Collusive Bidding, Competition Law, and Welfare

Collusive Bidding, Competition Law, and Welfare

 

Shubhashis Gangopadhyay

India Development Foundation; University of Gothenburg; University of Groningen, Faculty of Economics and Business, Students; Indian School of Public Policy

Stefan Sjögren

University of Gothenburg - Centre for Finance - School of Business, Economics and Law

Aineas Mallios

University of Gothenburg

Abstract

We explain why competing firms form collective entities to buy patents from other entities, particularly from non-producing entities (NPEs), and follow a catch and release patent strategy. We show why competitors bidding as a single unit is better than competitors bidding against each other and claim that collusive bidding on patents held by NPEs, even when the patents are not essential for a standard (SEPs), may be socially beneficial. This provides a theoretical foundation that explains why competition authorities often allow collusive bidding for patents and why courts employ the “rule of reason” to analyze agreements under competition law.