Antitrust & Competition Policy Blog

Janusz Ordover - RIP

I am saddened to learn about the passing of Janusz Ordover.  He was an important figure in antitrust (and innovation) for his scholarship, consulting, and great charm and warmth.  He taught at NYU before retiring and moving to Southern California.  He was happy when I told him that I was moving to USC but I regret that we did not have a chance to see each other before he died.  Janusz and I spoke about antitrust issues but also about issues of common non-antitrust interest.  I have a number of fond memories of spending time with him in NY, DC, and Shanghai as well as engaging in lovely email exchanges.  I had the pleasure of editing a chapter he wrote for me for the The Oxford Handbook of International Antitrust Economics, Volume 1 -  Coordinated Effects: Evolution of Practice and Theory.  His death impacts me particularly because he was a larger than life figure who is of my parents' age.  My thoughts go to Lori, his former NYU and Compass Lexecon, colleagues and his former students and friends in the world of practice.

Corporate Social Responsibility by Joint Agreement

Corporate Social Responsibility by Joint Agreement

 

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Leonard Treuren

University of Amsterdam - Amsterdam School of Economics (ASE)

Abstract

Industry-wide voluntary agreements are touted as a means for corporations to take more corporate social responsibility (CSR). We study what type of joint CSR agreement induces firms to increase CSR efforts in a model of oligopolistic competition with differentiated products. Consumers have a willingness to pay for more responsibly manufactured products. Firms are driven by profit, and possibly by intrinsic motivation, to invest in costly CSR efforts. We find that cooperative agreements directly on the level of CSR reduce CSR efforts compared to competition. Such agreements throttle both for-profit and intrinsic motivations for CSR. CSR efforts only increase if agreements are permitted solely on output. Such production agreements, however, reduce total welfare in the market and raise antitrust concerns. Taking externalities into account may help to justify a production agreement under a total welfare standard, but not agreements on CSR directly. Moreover, simply requiring a higher CSR level by regulation while preserving competition always gives higher within-market welfare.

Cambridge-USC Virtual Antitrust Seminar: Pablo Ibáñez Colomo (LSE) “Product Design and Business Models in EU Antitrust Law”

Please join Oke Odudu, Fellow of Emmanuel College, University of Cambridge and Deputy Director of the Centre for European Legal Studies and D. Daniel Sokol Professor, USC Gould School of Law Affiliate Professor, USC Marshall School of Business for the Cambridge-USC Virtual Antitrust Workshop series.

 

Time: Time: Nov 4, 2021 - 9:30 AM (PST)/12:30 PM (EST)/ 4:30 PM (GMT) and 5:30 PM (Brussels)*
* note that UK and Europe go through daylught savings time before the US does so please look out for this change on your clocks

Speaker: Pablo Ibáñez Colomo (LSE)

Title: “Product Design and Business Models in EU Antitrust Law”

 

Link to paper:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3925396

Please email me if you are

Antitrust and Big Tech Breakups: Piercing the Popular Myths by Cautious Inquiry

Antitrust and Big Tech Breakups: Piercing the Popular Myths by Cautious Inquiry

Eleanor Fox and Don Baker

 

ABSTRACT: “Break ‘em up with antitrust” is a popular and surging political drumbeat. This essay argues for a closer look at history and experience. They show that breakups of integrated single firm monopolies (which were not the product of mergers) have been rare and difficult. The essay takes a special look at the breakup of Ma Bell — a restructuring that needed to happen — recalling that even this rare success took a decade after the trial to implement.

----

I highly recommend this article.  This nuanced article is worth reading, not merely for the analysis but also because of who write it - Eleanor Fox and Don Baker.  Both have been very mucnb in the pro-enforcement camp for decades.  The conclusion is perhaps the most interesting part:

We have tried to talk realism and to sort out the truth about antitrust and breakups. We have shown that the first truth is: The public conversation about antitrust and breakups has been distorted; it is based on myths and non-sequiturs. The second truth is: U.S. antitrust law does not lean towards breakups for single-firm monopolization. Breakup is rare. It has been a standard remedy only when monopoly has been created by acquisition or consolidation of numerous rivals (something that no longer occurs on the scale of Standard Oil as a result of modern anti-merger enforcement). The third truth is: Breakup has been effectively implemented only after extensive, difficult efforts by government enforcers and judges.

This does not mean that there should never be breakups, whether for antitrust or social reasons. But it does imply long and hard attention to the relevant questions before the choice of breakup is made.

The rush by populists and the left and right to breakup (or indeed de facto break up) really requires a deep think. Populism, which rejects technocracy, is not exactly prone to such nuance but the stakes are high and misguided approaches may dxestroy innovation and hurt consumers.  What an odd alliance we have today of Warren and Hawley both pushing the same sort of changes in antitrust.  Antitrust has moved to the left in recent years and left technocrats are now looking very centrist with the left being overtaken by populists with overt political agendas that want to use antitrust as a redistributional tool for favored causes (but don't seem to mind that the poor will pay higher prices - a bit hard to reconcile with DEI goals).  The same is happening on the right with the libertarians in retreat to populist ethnonationalists.  

Market Power in the U.S. Airline Industry

Market Power in the U.S. Airline Industry

Germán Bet

University of Florida

Abstract

I document the evolution of market power in the U.S. airline industry for the period 1990:Q1-2019:Q4. I recover estimates of markups, defined as the ratio of price to marginal cost, at the airline-time level. Dominant carriers in the industry have substantially increased their markups in the last decade. The findings indicate an increase in market power: The increase in markups is not explained by proportionally higher fixed costs or a larger scale elasticity. In contrast, the net profit rate has dramatically increased for these carriers. I rely on these markup estimates and structural modeling to test if this recent increase in markups can be explained by a change in airlines’ conduct (coordinating behavior). The model rejects the null hypothesis of no increase in coordinating behavior for dominant carriers. Counterfactual simulations imply that the consumer surplus is, on average, 17% lower than it would have been under no change in conduct, and that prices are 10% higher.

Bipartisan Center video of "Technology and Antitrust/Competition Policy - Next steps after the Whistleblower Hearings" video available

 

Great panel discussion

Video of CCIA event "The Future of Merger Control Enforcement" that was today

 

The Future of Merger Control Enforcement from Competition Policy International on Vimeo.

This was a fun program in which I participated.

Department of Justice Antitrust Division and Federal Trade Commission to Hold Workshop on Promoting Competition in Labor Markets

Department of Justice Antitrust Division and Federal Trade Commission to Hold Workshop on Promoting Competition in Labor Markets

The Department of Justice and Federal Trade Commission (FTC) will jointly host a virtual public workshop on Dec. 6 and 7, to discuss efforts to promote competitive labor markets and worker mobility. The workshop will bring together lawyers, economists, academics, policy experts, labor groups and workers, and will cover recent developments at the intersection of antitrust and labor, as well as implications for efforts to protect and empower workers through competition enforcement and rulemaking.  

A series of panels, presentations and remarks will address competition issues affecting labor markets and the welfare of workers, including: labor monopsony; the increased use of restrictive contractual clauses in labor agreements, including non-competes and non-disclosure agreements; information sharing and benchmarking activity among competing employers; the role of other federal agencies in ensuring fair competition in labor markets; and the relationship between antitrust law and collective bargaining efforts in the “gig economy.” Panelists will be invited to discuss potential steps antitrust enforcers can take to better target enforcement resources, improve public guidance and pursue a whole-of-government approach to ensuring fair competition for workers and consumers by leveraging interagency resources.

The Department of Justice and FTC invite comments from the public on the topics covered by this workshop. Interested parties may submit public comments online now through Dec. 20, at https://www.regulations.gov/docket/FTC-2021-0057.

The workshop will be held virtually and webcast on the FTC’s website at FTC.gov. A recording of the workshop will be available on the Antitrust Division’s website and the FTC’s website. An agenda, list of speakers and instructions for accessing the webcast will be available in the near future at https://www.justice.gov/atr/events/public-workshop-promoting-competition-labor-markets.

Heath Antitrust Lecture - Christopher Leslie, Wednesday November 10 12pm EST

Christopher Leslie (UC Irvine) is the Heath lecturer this year   

 

 

https://ufl.zoom.us/j/91446015466?pwd=U0N0S1RkSERYL3F0V2EwbFNveHdnQT09

 

Meeting ID: 914 4601 5466

Passcode: 336518

The Dark Side of Patents: Strategic Patenting, Product Market Entry and

The Dark Side of Patents: Strategic Patenting, Product Market Entry and

Maria Kurakina

University of Utah - David Eccles School of Business

Abstract

This paper analyses how strategic patenting effects market concentration, entry, and competitor productivity and patenting. We introduce a new market-based classification of patent as strategic patenting and start by showing that this novel measure offers improvements over those in the extant literature. We find that when firms strategically patent, overall market concentration increases and entry is deterred. Further, competitor firms experience a decline in total factor productivity following a publication of a focal firm's strategic patent. These effects are more pronounced in capital-intensive firms and technological proximate peer groups. Overall these findings demonstrate the tensions inherent in designing patent policies that promote focal firm innovation, while preventing the stifling of competitor innovation.

OECD: Regulatory Barriers to Competition in Professional Services workshop

Regulatory Barriers to Competition in Professional Services

Aim of the workshop

A vibrant economy requires a supple regulatory framework for professional services that fosters innovation and effiiociency and growth, and ensures good quality for consumers, while taking account of country-specific legal traditions. Achieving this objective requires striking the right balance between guaranteeing that competition is effective, and addressing the market failures that characterise the provision of professional services.

The aim of this workshop is to hold a fruitful discussion on this theme by sharing new contributions on the theory of regulation, recent empirical studies assessing the links between regulatory constraints and economic variables, and lessons from regulatory reforms, with a variety of stakeholders and experts.

This workshop will also contribute to the revision and improvement of the OECD Product Market Regulation Indicators on professional services that, for the past twenty years, have measured barriers to competition arising from regulation in these sectors .

The focus of the discussion will be on the six professions included in the Product Market Regulation Indicators: lawyers, notaries, accountants, civil engineers, architect and estate agents.

Register  Here 

 This workshop will contribute to the revision and improvement of the OECD Product Market Regulation Indicators on professional services that, for the past twenty years, have measured barriers to competition arising from unnecessary or outdated regulation in these sectors (http://oe.cd/pmr).

Time

You can choose to attend one or more of the following webinars.

 Nov 18, 2021 12:30 PM
 Nov 19, 2021 12:30 PM

Time shows in Paris

Paying off the Competition: Market Power and Innovation Incentives

Paying off the Competition: Market Power and Innovation Incentives

 

Xuelin Li

University of South Carolina - Darla Moore School of Business

Andrew W. Lo

Massachusetts Institute of Technology (MIT) - Laboratory for Financial Engineering; Santa Fe Institute

Richard T. Thakor

University of Minnesota - Carlson School of Management; Massachusetts Institute of Technology (MIT) - Laboratory for Financial Engineering

 

Abstract

How does a firm’s market power in existing products affect its incentives to innovate? We explore this fundamental question using granular project-level and firm-level data from the pharmaceutical industry, focusing on a particular mechanism through which incumbent firms maintain their market power: “reverse payment” or “pay-for-delay” agreements to delay the market entry of competitors. We first show that when firms are unfettered in their use of “pay-for-delay” agreements, they reduce their innovation activities in response to the potential entry of direct competitors. We then examine a legal ruling that subjected these agreements to antitrust litigation, thereby reducing the incentive to enter them. After the ruling, incumbent firms increased their net innovation activities in response to competitive entry. These effects center on firms with products that are more directly affected by competition. However, at the product therapeutic area level, we find a reduction in innovation by new entrants after the ruling in response to increased competition. Overall, these results are consistent with firms having reduced incentives to innovate when they are able to maintain their market power, highlighting a specific channel through which this occurs.

Impact of Cartel Enforcement on Compliance in the Chemical Industry

Impact of Cartel Enforcement on Compliance in the Chemical Industry

 

Gianni De Stefano

European Commission

Andreas Stephan

University of East Anglia (UEA) - Centre for Competition Policy

Abstract

This paper undertakes a qualitative analysis of the relationship between EU cartel enforcement in the chemical industry in the period 1997-2010 and compliance measures announced in the Annual Reports of the undertakings involved. It goes on to focus on Akzo Nobel NV’s unique use of an internal amnesty programme, and the level of compliance in the industry following this period of enforcement. Its findings are consistent with cartel enforcement prompting significant investment in compliance measures, with some evidence of those measures resulting in the earlier reporting of cartels in return for leniency and in enforcement action against only one hard core cartel in the decade that followed.

Competing Architectures for Regulatory and Competition Law Governance

Competing Architectures for Regulatory and Competition Law Governance

 

 

P. Alexiadis

Gibson, Dunn & Crutcher LLP

Caio Mario da Silva Pereira Neto

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Abstract

This paper is concerned with the policy choices and trends related to the institutional design of competition law and regulatory enforcement. It focuses on the different architectures that seek to reconcile and bring together the tools used to regulate the behaviour of undertakings ex ante and to sanction eventual abuses ex post. These architectures are becoming ever more sophisticated, as both the language and the goals of regulation and competition law reach new levels of convergence. While the focal point of the analysis will be on regulatory structures developed in the EU, references to other jurisdictions will be made wherever non-EU examples illustrate particular trends in the shaping of agency structures.

Competition Laws and Earnings Management: International Evidence

Competition Laws and Earnings Management: International Evidence

 

 

Tao Chen

Nanyang Business School, Nanyang Technological University

Jimmy Chengyuan Qu

Nanyang Business School, Nanyang Technological University

Abstract

By exploiting the staggered change of legal competition environment in 58 non-US countries, we find that firms tend to inflate their earnings when domicile countries adopt stricter competition laws, which supports the pressure effect of legal competition threats. This result is robust to alternative measures of earnings management and stringency of competition laws. Consistent with the pressure effect, firms inflate more earnings under the strength of competition laws when they face greater external pressure, receive less external discipline, and lack information transparency. In cross-country analyses, the impact of competition laws on earnings management is mitigated in IFRS countries and countries with stronger investor protection. By showing earnings inflation under stricter competition laws, this paper finds a side effect of competition laws on firms in terms of financial reporting quality, which should not be neglected by policymakers.

The First Amendment, Common Carriers, and Public Accommodations: Net Neutrality, Digital Platforms, and Privacy

The First Amendment, Common Carriers, and Public Accommodations: Net Neutrality, Digital Platforms, and Privacy

 

Christopher S. Yoo

University of Pennsylvania Law School; University of Pennsylvania - Annenberg School for Communication; University of Pennsylvania - School of Engineering and Applied Science

 

Recent prominent judicial opinions have assumed that common carriers have few to no First Amendment rights and that calling an actor a common carrier or public accommodation could justify limiting its right to exclude and mandating that it provide nondiscriminatory access. A review of the history reveals that the underlying law is richer than these simple statements would suggest. The principles for determining what constitutes a common carrier or a public accommodation and the level of First Amendment protection both turn on whether the actor holds itself out as serving all members of the public or whether it asserts editorial discretion over whom to carry or host. This gives putative common carriers and public accommodations substantial control over their First Amendment status. The jurisprudence on privacy regulation, quasi-common carriers, non-common carriage services, and public accommodations confirms that the First Amendment protections they enjoy are substantial.

Eleanor Fox: Antitrust Ambassador to the World

New book

Eleanor Fox: Antitrust Ambassador to the World

 

Does Sunk Cost Affect Prices? Evidence from the U.S. Airline Industry

Does Sunk Cost Affect Prices? Evidence from the U.S. Airline Industry

 

Long Shi

Xi'an Jiaotong University; Xi'an Jiaotong University

Qihong Liu

University of Oklahoma - Department of Economics

Myongjin Kim

University of Oklahoma

 

Abstract

In contrast to the extensive literature on behavior bias by individuals, studies on behavior bias by firms have been relatively scarce. We explore the possibility of the latter in the context of U.S. airlines, where fuel hedging leads to lump sum gain or loss which is sunk to airlines' pricing decisions. Our results show that the (sunk) hedging gain or loss affects airlines' ticket prices. In particular, a 10% reduction in the reported fuel cost (due to hedging gain) leads to a 2.2% reduction in ticket prices. Moving onto non-price decisions, we find that hedging gain leads airlines to use larger aircrafts and reduce airtime of their flights, but has no impacts on the number of routes and flights which airlines operate. Our results provide empirical evidence that fixed/sunk costs can affect firms' price and non-price decisions, establish a link between financial market and product market competition, and have important welfare/policy and managerial implications.

Call for papers: 2022 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference

2022 Next Generation of Antitrust, Data Privacy and Data Protection Scholars Conference

 

Friday, January 28, 2022
8:20-5:30pm

Conference co-sponsors
NYU School of Law
American Bar Association, Antitrust Law Section

Conference co-organizers
Edward Cavanagh, St. John's
Judy Chevalier, Yale
Harry First, NYU
Daniel Sokol, USC
Katherine Strandburg, NYU

Abstract: The NYU School of Law and the American Bar Association Antitrust Law Section proudly announce that the 7th biennial 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 participant will be expected to cover their travel and lodging costs.  

Call for Papers: The paper submissions are due on November 1, 2021 and acceptance decisions will be made on December 1, 2021.  Please email Daniel Sokol ([email protected]) with your submission.

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.