Antitrust & Competition Policy Blog

Dynamic Pricing Algorithms, Consumer Harm, and Regulatory Response

Dynamic Pricing Algorithms, Consumer Harm, and Regulatory Response

 

Alexander MacKay

Harvard University - Business School (HBS)

Samuel Weinstein

Yeshiva University - Benjamin N. Cardozo School of Law

 

Abstract

Pricing algorithms are rapidly transforming markets, from ride-sharing apps, to air travel, to online retail. Regulators and scholars have watched this development with a wary eye. Their focus so far has been on the potential for pricing algorithms to facilitate explicit and tacit collusion. This Article argues that the policy challenges pricing algorithms pose are far broader than collusive conduct. It demonstrates that algorithmic pricing can lead to higher prices for consumers in competitive markets and even in the absence of collusion. This consumer harm can be initiated by a single firm employing a superior pricing algorithm. Higher prices arise from the automated nature of algorithms, impacting any market where firms price algorithmically. Thus, pricing algorithms that are already in widespread use may allow sellers to extract a massive amount of wealth from consumers. Because this consumer harm arises even when firms do not collude, antitrust law can-not solve the problem. This Article looks to the history of pricing innovation in the early twentieth century to show how government can respond when new pricing technologies and strategies disrupt markets. It argues for pricing regulation as a feasible solution to the challenges non-collusive algorithmic pricing poses, and it proposes interventions targeted at when and how firms set prices.

Regulating Competition in Digital Platform Markets: A Critical Assessment of the Framework and Approach of the EU Digital Markets Act

Regulating Competition in Digital Platform Markets: A Critical Assessment of the Framework and Approach of the EU Digital Markets Act

 

 

Pinar Akman

School of Law, University of Leeds

 

Abstract

The European Union’s Digital Markets Act (DMA) initiative, which is set to introduce ex ante regulatory rules for “gatekeepers” in online platform markets, is one of the most important pieces of legislation to emanate from Brussels in recent decades. It not only has the potential to influence jurisdictions around the world in regulating digital markets, it also has the potential to change the business models of the wealthiest corporations on the planet and how they offer their products and services to their customers. Against that backdrop, this article provides an analysis of the aims of and principles underlying the DMA, the essential components of the DMA, and the core substantive framework, including the scope and structure of the main obligations and the implementation mechanisms envisaged by the DMA. Following this analysis, the article offers a critique of the central components of the DMA, such as its objectives, positioning in comparison to competition law rules, and substantive obligations. The article then provides recommendations and proposes ways in which the DMA – and other legislative initiatives around the world, which may take the DMA as an example – can be significantly improved by, inter alia, adopting a platform-driven substantive framework built upon self-executing, prescriptive obligations.

History and Turning the Antitrust Page

History and Turning the Antitrust Page

 

 

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

 

Abstract

Present-day advocates of antitrust reform referred to as “New Brandeisians” have invoked history in pressing the case for change. The New Brandeisians bemoan the upending of a mid-20th century “golden age” of antitrust by an intellectual movement known as the Chicago School. In fact, mid-20th century enforcement of antitrust was uneven and large corporations exercised substantial market power. The Chicago School also was not as decisive an agent of change as the New Brandeisians suggest. Doubts about the efficacy of government regulation and concerns about foreign competition did much to foster the late 20th century counter-revolution antitrust experienced.

Antitrust Class Actions in the Wake of Procedural Reform

Antitrust Class Actions in the Wake of Procedural Reform

Christine Bartholomew

University at Buffalo School of Law

 

Abstract

What is the current vitality of antitrust enforcement? Antitrust class actions—the primary mode of competition oversight—has weathered two decades of procedural reform. This Article documents the effects of those reforms. Relying on an original dataset of over 1,300 antitrust class action settlements, this Article finds such cases alive but far from well. Certain suits do succeed on an impressive scale, returning billions of dollars to victims. But class action reform has made antitrust enforcement narrower, more time-consuming, and costlier than only a decade ago. And as this Article’s sources reveal, new battle lines are forming. Across the political spectrum, people are trumpeting antitrust as the next great hope to resolve trade issues, equalize wealth inequity, and reform Big Tech. Even amid these rising calls, class action opponents continue to campaign for more reform. This Article describes those efforts and provides the essential data to repel them.

Towards Responsive EU Antitrust Enforcement Regarding Pharmaceuticals

Towards Responsive EU Antitrust Enforcement Regarding Pharmaceuticals

 

Wolf Sauter

Vrije Universiteit Amsterdam - Faculty of Law; Tilburg Law and Economics Center (TILEC); Netherlands Authority for Consumers and Markets (ACM)

 

Abstract

This paper examines the way EU competition law is applied to the pharmaceutical sector, focusing on the approach by DG Competition and the Dutch NCA by way of example. After examining the structure and objectives of EU competition law and traditional enforcement strategies, it advocates a responsive approach, based on the work of John Braithwaite. It is expected that this will help to address capacity problems and aid competition policy regarding pharmaceuticals in becoming more effective, while preserving its legitimacy. Part of this strategy is promoting more private enforcement. An expected side-benefit of relying on a responsive approach is that it will allow competition authorities to address currently underenforced related areas like medical devices and information technology in healthcare.

Call for Papers: Antitrust Economics and Competition Policy Fourteenth Annual Conference on Antitrust Economics and Competition Policy, Friday, September 16 - Saturday, September 17, 2022

Fourteenth Annual Northwestern Conference on
Antitrust Economics and Competition Policy

 

Sponsored by Compass Lexecon

 

Call for Papers

Friday, September 16—Saturday, September 17, 2022

Submission Deadline: May 20, 2022

The Northwestern Center on Law, Business, and Economics at Northwestern Pritzker School of Law and the Center for the Study of Industrial Organization at Northwestern are issuing a call for original research papers to be presented in-person at the Fourteenth Annual Conference on Antitrust Economics and Competition Policy.  This year’s conference will return to the in-person two-day event format and will run from approximately 9:00 AM (Central) on Friday, September 16, 2022 to 12:30 PM (Central) on Saturday, September 17, 2022.

We are delighted to announce that Compass Lexecon has agreed to provide the funding to support both this year’s conference. As always, conference organizers will be solely responsible for choosing papers and speakers.

The goal of this conference is to provide a forum where leading scholars from across the world can gather together with Northwestern’s own distinguished faculty to present and discuss high quality research relevant to antitrust economics and competition policy. Both theoretical and empirical submissions are welcome.  Papers in industrial organization or applied microeconomic theory that address issues relevant to antitrust policy are welcome even if they do not directly focus on particular antitrust policy issues or institutions.  While papers on all topics are welcome, we especially encourage submissions related to the following topic areas: 

• digital platforms and competition policy
• privacy, data security, and competition policy
• innovation and competition policy
• vertical mergers/integration
• vertical contracting, foreclosure/exclusion
• the effectiveness of behavioral remedies
• buyer power and monopsony power
• EU platform regulation

We hope to involve leading thinkers from the government, non-profit, and private sector, as well as leading academics from economics departments, business schools, law schools and public policy schools. While most of the conference will be devoted to presentation and discussion of original academic research, we also expect to schedule a small number of panels on important current topics or policy issues.   

If you have questions about the appropriateness of your topic for the conference, or suggestions for panel subjects, please contact Professor William Rogerson, Professor of Economics and CLBE Research Director on Competition, Antitrust and Regulation at [email protected].

Papers prepared for the Fourteenth Annual Conference on Antitrust Economics and Competition Policy will be permanently hosted on the Center on Law, Business, and Economics website as part of our Working Papers Series:  http://www.law.northwestern.edu/research-faculty/clbe/workingpapers/.             

Authors will be free to publish their work in other venues.

RESEARCH PROPOSALS: SUBMISSION, REVIEW PROCEDURE AND TIMELINE

Research Proposals should include an abstract (300 words maximum) and c.v.

Proposal Submission Deadline: Research Proposals should be submitted to [email protected] by close of business on May 20, 2022.

Notification Deadline:  Research Proposals will be reviewed by a committee.  Authors will be notified of the committee’s decisions on or around June 15, 2022.

2022 Antitrust Law Spring Meeting April 5, 2022—April 8, 2022 Marriott Marquis Washington, DC

2022 Antitrust Law Spring Meeting

April 5, 2022—April 8, 2022

 

 

Marriott Marquis Washington, DC

 

Register here

 

 

Download 2022 Brochure 

Antitrust Law & Economics Under Attack: Populism Versus Innovation

Antitrust Law & Economics Under Attack: Populism Versus Innovation

 

Aurelien Portuese

Information Technology and Innovation Foundation; George Mason University

 

Abstract

The economic analysis of antitrust laws is on the wane. The Chicago School influentially developed an antitrust approach with the principle of economic efficiency as the North Star of enforcement analysis. Robert Bork has seminally singled out The Antitrust Paradox of his time: Antitrust suppressed the competition it should foster. Conducive to an economic analysis of antitrust laws, “Borkian” antitrust has nonetheless experienced continuous criticisms. Recently, powerful assaults revived an old antitrust approach–the populist approach. Self-proclaimed the “Neo-Brandeisians” after Justice Louis D. Brandeis, who extolled small businesses and mocked the “Curse of Bigness,” antitrust populism represents a paradigm-shift away from antitrust law & economics in favor of greater discretionary power in redesigning markets for the sake of a market competition made of small business units.

This article argues that the limits of the Borkian antitrust do not justify embracing the populist Brandeisian antitrust. Antitrust is at a crossroads: It can reject Brandeisian antitrust without necessarily reverting to a passé Borkian antitrust. Economic analysis of antitrust laws remains relevant only if we take efficiency seriously–namely, including allocative and productive efficiencies and, most importantly, dynamic efficiency (i.e., innovation). An economic analysis of antitrust laws relevant to today’s (and tomorrow’s) economy can only be innovation-centric. Dynamic efficiency in the antitrust analysis would avoid the misguided populist antitrust approach, but it would also frame antitrust analysis in line with Schumpeterian principles. If innovation matters, Schumpeterian competition needs to be the cornerstone of a renewed economic analysis of antitrust laws.

Antitrust Liability for False Advertising: A Response to Carrier & Tushnet

Antitrust Liability for False Advertising: A Response to Carrier & Tushnet

 

 

Susannah Gagnon

University of Pennsylvania Carey Law School, Students; University of Victoria

Herbert Hovenkamp

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

 

Abstract

This reply briefly considers when false advertising can give rise to antitrust liability. The biggest difference between tort and antitrust liability is that the latter requires harm to the market, which is critically dependent on actual consumer response. As a result, the biggest hurdle a private plaintiff faces in turning an act of false advertising into an antitrust offense is proof of causation – to what extent can a decline in purchase volume or other market rejection be specifically attributed to the defendant’s false claims? That requirement dooms the great majority of false advertising claims attacked as violations of the Sherman Act.

One important exception arises when the false statements are made in an institutional setting where truthfulness is mandated and reliance is naturally stronger. We offer the example of product disparagement in the pharmaceutical industry. Depending on the context false claims, particularly in a regulatory or adjudicatory setting, can lead much more reliably to harm.

The Progressives' Antitrust Toolbox

The Progressives' Antitrust Toolbox

 

Herbert Hovenkamp

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

 

Abstract

The period 1900 to 1930 was the Golden Age of antitrust theory, if not of enforcement. During that period courts and scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In subsequent years antitrust policy veered to both the left and the right, but today seems to be returning to a position quite similar to the one that these Progressive adopted. Their principal contributions were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later provided the foundation for the development of the antitrust “relevant market”; (2) classification of costs into fixed and variable, with the emergent belief that industries with high fixed costs were more problematic; (3) development of the concept of entry barriers, contrary to a long classical tradition of assuming that entry is easy and quick; (4) the distinction between horizontal and vertical relationships and the emergence of vertical integration as a competition problem; (5) price discrimination as a practice that could have competitive consequences. Finally, at the end of this period came (6) theories of imperfect competition, including the rediscovery of oligopoly theory and the rise of product differentiation as relevant to antitrust policy making.

What Next for the Horizontal Merger Guidelines?

Nancy L. Rose and Carl Shapiro offer some concrete proposals in their new paper What Next for the Horizontal Merger Guidelines?

Call for papers: 9th BU Platform Strategy Research Symposium

We are delighted to host the 2022 platform research symposium at Boston University bringing together global scholars to advance the latest research.

The symposium will be held at the Boston University Questrom School of Business.
Cocktails will be at the BU castle.

This year’s topics include:

• Strategies for platform launch and growth
• Governance
• Platform design and architecture
• Internal organization of platform firms
• Transforming products into platforms
• How traditional firms compete or play with platforms
• Data and analytics for platforms
• Antitrust & regulation issues raised by platforms
• Fake news and platform externalities
• Valuing platforms

This year’s co-chairs are:

Andrei Hagiu Boston University

Geoffrey Parker Dartmouth College

Marshall Van Alstyne Boston University

Feng Zhu Harvard Business School

Scientific Committee & Track Chairs:

Bin Gu Boston University

Avi Siedmann Boston University

Gord Burtch Boston University

 

Interfaces and Interoperability After Google v. Oracle

Interfaces and Interoperability After Google v. Oracle

 

 

Mark A. Lemley

Stanford Law School

Pamela Samuelson

University of California, Berkeley - School of Law

 

Abstract

We address an important issue the Supreme Court left unaddressed this spring in its blockbuster Google v. Oracle decision: are computer interfaces copyrightable at all? We argue that they aren’t, and that the Federal Circuit's decision to the contrary is an aberration that should not undermine a quarter century of consensus on the importance of interoperability and open APIs. In our view, denying copyright protection for APIs and encouraging interoperability is important not only for innovation in the software world but for restoring competition to a technology industry dominated by a few incumbent firms.

Regulating New Tech: Problems, Pathways, and People

Regulating New Tech: Problems, Pathways, and People

TechREG Chronicle, Issue 1

Cary Coglianese

University of Pennsylvania Carey Law School

Abstract

New technologies bring with them many promises, but also a series of new problems. Even though these problems are new, they are not unlike the types of problems that regulators have long addressed in other contexts. The lessons from regulation in the past can thus guide regulatory efforts today. Regulators must focus on understanding the problems they seek to address and the causal pathways that lead to these problems. Then they must undertake efforts to shape the behavior of those in industry so that private sector managers focus on their technologies’ problems and take actions to interrupt the causal pathways. This means that regulatory organizations need to strengthen their own technological capacities; however, they need most of all to build their human capital. Successful regulation of technological innovation rests with top quality people who possess the background and skills needed to understand new technologies and their problems.

Assessing EU Merger Control Through Compensating Efficiencies

Assessing EU Merger Control Through Compensating Efficiencies

 

Pauline Affeldt

German Institute for Economic Research (DIW Berlin); Technische Universität Berlin (TU Berlin)

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization; Centre for Economic Policy Research (CEPR)

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

Joanna Piechucka

German Institute for Economic Research (DIW Berlin)

 

Abstract

Worldwide, the overwhelming majority of large horizontal mergers are cleared by antitrust authorities unconditionally. The presumption seems to be that efficiencies from these mergers are sizeable. We calculate the compensating efficiencies that would prevent a merger from harming consumers for 1,014 mergers affecting 12,325 antitrust markets scrutinized by the European Commission between 1990 and 2018. Compensating efficiencies seem too large to be achievable for many mergers. Barriers to entry and the number of firms active in the market are the most important factors determining their size. We highlight concerns about the Commission’s merger enforcement being too lax.

OECD Competition Open Day Wednesday 23 February 2022 (full-day event)

The OECD Competition Division is pleased to invite you to the fourth OECD Competition Open Day to be held virtually on Wednesday 23 February 2022 (full-day event).

 

The 2022 Open Day will features sessions on:

 

·        Green Innovation and Competition

·        Competitive Neutrality and the Role of the State in the Market

·        Regulation and Competition Enforcement in Digital Markets

·        Competition, Media and Digital Platforms

Friend or Foe: When a Platform Enters the Market to Compete with its Third-Party Sellers

Friend or Foe: When a Platform Enters the Market to Compete with its Third-Party Sellers

Yiting Deng

University College London

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Wei Wang

University of International Business and Economics (UIBE) - School of International Trade and Economics

Onesun Steve Yoo

UCL School of Management, University College London

Abstract

Due to informational advantage of online marketplaces (i.e., platforms), there is a common belief that a platform’s market entry will be detrimental to third party sellers who sell similar products on the platform. To examine the validity of this belief, we conduct an exploratory analysis by using the sales data of a single product category provided by JD.com over the month of March 2018. While we find evidence that the platform tends to “cherry pick” cheaper and popular items to enter the market, our analysis reveals an unexpected result: upon the platform’s entry, third part sellers who sell similar products tend to respond by charging a higher selling price (a 1.2% increase) and enjoy a higher sales volume (a 4.8% increase).

To develop a plausible explanation for this unexpected result, we develop a duopoly model by incorporating the changing competitive nature before and after the platform’s entry. Specifically, before entry, the platform and the seller engage in a “vertical competition”: the platform earns a sales-based commission while the seller sets the retail price. However, after entry, the original vertical competition is augmented by a “horizontal competition” that involves direct price competition between the platform and the seller. Therefore, the platform’s market entry may not be beneficial especially when the loss in sales commission (when the seller sells less) outweighs the gain in profit from direct sales. By focusing on the platform’s “co-existent” entry conditions under which the seller can exist upon the platform’s entry, we obtain the following analytical result. When the platform’s entry creates a positive “spillover” effect that enlarges the seller’s market potential and when the platform’s market potential is moderate, the seller can afford to charge a higher selling price and sell more upon the platform’s entry. Hence, the platform’s entry can benefit both the seller and the platform (who earns more sales commission in addition to its profit generated from direct sales). Thus, our analytical result provides a plausible explanation for our empirical observation: a platform’s entry can benefit the seller under certain market conditions.

Do Antitrust Laws Chill Corporate Disclosure?

Do Antitrust Laws Chill Corporate Disclosure?

Jinjie Lin

Yale School of Management

Abstract

I study how antitrust concerns arising from product markets influence corporate disclosure in capital markets. While securities regulators encourage disclosure, product-market regulators discourage disclosure of competitively sensitive information. Thus, firms may refrain from disclosing such information when antitrust regulators and private plaintiffs use corporate disclosure to infer collusion. Using peer firms’ announcements of product price increases as a shock to antitrust concerns, I find that companies with more antitrust concerns reduce their disclosure of competitively sensitive information, such as information on future strategies, sales, production, and product markets. Additional analyses suggest that firms with more antitrust concerns may also raise their product prices without issuing explicit press releases. To avoid further attention from antitrust regulators and plaintiffs, these companies limit their disclosure of competitively sensitive information. Overall, my findings suggest that antitrust considerations from product markets can spill over into capital markets.

Market Power and Credit Rating Standards: Global Evidence

Market Power and Credit Rating Standards: Global Evidence

 

 

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Pepa Kraft

HEC Paris

Shiheng Wang

Hong Kong University of Science & Technology (HKUST)

Gwen Yu

University of Michigan

 

Abstract

We examine how the market power of credit rating agencies (CRAs) affects their rating standards. Using a global sample across 26 countries from 1994 to 2019, we find that greater market power of global CRAs, measured by their country-level market shares, is associated with stricter corporate ratings. In addition, the increase in global CRAs’ market shares contributes to the tightening trend in their credit ratings worldwide. Exploiting the NRSRO designation of local CRAs in Japan, we find that global CRAs issue more inflated ratings following a decline in their market power. Further, global CRAs’ greater market power is associated with timelier ratings, fewer missed defaults, but more false warnings. Collectively, our findings suggest that global rating agencies’ market power leads to stricter rating standards and timelier ratings by strengthening the agencies’ reputation concerns, but at the expense of increased false warnings.

The New Sustainability Exemption in Austrian Competition Law

The New Sustainability Exemption in Austrian Competition Law

 

Viktoria H.S.E. Robertson

Vienna University of Economics and Business; University of Graz

Abstract

A new sustainability exemption entered into force with Austria’s most recent competition law amendment of September 2021. The new exemption provision’s aim is to promote genuine green cooperation. The sustainability exemption’s scope of application, however, is not yet clear. The Austrian Federal Competition Authority is set to publish sustainability guidelines in 2022 in order to provide companies with further guidance. It also remains an open question to what extent the new provision is compatible with Article 101 para 3 TFEU.