mergers mitigate bilateral contracting externalities and hold-up, which leads to an increase in complementary investments. If downstream products are either sufficiently distant or sufficiently close substitutes, a vertical merger benefits the merging firm, consumers, and the unintegrated downstream firm. For intermediate degrees of product differentiation, a case with linear demand and quadratic investment costs shows that consumers benefit if the marginal cost of investment is sufficiently low as revealed, for example, by a high ratio of R&D investments to sales. We apply the model to a vertical merger in the computer industry.

September 24, 2021 | Permalink | Comments (0)

Price Effects of Horizontal Mergers: A Retrospective on Retrospectives

Price Effects of Horizontal Mergers: A Retrospective on Retrospectives

 

Annika Stöhr

Ilmenau University of Technology

 

Abstract

In this comprehensive review of ex-post merger studies price effects of horizontal transactions are evaluated. By combining and further analyzing the results of 52 retrospective studies on 82 mergers or merger-like transactions it can be shown that the industry alone is no strong indication for the direction of price-related merger effects. However, the “size” or “importance” of a transaction as well as market concentration pre-merger and change in concentration due to the transaction seem to have an impact on post-transaction price development.

September 24, 2021 | Permalink | Comments (0)

Thursday, September 23, 2021

How Will the FTC Evaluate Vertical Mergers?

Carl Shapiro (Berkeley) and Herb Hovenkamp (Penn) have written How Will the FTC Evaluate Vertical Mergers?

When the leading figures in antitrust economics and law write, it is worth reading and taking what they say very seriously.

September 23, 2021 | Permalink | Comments (0)

How Will the FTC Evaluate Vertical Mergers?

Carl Shapiro (Berkeley) and Herb Hovenkamp (Penn) have written How Will the FTC Evaluate Vertical Mergers?

When the leading figures in antitrust economics and law write, it is worth reading and takin g what they say very seriously.

September 23, 2021 | Permalink | Comments (0)

Competition and Selection in Credit Markets

Competition and Selection in Credit Markets

 

 

Constantine Yannelis

University of Chicago

Anthony Lee Zhang

University of Chicago - Booth School of Business

 

Abstract

We present both theory and evidence that increased competition may decrease rather than increase consumer welfare in subprime credit markets. We present a model of lending markets with imperfect competition, adverse selection and costly lender screening. In more competitive markets, lenders have lower market shares, and thus lower incentives to monitor borrowers. Thus, when markets are competitive, all lenders face a riskier pool of borrowers, which can lead interest rates to be higher, and consumer welfare to be lower. We provide evidence for the model’s predictions in the auto loan market using administrative credit panel data.

September 23, 2021 | Permalink | Comments (0)

Wednesday, September 22, 2021

THE FTC’S RESCISSION OF ITS 2015 POLICY STATEMENT ON SECTION 5: IF NOT CONSUMER WELFARE AND THE RULE OF REASON, WHAT?

William Kolasky (Hughes Hubbard) has written THE FTC’S RESCISSION OF ITS 2015 POLICY STATEMENT ON SECTION 5: IF NOT CONSUMER WELFARE AND THE RULE OF REASON, WHAT?

ABSTRACT:

Snapshot: Drawing on extensive analysis of the FTC Act’s legislative record, a leading antitrust-law attorney and scholar debunks three FTC Commissioners’ justifications for eliminating a bipartisan guidance for how to pursue “unfair methods of competition” enforcement, and concludes that a drift away from first principles will stoke harmful uncertainty that chills competition. 

Executive Summary (click HERE for PDF of this summary)
For the last forty years, enforcement of the antitrust laws has been guided by the principle that the laws are meant to protect competition, not competitors, and thereby to protect consumer welfare. The framework the Supreme Court and lower courts have developed to enforce the antitrust laws with that larger goal in mind is a modern version of the rule of reason the Court first enunciated in 1911.

The Biden Administration’s senior antitrust appointments, and the “reform” views reflected in those individuals’ past academic writings, have placed the consumer-welfare approach to antitrust at substantial risk. The first clear sign of these appointees’ preference for a more forceful, structuralist approach was the Federal Trade Commission’s decision, taken along partisan lines and after little opportunity for public input, to rescind a 2015 policy statement. The statement provided guidance on how the FTC would interpret FTC Act § 5’s ban on “unfair methods of competition.” The three Commissioners asserted that the statement contravened the text, structure, and history of the FTC Act, and also that the statement’s challenging administrability would undermine enforcement.

This Working Paper explains why both reasons for rescinding the § 5 statement lack merit. First, the 2015 Statement is fully consistent with the principles Congress intended to guide enforcement of FTC Act § 5. Informed by an exhaustive review of the legislative record, the paper details these five principles which, at their core, reflect enforcement to protect competition and the public interest by applying the rule of reason.

Second, contrary to the Commissioners’ conclusion, the courts have successfully made the rule of reason more administrable and their approach provided the Commission guidance when making enforcement decisions. Notably, Supreme Court justices that firmly believe in strong antitrust enforcement, such as Justices Stevens and Breyer, have led the creation of a useful analytical framework for reviewing defendants’ actions or policies. That framework does not favor plaintiffs or defendants.  Instead, the framework seeks to balance the public’s interest in both competition and efficiency, just as Congress intended when it created the Federal Trade Commission.

Rescission of the 2015 Statement is a significant step toward expanding the FTC’s discretion and seemingly its ability to use antitrust as a tool to cure such social ills as income inequality and increased market concentration. But it’s far from clear whether antitrust policy can be blamed for these ills. . And it’s further unclear how an antitrust approach detached from the rule of reason and consumer welfare can be an effective tool in protecting competition without unduly impeding the efficient functioning of the market, much less for addressing broader societal problems.  

September 22, 2021 | Permalink | Comments (0)

The Antitrust Duty to Deal in the Age of Big Tech

The Antitrust Duty to Deal in the Age of Big Tech

 

 

Erik Hovenkamp

University of Southern California School of Law

 

Abstract

The antitrust duty to deal is perhaps the most confounding and controversial form of antitrust intervention. It is sought by plaintiffs in situations where a monopolist controls a critical input (or “essential facility”) and unilaterally refuses to sell access to rivals. Courts have substantially narrowed the doctrine in recent decades. However, the prevalence of dominant platforms like Google, Facebook, and Amazon has provoked intense debate over whether the antitrust duty to deal needs a revival. Many such platforms are accused of refusing to deal with (or otherwise discriminating against) rivals in adjacent markets.

The debate centers mainly on what a plaintiff should have to show to trigger a duty to deal. However, I argue that this overlooks the most pressing problem, which is not the standard of liability but rather its domain: the set of cases in which it must be applied. At present, this domain is far too broad, conjoining two very different lines of cases that have no business being evaluated under a common standard. In one line of cases, the defendant’s refusal raises substantially the same theory of harm as tying or related vertical restraints. However, formalistic legal doctrine prevents plaintiffs from challenging them as such. As a result, these cases almost never receive meaningful scrutiny. This is problematic, because a large majority of meritorious refusal-to-deal cases fall into this category. It also happens to include almost all cases involving platform defendants.

In a separate line of cases, intervention is much harder to justify on economic policy grounds, as it carries a serious risk of chilling investment in valuable new technologies. Courts often acknowledge this investment concern in dicta, but the operative liability standard—which focuses myopically on exclusion—ignores it. Consequently, there is a major disconnect between what courts say in dicta and what the underlying standard of liability says. The dicta says that a duty to deal is almost never warranted. But simple economic arguments show that the refusals in these cases are routinely exclusionary in precisely the sense that the law purports to condemn. This internal conflict has led courts to erect suffocating proof requirements that bear little logical connection to exclusion. These evidentiary rules do most of the heavy lifting in practice, and they excel at avoiding excessive liability. The problem is that they also kill off all the meritorious cases.

This paper argues that any effective reform must begin by disentangling these distinct lines of cases. As I explain, there is a natural way to do this that would help to address many of the key concerns raised on both sides of the debate. This approach offers many policy benefits. First, it protects investment incentives without needlessly stifling antitrust enforcement in meritorious cases. Second, it naturally limits antitrust scrutiny to those cases in which intervention is most likely to be administrable. Third, it is exactly analogous to the way antitrust already treats other forms of unilateral conduct. Finally, in contrast to the status quo, this approach would allow for meaningful antitrust scrutiny of unilateral conduct by dominant platforms—an objective that has recently received bipartisan support in Congress.

September 22, 2021 | Permalink | Comments (0)

Tuesday, September 21, 2021

Cartel Activity and Recidivism

Cartel Activity and Recidivism

Research Handbook on Cartels (Edward Elgar, Peter Whelan, ed.)

 

Catarina M. P. Marvão

Technological University Dublin; Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)

Abstract

The existence and extent of recidivism have been highly debated in the last few years. This chapter examines the current theoretical, experimental and empirical literature on recidivism and related issues. It also presents novel evidence on: (i) the amount of recidivism in the EU between 1998 and December 2020 (up to 19% of cartel members, depending on how recidivism is defined); (ii) the trend of EU “leniency inflation” noticed by Marvão and Spagnolo (2018b), which is even steeper for multiple offending firms; and (iii) the ability of recidivists to use leniency programs strategically by rotating reports and using multi-market contact. While “true recidivism” seems to have been eliminated in the US (Werden et al., 2011), it appears to be on the rise in the EU. Although it represents only 2% of the cartel members, it should be interpreted as a lower bound estimate since many cartels may remain undeterred and undetected (Ormosi, 2013).

September 21, 2021 | Permalink | Comments (0)

Monday, September 20, 2021

New Retail: Implications for Channel Choices under Competition

New Retail: Implications for Channel Choices under Competition

 

 

Ping Tang

University of Texas at Dallas

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management

Srinivasan Raghunathan

University of Texas at Dallas - Naveen Jindal School of Management

 

Abstract

The Internet and online retailing has disrupted traditional brick-and-mortar retailing immensely. In recent years, a hybrid omnichannel structure referred to as “New Retail” that promises to take advantage of the positive aspects of online and physical channels has emerged within the industry, and some industry experts tout New Retail as the future of retailing. In this paper, we provide insights into competing firms' retail-channel choices among online channel, physical channel, and omnichannel. The online and physical channels could differ in terms of geographical market coverage, consumer shopping cost, and consumer valuation—an online channel can serve both city and remote (suburban) consumers whereas a physical channel may be able to serve only city consumers, and consumers have a lower shopping cost in the online channel than the physical channel but can have a higher valuation for either the physical or the online channel. We find that an equilibrium in which at least one firm operates the omnichannel emerges only when consumers have a higher valuation for the physical channel. Moreover, neither firm would operate only the online channel in this case. In contrast, when consumers have a higher valuation for the online channel than the physical channel, neither firm is likely to operate the omnichannel. The market and channel characteristics have nonuniform and counterintuitive impacts on firms' profits under different equilibria. For instance, neither increasing the differentiation between the channels within a firm nor increasing the differentiation between channels across firms necessarily benefits firms. Furthermore, an increase in the number of city consumers relative to the suburban consumers can hurt the firm that serves only city consumers. The tradeoffs among interfirm competition, market expansion, consumer segmentation, and intrafirm-cannibalization effects of firms' channel choices are the driving forces that lead to our findings.

September 20, 2021 | Permalink | Comments (0)

Sunday, September 19, 2021

2022 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference Call for papers Friday, January 28, 2022 | 8:20 AM - 5:30 PM EST NYU School of Law

2022 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference
Friday, January 28, 2022 |  8:20 AM - 5:30 PM EST
NYU School of Law

 

Call for papers

The NYU School of Law and the American Bar Association Antitrust Law Section proudly announce that the 7th biennual Next Generation conference, which has expanded beyond Antitrust to include Data Privacy and Data Protection, will be held on January 28, 2022. This day-long conference provides an opportunity for professors in law, economics, accounting, finance, management, information systems, operations management, and marketing who began their full-time tenure-track career in or after 2014 to present their latest research. Senior scholars and practitioners in the field will comment on the papers.  The conference is co-sponsored by NYU School of Law and the American Bar Association -- Antitrust Law Section.

 

For the agenda of the 2020 conference, see https://www.law.nyu.edu/conferences/2020-NextGen-Antitrust-Conference.  

 

NYU has not yet announced whether there will be restrictions on conferences to be held next semester.  We hope that the conference will be held in-person, but it is possible that it will be held online.  If the conference is held in person, every particpant will be expected to cover their travel and lodging costs.  

 

The paper submissions are due on November 1, 2021 and acceptance decisions will be made on December 1, 2021.  Please email Daniel Sokol (dsokol@usc.edu) with your submission.

 

Conference co-organizers

 

Edward Cavanagh, St. John's

Judy Chevalier, Yale

Daniel Sokol, USC

Katherine Strandburg, NYU

September 19, 2021 | Permalink | Comments (0)

Friday, September 17, 2021

Academic Roundtable Talk: What I learned during my stint in government Sep 23, 2021 09:00 AM in Pacific Time/12pm EST

I am thrilled to be leading this amazing webinar as part of the USC Initiative on Digital Competition of the University of Southern California - Marshall School of Business on "Academic Roundtable Talk: What I learned during my stint in government"

with

Leemore Dafny (Harvard Business School)
Nancy L. Rose (Massachusetts Institute of Technology)
Guofu Tan (University of Southern California)

https://uscmarshall.zoom.us/webinar/register/WN_bplGYvQCQ56DdyMKiB5NIQhttps://lnkd.in/dWXKQkyW

I think that this talk will be of interest to academics and practitioners interested in what chief economists do in agencies and how it reshapes research.
 
Sep 23, 2021 09:00 AM/ 12:00 PM PM

September 17, 2021 | Permalink | Comments (0)

Platform Competition and Differentiation: Business Choices in Mobile Platforms

Platform Competition and Differentiation: Business Choices in Mobile Platforms

 

Tejaswi Channagiri

University of Florida

Mark A Jamison

University of Florida - Warrington College of Business Administration, Public Utility Research Center

 

Abstract

This paper examines firms’ choices to use mobile platforms — namely iOS and Android. Using Crunchbase data on startups seeking external funding, we find that 16 of 47 business categories are likely to use mobile platforms. 10 of these 16 exhibit no platform preferences, implying substitutability. Businesses that are unlikely to use mobile platforms view the platforms as differentiated. iOS was more popular than Android: 60 percent of businesses choosing to be on mobile platforms chose to be only on iOS. In contrast, only 8 percent chose to be on Android only. Our finding of platform substitutability holds when accounting for businesses belonging to multiple categories.

September 17, 2021 | Permalink | Comments (0)

Thursday, September 16, 2021

Common Institutional Ownership and Corporate Social Responsibility

Common Institutional Ownership and Corporate Social Responsibility

 

 

Xin Cheng

Renmin University of China - School of Business

He (Helen) Wang

West Virginia University - Department of Finance

Xianjue Wang

Southwestern University of Finance and Economics (SWUFE); Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Abstract

We examine relationship between common institutional ownership and corporate social responsibility (CSR). We find that common institutional ownership is negatively associated with the level of CSR, which supports an anti-competitive view. We conduct a propensity score matching (PSM) analysis and a difference-in-differences (DiD) analysis based on a quasi-natural experiment of financial institution mergers. The results alleviate concerns about endogeneity. Using the DiD setting, we find further support for the anti-competitive channel, and can rule out alternative explanations. Additional analyses on investor characteristics show that our results come mainly from common owners with long-term investment horizons or low social inclination. Moreover, we find that the anti-competitive effect is more pronounced for mature firms, and for firms in industries with lower labor intensity and low customer sensitivity.

September 16, 2021 | Permalink | Comments (0)