Antitrust & Competition Policy Blog

A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures

A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures

By:	John M. Barrios; Thomas G. Wollmann
Abstract:	Antitrust authorities search public documents to discover anticompetitive mergers. Thus, investor disclosures may alert them to deals that would otherwise escape scrutiny, creating disincentives for managers to divulge transactions. We study this behavior in publicly traded US companies. First, we estimate a regression discontinuity that exploits mandatory disclosure thresholds stipulated by securities law. We find that releasing information to investors poses antitrust risk. Second, we present a method for measuring undisclosed merger activity that relies on financial accounting reporting requirements. We find that undisclosed mergers total $2.3 trillion between 2002 and 2016.
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:29655&r=&r=ind

Innovation, Antitrust Enforcement, and the Inverted-U

Innovation, Antitrust Enforcement, and the Inverted-U

 

 

Richard Gilbert

University of California, Berkeley

Christian Riis

Norwegian Business School

Erlend Riis

University of Cambridge

Date Written: February 10, 2022

Abstract

The effects of monopoly power or mergers on incentives to innovate are important issues for antitrust enforcement, but they receive relatively little attention in litigated cases compared to the analysis of predicted effects on prices. This paper reviews what is known about the relationship between market structure and innovation and its implications for antitrust enforcement. A focus is on the significance of the inverted-U result in dynamic markets identified in research by Philippe Aghion, Peter Howitt, and their co-authors. We note that these results do not apply directly to mergers. A merger creates a negative externality by eliminating the incentive of each merging party to invest in an innovation that takes sales from the other party. However, mergers also can create a positive externality for innovations that expand the merged firm’s demand or accelerate discovery. We conclude that the net effects for innovation from mergers and from the acquisition or maintenance of monopoly power depend importantly on the extent to which mergers or monopoly power increase existing profits that are jeopardized by innovation.

FinTechs and Racial Discrimination in Lending

FinTechs and Racial Discrimination in Lending

 

 

Rachel M. B. Atkins

New York University (NYU) - Department of Management and Organizational Behavior

Lisa D. Cook

Michigan State University - Department of Economics and James Madison College; NBER

Robert Seamans

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

Date Written: January 9, 2022

Abstract

We assess the role of FinTech firms in loans made through the Paycheck Protection Program (PPP). The PPP program, created by the U.S. government as a response to the COVID-19 pandemic, provides loans to small businesses so they can keep employees on their payroll. We argue that FinTech firms’ reliance on technology rather than relationship-banking approaches used by traditional banks helps to address discrimination in lending, at least in part. Using newly released data on the PPP program, we find support for our arguments: while Black-owned businesses received loans that were approximately 50 percent lower than observationally similar White-owned businesses, the effect narrows considerably when FinTechs are allowed to provide loans.

Passive Forward Ownership and Upstream Collusion

Passive Forward Ownership and Upstream Collusion

Ioannis Pinopoulos

National and Kapodistrian University of Athens - Department of Economics

Konstantinos Charistos

University of Macedonia - Department of Economics

Panagiotis Skartados

Athens University of Economics and Business - Department of Economics

 

Abstract

We examine the effects of passive forward ownership on the sustainability of upstream collusion. We consider a homogeneous Cournot duopoly with competing vertical chains. In one vertical chain, the upstream firm has passive ownership over its downstream client. We find that passive forward ownership hinders upstream collusion. We identify as the main driver of our finding the negative effect that passive forward ownership has on the upstream non‐owner’s collusive profits.

The Impact of Privacy Regulation on Web Traffic: Evidence From the GDPR

The Impact of Privacy Regulation on Web Traffic: Evidence From the GDPR

Raffaele Congiu

Lorien Sabatino

Department of Production and Management Engineering, Politecnico di Torino

Geza Sapi

European Commission, DG Competition, Chief Economist's Team; Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Abstract

We use traffic data from around 5,000 web domains in Europe and United States to investigate the effect of the European Union’s General Data Protection Regulation (GDPR) on website visits and user behaviour. We document an overall traffic reduction of approximately 15% in the long-run and find a measurable reduction of engagement with websites. Traffic from direct visits, organic search, email marketing, social media links, display ads, and referrals dropped significantly, but paid search traffic - mainly Google search ads - was barely affected. We observe an inverted U-shaped relationship between website size and change in visits due to privacy regulation: the smallest and largest websites lost visitors, while medium ones were less affected. Our results are consistent with the view that users care about privacy and may defer visits in response to website data handling policies. Privacy regulation can impact market structure and may increase dependence on large advertising service providers. Enforcement matters as well: The effects were amplified considerably in the long-run, following the first significant fine issued eight months after the entry into force of the GDPR.

CCP Conversations: Evolving Merger Guidelines (webinar)

Webinar Registration

 

 

Topic

CCP Conversations: Evolving Merger Guidelines

Description

Merger guidelines play a key role in providing clarity about approaches for competition authorities' evaluation of mergers across the the European Union, UK and US. Emerging from the current debate about standards of proof for merger challenges, the content of merger guidelines is now open for question. An ongoing public enquiry on US merger guidelines addresses 15 different topics. Meanwhile, the UK merger guidelines were updated in 2021 and the European Commission guidelines, in contrast, have remained unchanged since 2004. What are the elements of merger guidelines under review, what changes might be made, and in what sense would changes be appropriate? This Conversation offers an opportunity to hear a US perspective from a key participant in their policy debate - and to compare transatlantic thinking.

 

Register here

The Berkeley 5 Antitrust Economist Program on Proposed Antitrust Legislation is now up on Youtube

This was a really great program with Joe Farrell, Rich Gilbert, Mike Katz, and Dan Rubinfeld, and Carl Shapiro.  It is amazing how many Berkeley economists have served as chief economist of DOJ or FTC.

 

 

 

Anti-Collusion Leniency Programs and the Pricing of IPOs: International Evidence

Anti-Collusion Leniency Programs and the Pricing of IPOs: International Evidence

 

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Abhinav Goyal

University College Cork

Leon Zolotoy

University of Melbourne - Melbourne Business School

 

Abstract

We provide evidence that anti-collusion leniency legislations around the world reduce IPO underpricing. The effect is amplified (mitigated) among IPOs with more prominent agency concerns (lower level of information asymmetry) and is mitigated in countries with stringent financial reporting regulations and strong external governance mechanisms. Following the passage of the legislations, IPOs have higher float, manifest a stronger link between proceeds raised and post-IPO operating performance, and are more likely to disclose the use of proceeds and to be oversubscribed. Our results are consistent with the view that leniency legislations mitigate informational and agency-related frictions, resulting in less underpriced IPOs.

2022 Handler Lecture

THE 2022 MILTON HANDLER LECTURE ON ANTITRUST
Sponsoring Committee: Antitrust and Trade Regulation
Yee Wah Chin, Chair

IN-PERSON:
Wednesday, May 18, 2022, 6:30-8:00 PM, with reception to follow

VENUE:
Meeting Hall of the House of the Association of the Bar of the City of New York
42 West 44th St., New York, NY 10036

WELCOME:
Sheila S. Boston, President, New York City Bar Association

KEYNOTE SPEAKER:
Jonathan Kanter, Assistant Attorney General for the Antitrust Division
U.S. Department of Justice

PANELISTS:
Nancy L. Rose, Charles P. Kindleberger Professor of Applied Economics
MIT Department of Economics
Daniel Francis, Climenko Fellow and Lecturer on Law
Harvard Law School

MODERATOR:
Spencer Weber Waller, John Paul Stevens Chair in Competition Law
Director of the Institute for Consumer Antitrust Studies, Loyola Law School

No Fee to Attend. Please register at
https://services.nycbar.org/EventDetail?EventKey=CMTE051822

For registration assistance, contact Customer Relations at 212-382-6663 or
[email protected]

The Milton Handler Lectures, devoted to developments in the law of antitrust, are made
possible by a generous endowment fund established by Professor Handler -- a leading
authority on antitrust who taught at Columbia Law School for nearly 50 years; practiced
at Kaye, Scholer, Fierman, Hays & Handler; and received the John Sherman Award from
the Department of Justice.

Selling Antitrust

Selling Antitrust

Hastings Law Journal, 2022

Herbert Hovenkamp

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

Abstract

Antitrust enforcers and its other defenders have never done a good job of selling their field to the public. That is not entirely their fault. Antitrust is inherently technical, and a less engaging discipline to most people than, say, civil rights or criminal law. The more serious problem is that when the general press does talk about antitrust policy it naturally gravitates toward the fringes, both the far right and the far left. Extreme rhetoric makes for better press than the day-to-day operations of a technical enterprise. The extremes are often stated in overdramatized black-and-white terms that avoid the real world subtleties that make science more fact-dependent but also more useful.

Both extreme positions generally favor lower output as a solution to antitrust problems. The result is higher prices and also fewer jobs. The right shrugs at higher prices because of its faith that there are offsetting efficiencies in production. The left simply accepts that higher prices benefit smaller competitors, its preferred protected class. On employment, the extreme right does not really care, because suppressing labor power was part of a bigger neoliberal agenda. The negative impact on jobs remains a major blind spot for the left, however, which claims to support worker rights but ends up advocating policies that do much more harm than good.

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 Gugler

Vienna University of Economics and Business

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.

Competition, Innovation, and Inclusive Growth

Competition, Innovation, and Inclusive Growth

 

 

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Fuad Hasanov

International Monetary Fund

Reda Cherif

International Monetary Fund (IMF)

 

Abstract

We provide an overview of the theories and empricial evidence on the complex relationship among innovation, competition, and inclusive growth. Competition and innovation-led growth are critical to drive productivity gains and support broad-based growth. However, new technologies and trends in market concentration are stifling future innovation while contributing to the marked increase in inequality. Beyond consumer welfare in a narrow market, competition policy should adapt to this new reality by considering the spillover and dynamic effects of market power, especially on firm entry, innovation, and inequality. Innovation policies should tackle not only government failures but also market failures.

Collusive Compensation Schemes Aided by Algorithms

Collusive Compensation Schemes Aided by Algorithms

By:

Simon Martin; Wolfgang Benedikt Schmal

Abstract:

Sophisticated collusive compensation schemes such as assigning future market shares or direct transfers are frequently observed in detected cartels. We show formally why these schemes are useful for dampening deviation incentives when colluding firms are temporary asymmetric. The relative attractiveness of each of these schemes is shaped by firms’ ability to predict future market conditions, possibly aided by algorithms. Prices and profits are inverse u-shaped in prediction ability. Assigning future market shares is optimal when prediction ability is intermediate, and otherwise direct transfers are optimal. Competition authority's limited resources should be utilized to respond to these changing market conditions.

Mergers Involving Nascent Competition

Mergers Involving Nascent Competition

 

A. Douglas Melamed

Stanford Law School

Abstract

Mergers involving nascent competition are a hot topic in antitrust circles, especially in light of the pending FTC case against Facebook; but the thinking about the topic is nascent, too. This paper is intended to contribute to that thinking and to discuss a variety of questions that have not previously been discussed together. It explains that, while the vast majority of such mergers are likely to be benign or procompetitive, some might be very harmful to competition and economic welfare. It argues that the latter can in principle be prohibited under existing Section 2 law, suggests criteria for doing so, and addresses policy concerns about merger efficiencies, error costs, the impact of heighted scrutiny of such mergers on venture capital investment, and post-acquisition challenges to such mergers.

Market Power and Artificial Intelligence Work on Online Labour Markets

Market Power and Artificial Intelligence Work on Online Labour Markets

 

 

Néstor Duch-Brown

Joint Research Centre - European Commission

Estrella Gomez-Herrera

Joint Research Center of the European Commission; University of Balearic Islands

Frank Mueller-Langer

University of the Bundeswehr Munich; Max Planck Institute for Innovation and Competition; European Commission, Joint Research Center

Songül Tolan

Joint Research Center of the European Commission

 

Abstract

We investigate three alternative but complementary indicators of market power on one of the largest online labour markets (OLMs) in Europe: (1) the elasticity of labour demand, (2) the elasticity of labour supply, and (3) the concentration of market shares. We explore how these indicators relate to an exogenous change in platform policy. In the middle of the observation period, the platform made it mandatory for employers to signal the rates they were willing to pay as given by the level of experience required to perform a project, i.e., entry, intermediate or expert level. We find a positive labour supply elasticity ranging between 0.06 and 0.15, which is higher for expert-level projects. We also find that the labour demand elasticity increased while the labour supply elasticity decreased after the policy change. Based on this, we argue that market-designing platform providers can influence the labour demand and supply elasticities on OLMs with the terms and conditions they set for the platform. We also explore the demand for and supply of AI-related labour on the OLM under study. We provide evidence for a significantly higher demand for AI-related labour (ranging from +1.4% to +4.1%) and a significantly lower supply of AI-related labour (ranging from -6.8% to -1.6%) than for other types of labour. We also find that workers on AI projects receive 3.0%-3.2% higher wages than workers on non-AI projects.

Digital Evidence Gathering in Cartel Investigations

Digital Evidence Gathering in Cartel Investigations

 

Cristina Volpin

University of Padova; Organization for Economic Co-Operation and Development (OECD) - Competition Division; University College London - Faculty of Laws; Queen Mary University of London, School of Law

Takuya Ohno

Organization for Economic Co-Operation and Development (OECD) - Competition Division

Date Written: September 2020

Abstract

Companies increasingly recur to digital communications and storage of documents. The change brought by digitalisation to the way in which companies operate creates opportunities but also a number of challenges for competition enforcement.

Competition authorities may adopt a number of digital tools and resources to strengthen their fight against cartels, which may allow them to search through high volumes of data in a swift manner and with a high degree of accuracy. However, the implementation of these tools may not always be straightforward. A few legal and practical challenges may arise in relation to the protection of the authenticity of the seized evidence and of the rights of defence of the company and its employees. In addition, internal coordination of resources and external co-operation may need to be implemented to ensure the full exploitation of the opportunities offered by these tools. This Issues Note will discuss some advantages and disadvantages of the most common digital tools for evidence gathering, and it will explore some of the legal and practical issues arising from their use, drawing from cases where competition authorities across the world dealt with the delicate phase of evidence gathering in cartel enforcement.

The University of Florida is looking for antitrust visiting professors (among other areas) for next year - apply

See here: https://explore.jobs.ufl.edu/en-us/job/521323/visiting-professor-levin-college-of-law 

The University of Florida is looking for antitrust visiting professors (among other areas) for next year - apply

See here: https://explore.jobs.ufl.edu/en-us/job/521323/visiting-professor-levin-college-of-law 

Colluding Through Smart Technologies: Understanding Agreements in the Age of Algorithms

Colluding Through Smart Technologies: Understanding Agreements in the Age of Algorithms

 

Giuseppe Colangelo

University of Basilicata, Department of Mathematics, Computer Science and Economics; Stanford Law School; LUISS Guido Carli, Department of Business and Management

Francesco Mezzanotte

Roma Tre University

 

Abstract

By affecting business strategies and consumers’ behavior, the wide-scale use of algorithms, prediction machines and blockchain technology is currently challenging the suitability of several legal rules and notions which have been designed to deal with human intervention. In the specific sector of antitrust law, the question is arising on the adequacy of the traditional doctrines sanctioning anticompetitive cartels to tackle coordinated practices which, in the absence of an explicit “meeting of the minds” of their participants, may be facilitated by algorithmic processes adopted, and eventually shared, by market actors. The main concern in these cases, discussed both at regulatory and academic level, derives from the general observation that while the traditional concept of collusive agreement requires some form of mutual understanding among parties, nowadays decision-making of firms is increasingly transferred to digitalized tools. Moving on from these premises, the paper investigates the impact that the rules applicable to the conclusion of (smart) contracts may have, from an antitrust law perspective, in the detection and regulation of anticompetitive practices.

What Should We Do about E-Commerce Platform Giants? —The Antitrust and Regulatory Approaches in the US, EU, China, and Japan

What Should We Do about E-Commerce Platform Giants? —The Antitrust and Regulatory Approaches in the US, EU, China, and Japan

Toshiaki Takigawa

Kansai University

 

Abstract

This paper focuses on one of the most important digital platform sectors—E-commerce—addressing the antitrust enforcement, comparing it with new regulatory approaches, learning from experiences in the US, EU, China, and Japan. E-commerce is shown to have distinct characteristics, as compared to other platform sectors: in particular, prevalence of multihoming and product differentiation. As a result, e-commerce market shares in the US, China and Japan all have shown no tendency toward monopoly. It is, therefore, misguided to adopt ex-ante fixed regulation on digital platforms as a whole, as now envisaged by the EU Digital Markets Act proposal. Instead, competition in e-commerce should be protected by competition-law enforcement, which has the merit of a flexible case-by-case approach. Focus by competition authorities should be put on exclusionary practices of e-commerce giants, most pernicious of which is exclusive dealing (or “pick one from two” practice), since this practice destroys multi-home nature of e-commerce. A striking example of this is a crackdown recently conducted by the Chinese competition authority against Alibaba and Tencent. On the other hand, forced data sharing, as well as interoperability, has recently received particular attention as public policy aimed at ameliorating competition in digital platforms. However, for e-commerce, such forceful intervention leads to negative consequences of robbing enterprises of incentives to analyze data and innovate. Instead, competition-law enforcement is called for, although competition law jurisprudence on refusal-to-deal does not lead to enforcement on e-commerce giants. Meanwhile, exploitative abuse (or superior-bargaining-position) regulation has attracted increasing attention, in order to protect suppliers from abuse by e-commerce giants. This regulation needs exacting application, in order to achieve transparency in finding exploitation, and then needs to weigh the need to protect suppliers against benefits to consumers realized through efficiency in e-commerce.