Tuesday, November 13, 2018
The Right of Defense in the Decentralized System of EU Competition Law Enforcement: A Call for Harmonization from Central and Eastern Europe
Maciej Bernatt University of Warsaw, Centre for Antitrust and Regulatory Studies, Marco Botta Max Planck Institute for Innovation and Competition, and Alexandr Svetlicinii, University of Macau - Faculty of Law address The Right of Defense in the Decentralized System of EU Competition Law Enforcement: A Call for Harmonization from Central and Eastern Europe.
ABSTRACT: The article compares the application of the right of defense in competition law proceedings by seven National Competition Authorities (NCAs) of Central and Eastern Europe (CEE). In particular, the article focuses on four sub-rights that are part of the right of defense: right to be informed; right to access the file; privilege against self-incrimination (PASI) and legal professional privilege (LPP). The article shows that the NCAs selected as case studies generally provide lower procedural guarantees in comparison to DG Competition of the European Commission. The findings of the article are relevant in view of the Directive aiming at harmonizing the powers of NCAs (“ECN Directive”). The legislation aims at strengthening the investigatory tools of NCAs, while it pays limited attention to the procedural guarantees followed by NCAs. In view of the diverging application of the right of defense by the NCAs selected as case studies, the article challenges such policy choice, claiming that stronger investigative powers should be counterbalanced by a more homogenous application of the right of defense by NCAs of the EU Member States.
Monday, November 12, 2018
Ohio v. American Express: Misunderstanding Two-Sided Platforms, the Credit Card 'Market,' and the Need for Procompetitive Justifications
Jeffrey Lynch Harrison, University of Florida - Levin College of Law explains Ohio v. American Express: Misunderstanding Two-Sided Platforms, the Credit Card 'Market,' and the Need for Procompetitive Justifications.
ABSTRACT: In Ohio v. American Express Co., the United States Supreme Court had its first knowing encounter with what it incorrectly viewed as a two-sided platform in the context of American Express’ Non Disclosure Provisions (NDP). Under these provisions merchants accepting the American Express card for payment are not permitted to inform consumers that other cards charge merchants less for their use and that this could be reflected in the final price paid. The opinion includes poor reasoning, a lack of attention to precedent, and bad news for those who thought antitrust law was due for a revival. Yet, and perhaps surprisingly, the outcome may be correct. Part II of this Essay very briefly summarizes the antitrust landscape in order to provide an understanding of where the practices of America Express fit. Part III then discusses the two-sided market issue generally and how it was treated in American Express specifically. That Part includes an explanation of why what was involved in American Express was actually a one-sided market that had been segmented in the interests of price discrimination. In fact, American Express and its competitors sell a single product to one group of customers: the right to delay payment to purchasers of goods and services. Part IV also makes the point that the American Express system shares characteristics of tying, resale price maintenance, and exclusive dealing. It further claims that the NDP shares none of the qualities that make those practices frequently lawful. American Express’s activity skirts the edges of several vertical restraints and its underlying character restricted interbrand competition. Part V includes general observations about the case and suggests the outcome may be correct but that the reasoning employed to get there is troublesome in that it continues the trend to minimize the importance of antitrust law.
Stephen Houck, Offit Kurman, P.A. asks Android - Is There a Viable Monopolization Case?
ABSTRACT: This paper considers the viability of a Sherman Act § 2 enforcement action in respect of Google’s Android operating system. It discusses the applicability of the D.C. Circuit’s 2001 Microsoft opinion in which Microsoft was found to have engaged in anticompetitive conduct to maintain its Windows operating system monopoly. The paper explains why, despite some superficial similarities, the facts that gave rise to liability in Microsoft are different in crucial respects from those pertaining to Android. The paper concludes 1) that Google lacks monopoly power in a properly defined market in which Android competes; and 2) that Google has not engaged in the type of anticompetitive conduct condemned in Microsoft. The facts underlying Microsoft and the D.C. Circuit’s reasoning strongly suggest that an enforcement action in the United States is unlikely to succeed notwithstanding the European Commission’s July 2018 Android decision.
Murthy Kambhampaty, CAP Economics; Navigant Economics assesses Sound Guppi Safe Harbor: A Calibrated Unilateral Effects Screen for Merger Enforcement.
ABSTRACT: The 2010 Horizontal Merger Guidelines (Guidelines) advance the use of the Gross Upward Pricing Pressure Index (GUPPI) for analyzing unilateral effects of mergers in differentiated-products industries. However, the Guidelines do not quantify a GUPPI safe harbor threshold, whereas the Guidelines do quantify thresholds for concentration (HHI) and change in concentration (ΔHHI) below which a merger is considered unlikely to harm competition, i.e., to lie within a safe harbor. Prior proposals for a GUPPI safe harbor threshold reflect a calibration to the 5 percent benchmark for the “small but significant nontransitory increase in price” (SSNIP) in the Guidelines, but the benchmark SSNIP is not a safe harbor threshold. This paper presents a GUPPI safe harbor defined as (a.) a GUPPI threshold that is derived from the ΔHHI safe harbor, along with (b.) a diversion ratio threshold to address the concern that a GUPPI safe harbor threshold produces false negatives under specific conditions. A sound GUPPI safe harbor, as derived in this paper, improves the clarity, consistency, and transparency of merger enforcement under the Guidelines.
ABSTRACT: Only merging party conduct that materially contributes to the change of target control during the standstill period is prohibited gun-jumping.
Sunday, November 11, 2018
Episode 13: Academics and big tech, with Prof Daniel Sokol: https://competitionlore.com/podcasts/academics-and-big-tech/
Episode 14: Why we need maverick academics, with Prof Ioannis Lianos: https://competitionlore.com/podcasts/maverick-academics-antitrust/
Friday, November 9, 2018
Primary Care Competition and Quality of Care: Empirical Evidence from Medicare's Physician Quality Reporting System
Christopher Brunt, Georgia Southern University - Department of Finance and Economics, Joshua R. Hendrickson, University of Mississippi; American Institute for Economic Research, and John R. Bowblis, Miami University of Ohio - Department of Economics identify Primary Care Competition and Quality of Care: Empirical Evidence from Medicare's Physician Quality Reporting System.
Abstract: Using data from Medicare’s Physician Compare Quality Reporting System, we explore the effects of primary care physician (PCP) practice competition on four distinct quality metrics directly tied to screening and follow-up care. Controlling for physician and practice attributes, we find strong evidence that primary care practices in more concentrated markets are less likely to perform screening and follow- ups for blood pressure, body weight, depression, and tobacco use. These results suggest that mergers of physician practice may harm quality competition implying that antitrust merger review should not only focus on how provider mergers impact commercially insured prices but also quality for Medicare beneficiaries.
John R. Allison, University of Texas - McCombs School of Business formulates Patent Value.
ABSTRACT: This paper provides an analysis of the concept of patent value and the identification of patents with economic value. It distinguishes private and social value, and critically analyzes the literature on the subject of patent value.
Luis Cabral, NYU is Standing on the Shoulders of Dwarfs: Dominant Firms and Innovation Incentives.
ABSTRACT: We develop a dynamic innovation model with three important features: (a) asymmetry between large and small firms ("giants" and "dwarfs"); (b) technology transfer by acquisition; and (c) the distinction between radical innovation (compete for the market) and incremental innovation (compete within the market). We provide conditions such that (a) greater asymmetry between giant and dwarfs decreases incremental innovation but increases radical innovation; and (b) allowing for technology transfer increases incremental innovation but decreases radical innovation.
These results have several policy implications, including: (a) with weak markets for technology, a soft antitrust policy toward dominant firms leads to an increase in radical innovation but a decrease in incremental innovation; (b) a merger policy that restricts the acquisition of fringe firms by dominant firms leads to lower incremental innovation rates and higher radical innovation rates; (c) the effect of IP protection on innovation is mixed: by increasing the prize from patenting, it increases incremental innovation; but, by improving the market for technology, it reduces the rate of radical innovation.
Thursday, November 8, 2018
Allen P. Grunes, The Konkurrenz Group and Maurice E. Stucke, The Konkurrenz Group; University of Tennessee College of Law think about Potential Legal Issues in Terminating the ASCAP and BMI Decrees.
ABSTRACT: This paper addresses some of the likely challenges that the DOJ would face should it seek to terminate the ASCAP and BMI consent decrees.
In Part I, we provide some background on ASCAP and BMI, the consent decrees, and market structure. In Part II, we discuss how these two decrees have become an important part of the legal scaffolding for licensing music over the past 70 years.
Given the important role the decrees have played in mitigating the antitrust risks from ASCAP and BMI while promoting the efficiencies from collective licensing, Part III examines the legal standard the federal court would likely apply in determining whether to terminate the decrees. One problem is that if the ASCAP and BMI consent decrees were terminated, the duopoly would remain, and licensees and consumers would bear the risk of unduly restrictive anticompetitive practices. A second problem is the difficulties the DOJ would likely face in convincing the court that terminating the decrees would benefit the public, given that it reached the opposite conclusion a couple of years ago. Moreover, the concerns the DOJ heard during its review process from licensees, such as Netflix, Pandora, and religious broadcasters, would undercut the argument that the public would somehow benefit from the decrees’ termination.
Part IV examines the interplay between competition and regulation. One assumption is that an antitrust agency’s mission to promote competition is in tension with prescriptive government regulation. This is certainly true at times. But at other times, particularly in markets with high transaction costs and dominant players, regulation may be needed to promote competition. So this Part explores how behavioral regulatory decrees, like ones in ASCAP, BMI, and other notable antitrust cases, can actually promote, rather than undermine, competition.
If terminating the decrees will harm, rather than help, competition and consumers, what are the alternatives? Part V offers three potential paths going forward.
Gregory J. Werden, U.S. Department of Justice - Antitrust Division has a fascinating paper on the Establishment of the Antitrust Division of the U.S. Department of Justice.
ABSTRACT: Official sources state that the Antitrust Division of the U.S. Department of Justice was created by Attorney General Homer S. Cummings in 1933, but no corroboration is provided. This note carefully examines the events of 1933 as well prior history, and it discovers that the Antitrust Division actually was established by Attorney General A. Mitchell Palmer in 1919.
Kate Ho, Princeton University - Department of Economics; National Bureau of Economic Research (NBER) and Robin S. Lee, Harvard University - Department of Economics; National Bureau of Economic Research (NBER) have an interesting paper on Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets.
ABSTRACT: We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, Nash-in-Nash with Threat of Replacement, that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer-optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer bene fits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.
Competition Law and Trade in Energy vs. Sustainable Development: A Clash of Individualism and Cooperative Partnerships?
Paolo Davide Farah, West Virginia University (WV, USA); gLAWcal - Global Law Initiatives for Sustainable Development (United Kingdom) and Tivadar Ötvös, gLAWcal - Global Law Initiatives for Sustainable Development ask Competition Law and Trade in Energy vs. Sustainable Development: A Clash of Individualism and Cooperative Partnerships?
ABSTRACT: At first sight the potential discrepancy between competitive behavior of market participants, trade rules and the basic notion of sustainable development may seem to be of a negligible importance. However, during the interactions of market processes with sustainability goals through various levels of support, provided by public or private entities problems arise, even more so in the light of the commitments of the Paris Agreement, the United Nations Sustainable Development Goals (SDGs) and corporate social responsibility principles. This Article aims to address the most obvious overlappings between these areas under the coverage of legal provisions regulating the grant of state aid, subsidies and policies related to mutual cooperation of private subjects towards achieving sustainability. The purpose is to draw conclusions regarding the criteria taken into consideration during the evaluation of competition distorting behaviors in case of environmental and sustainable energy state aid, subsidy- and contract-based cooperation and coalitions among private entities.
Wednesday, November 7, 2018
Assistant Attorney General Makan Delrahim Delivers Remarks at the Federal Institute of Telecommunications’ Conference in Mexico City
Alexandre de Corniere, Toulouse School of Economics and Greg Taylor, University of Oxford - Oxford Internet Institute write on Upstream Bundling and Leverage of Market Power.
ABSTRACT: Motivated by the recent Google-Android antitrust case, we present a novel rationale for bundling by a multiproduct upstream firm. Consider a market where downstream firms procure components from upstream suppliers. U1 is the only supplier of component A, but faces competition for component B. Suppose that component A increases demand for the downstream product and that contractual frictions induce positive wholesale markups. By bundling A and B, U1 reduces its B-rivals' willingness to offer slotting fees to the downstream firm, thereby allowing U1 to capture more of the industry profit. Bundling harms the downstream firm and the B rivals, and can be anticompetitive.
Emmanuel Petrakis, University of Crete - Department of Economics and Panagiotis Skartados, University of Crete - Department of Economics address Vertical Arrangements and Upstream Mergers.
ABSTRACT: We study the incentives for horizontal upstream mergers in a quantity-setting vertically related industry, under bargain and endogenous contract types. We show that the contract types used could have important consequences for the equilibrium market structure and vice versa. If it is the retailers who choose contract types, they share the same preferences as the policymakers and choose to offer two-part tariff contracts, leading the suppliers not to merge. This result has some obvious policy implications. If it is the suppliers who decide contract types, they prefer to merge and offer a partial forward vertical ownership scheme. Under Bertrand competition, there is always an upstream merger, but the common manufacturer will offer a two-part tariff contract for intermediate bargain power levels. For high bargain power levels, he will choose a partial forward vertical ownership scheme, while for low bargain power will suffer from negative profits. A policymaker, considering the maximization of the social welfare should consider the upstream merger and two-part tariff contracts.
ABSTRACT: The General Court for the first time rules under what circumstances the Commission has a duty to waive merger remedies. To prevent market distortions, the Commission must waive remedies that are no longer necessary to ensure effective competition. In response to a waiver request, the Commission must pro-actively seek to corroborate or refute evidence using its investigative tools.
Louis Kaplow, Harvard Law School; National Bureau of Economic Research (NBER) explores Recoupment, Market Power, and Predatory Pricing. Worth downloading!
ABSTRACT: Recoupment inquiries play an important role in predatory pricing cases. Nevertheless, their place in antitrust analysis is unclear and potentially problematic in ways that are not fully appreciated. Does a recoupment requirement define, augment, or replace the preexisting monopoly power requirement that involves similar analysis? How can a recoupment test be inserted in sequential assessments of alleged predatory pricing when all of the steps are intertwined with the others, including those deemed to come later? Why is a plaintiff permitted to show either that recoupment was ex ante plausible or that sufficient ex post profit recovery occurred, rather than requiring one in particular, or both? This article addresses these questions by examining the underlying purposes of recoupment assessments and predatory pricing inquiries more broadly. As will become evident, much of the analysis is relevant not just to predatory pricing but to other forms of anticompetitive conduct as well.
Tuesday, November 6, 2018
Principal Deputy Assistant Attorney General Andrew C. Finch Delivers Remarks at Judge Douglas H. Ginsburg Liber Amicorum Conference at Antonin Scalia Law School
William E. Kovacic, George Washington University - Law School; King's College London – The Dickson Poon School of Law, Robert C. Marshall, Pennsylvania State University, College of the Liberal Arts - Department of Economic, and Michael J. Meurer, Boston University - School of Law offer evidence about Serial Collusion by Multi-Product Firms.
ABSTRACT: We provide empirical evidence that many multi-product firms have each participated in several cartels over the past 50 years. Standard analysis of cartel conduct, as well as enforcement policy, is rooted in the presumption that each cartel in which a given firm participates is a singular activity, independent of other cartel conduct by the firm. We argue that this analysis is deficient in many respects in the face of serial collusion by multi-product firms. We offer policy recommendations to reign in serial collusion, including a mandatory coordinated effects review for any merger involving a serial colluder, regardless of the apparent nature of the merger.