Thursday, May 23, 2024

The (second) modernisation of Article 102 TFEU: reconciling effective enforcement, legal certainty and meaningful judicial review

The (second) modernisation of Article 102 TFEU: reconciling effective enforcement, legal certainty and meaningful judicial review

Pablo Ibáñez Colomo

London School of Economics - Law School

Abstract

This paper discusses how Article 102 TFEU can be interpreted and applied in a manner that is consistent with effective enforcement, legal certainty and meaningful judicial. review. First, it explains the points of convergence and divergence between the key actors in the system. In particular, it shows that the Court has a duty to ensure that EU law is uniformly applied across the Union, while allowing for the necessary flexibility into the system. Second, the paper summarises the Article 102 TFEU acquis of the past decade and contrasts it with the remaining uncertainties. Finally, it identifies four key principles which could ensure that the three abovementioned interests can be reconciled.

May 23, 2024 | Permalink | Comments (0)

Wednesday, May 22, 2024

Antitrust & Regulatory Compliance in The 21st Century: New Challenges, New Opportunities and the Role of AI

Antitrust & Regulatory Compliance in The 21st Century: New Challenges, New Opportunities and the Role of AI

Rosa M. Abrantes-Metz

Berkeley Research Group, LLC

Albert Metz

Berkeley Research Group, LLC

Abstract

We have previously made the case that the high penalties for cartels, the expansion of leniency programs, the new incentive provided by the U.S. Department of Justice, and the increased use of screening methods by competition authorities and private litigants would motivate corporations to enhance their antitrust compliance programs. In particular, that corporations would increasingly incorporate screens as part of such programs. We have, indeed, observed a greater focus on antitrust compliance over the last few years, even more so with new regulations on competition in the tech space.

Antitrust compliance was, for a long time, part of a process that had to exist because it was simply required, and it was not characterized by many as a specially exciting and dynamic area. But a combination of recent new demands and challenges from an ever more complex and intense regulatory environment, as well as new powerful technologies and tools, are transforming this area of work into a highly creative and value-added activity which, of course, extends much beyond antitrust compliance to several of the functions of the corporation as a whole.

Just as we have, for some time, been advocating for the use of screens in antitrust compliance, in this article we will advocate for the use of AI in that same context. Both detection and deterrence of anticompetitive conduct could get a major boost with the assistance of these tools, allowing corporations to stay ahead of the game in a cost-efficient way, potentially significantly minimizing the risk of non-compliance and regulatory violations, at a time when the stakes for non-compliance are becoming very high.

May 22, 2024 | Permalink | Comments (0)

Tuesday, May 21, 2024

The Economics of Social Media

The Economics of Social Media

Guy Aridor

Northwestern University - Kellogg School of Management

Rafael Jiménez Durán

Bocconi University - Department of Economics; University of Chicago

Ro'ee Levy

Tel Aviv University - Eitan Berglas School of Economics

Lena Song

The University of Illinois at Urbana-Champaign

Abstract

We review the burgeoning literature on the economics of social media, which has become ubiquitous in the modern economy and fundamentally changed how people interact. We first define social media platforms and isolate the features that distinguish them from traditional media and other digital platforms. We then synthesize the main lessons from the empirical economics literature and organize them around the three stages of the life cycle of user-generated content: (1) production, (2) distribution, and (3) consumption. Under production, we discuss how incentives affect content produced on and off social media and how harmful content is moderated. Under distribution, we discuss the social network structure, algorithms, and targeted advertisements. Under consumption, we discuss how social media affects individuals who consume its content and society at large, and discuss consumer substitution patterns across platforms. Throughout the review, we delve into case studies examining the deterrence of misinformation, segregation, political advertisements, and the effects of social media on political outcomes. We conclude with a brief discussion on the future of social media.

May 21, 2024 | Permalink | Comments (0)

Monday, May 20, 2024

Potential Competition and the 2023 Merger Guidelines

Potential Competition and the 2023 Merger Guidelines

Richard Gilbert

University of California, Berkeley

A. Douglas Melamed

Stanford Law School

Abstract

Potential competition can benefit consumers by providing an important source of future competition and by provoking efforts by incumbents to keep prices low or engage in other beneficial conduct in order to deter new entry. Courts have characterized the first benefit as the result of actual potential competition and the second as the result of a response to perceived potential competition. The 2023 Merger Guidelines issued by the U.S. Department of Justice and Federal Trade Commission include a section that describes how the agencies will evaluate mergers that eliminate potential competition. None of the earlier Merger Guidelines since 1984 had addressed the particular issues raised by potential competition. This paper reviews empirical evidence regarding the effects of potential competitors on market performance and describes conditions under which incumbents might, or might not, have incentives to acquire potential competitors. One conclusion is that the distinction between actual and perceived potential competition is not very helpful because potential competition typically has both effects. Another is that the incentive to acquire potential competitors does not depend on the probability of actual competition from the acquired firm. A corollary is that courts have erred by treating actual and perceived potential competition as distinct phenomena and by placing too much emphasis on the probability of new competition and not enough emphasis on the potential benefits from new competition.

May 20, 2024 | Permalink | Comments (0)

Friday, May 17, 2024

Dynamic Competition and Antitrust: Quick-Look Inferences From the Analysis of Big Tech’s R&D Expenditure Ratios

Dynamic Competition and Antitrust: Quick-Look Inferences From the Analysis of Big Tech’s R&D Expenditure Ratios

 

Jorge Padilla

Compass Lexecon

Douglas H. Ginsburg

U.S. Court of Appeals for the District of Columbia Circuit; George Mason University - Antonin Scalia Law School

Koren W. Wong-Ervin

Jones Day; George Washington University

Abstract

In this essay we discuss the proposition, held by many economists and legal scholars, that with dynamic competition—i.e., competition for the market through sequential winner-take-all races won through significant innovation—it is natural and not an indication of market failure for the successful firm to have a high market share for a sustained period of time. The debate today centers on whether evidence of long-held high market shares in high-technology markets implies that this proposition is flawed and innovation races fail to pose a sufficient competitive constraint such that market structure matters. We conclude this is not the case because market contestability does not require shifts in market shares (setting aside the question of whether high market shares are a result of artificially narrow market definitions). Instead, we explain that testing the dynamic competition hypothesis requires an investigation of the innovation efforts of the market leaders over time. Have they increased or decreased their R&D investments? Does their behavior indicate that entrants are in fact playing a disciplinary role on industry leaders? Interventions that ignore these questions may well reduce the market share of these leading firms, but at the expense of decreasing innovation and reducing consumer welfare.

May 17, 2024 | Permalink | Comments (0)

Thursday, May 16, 2024

Reputation and Personality Traits in Antitrust Merger Analysis

Reputation and Personality Traits in Antitrust Merger Analysis

Steven C. Salop

Georgetown University Law Center

Abstract

Courts in recent merger cases have accepted defenses to alleged anticompetitive conduct based on the reputation of the acquiring firm as well as the reputations and personalities of the CEO and employees of the firm. At the same time, it has been suggested that acquisitions by some private equity firms or others might be disfavored because of their reputations for having the ability and incentive to set high prices or adopt debt-driven business plans that tend to reduce wages and raise the risk of bankruptcy, with associated economic harms to consumers and workers. These developments raise several policy issues regarding the proper scope of merger analysis and law. They also raise interesting issues regarding the roles and evidence of reputation and personality traits affecting the likely conduct of companies and the CEOs that lead those companies, issues that have been studied by experimental economists and psychologists.

May 16, 2024 | Permalink | Comments (0)

Wednesday, May 15, 2024

If Platforms Are Exploiting Producers, Is Platform Competition the Solution?

If Platforms Are Exploiting Producers, Is Platform Competition the Solution?

Xingyue (Luna) Zhang

University of Washington Tacoma

Kitty Wang

University of Houston - C.T. Bauer College of Business

Hemant K. Bhargava

University of California, Davis

Abstract

Digital platforms enable third-party producers and workers to create and sell digital and non-digital products and services. High commissions charged by the platforms (implying that less is shared with the producers) have raised public and antitrust concerns. Economic theories profess the benefits of industry competition, yet we observe several platform industries where thriving competition has failed to yield a greater share of the surplus to the platforms' partners. We develop a model of platform competition to understand how it affects the platform ecosystem. We find that a higher degree of competition can decrease producer participation and the revenue sharing rate (as opposed to popular belief) because competition fails to expand the market significantly and can cause producers to spread higher costs across smaller markets (and lower revenues). This counter-intuitive outcome occurs even when there are no added benefits and costs associated with platform competition: competition's effect on one side of the market (lowering prices to the consumers) can reduce revenue platforms generate and share with the producers, making it marginally less attractive for producers to participate. We show that in addition to the revenue sharing rate, producer participation is a meaningful metric for evaluating the overall health of the platform ecosystem: even when revenue share increases, producer participation alongside producer profits can decrease. This does not mean platform competition is always detrimental. However, when competition does improve producer profits by increasing overall ecosystem revenue, most of the welfare gain can go to the platforms instead of the producers.

May 15, 2024 | Permalink | Comments (0)

Tuesday, May 14, 2024

Antitrust's Social "Ripple Effect"

Antitrust's Social "Ripple Effect"

 

Sandra Marco Colino

The Chinese University of Hong Kong (CUHK) - Faculty of Law; University of Glasgow, School of Law

Abstract

The relentless discussion on the value of social goals in antitrust is currently governed by two pressing concerns: rising wealth inequality and the plight for sustainability. On the one hand, the alarming upward trend in wealth concentration has been linked to issues antitrust may have the power to tackle, such as the intensification of market power. On the other hand, as the world tries to grapple with an impending environmental catastrophe, it seems unacceptable to compel companies to invest in green initiatives if there is a risk that they may incur in antitrust liability. More antitrust enforcement is usually invoked as a means to narrow the wealth gap, while less antitrust is portrayed as the best way to enable environmentally friendly collaborations. This article constructs a consistent path for competition policy to embrace non-economic goals without losing sight of its pivotal role as the guardian of well-functioning markets. It vehemently rejects calls for laxer antitrust. Instead, the article contends that robust enforcement can provide adjuvant protection to social goals, and proposes a strategy to maximize antitrust’s social “ripple effect” within the boundaries of the current competition policy.

May 14, 2024 | Permalink | Comments (0)

Monday, May 13, 2024

The FTC's Revival of the Robinson-Patman Act: A Policy in Need of a Rationale

The FTC's Revival of the Robinson-Patman Act: A Policy in Need of a Rationale

M. Niefer

Antonin Scalia Law School at George Mason University

Donald I. Baker

Baker & Miller PLLC

Abstract

The U.S. antitrust agencies largely gave up enforcing the Robinson-Patman Act (RPA) more than forty years ago. The change in policy was prompted in part by a landmark 1977 Department of Justice (DOJ) report concluding that the costs of enforcing RPA exceeded the benefits. Despite the 1977 report (and many others since then that have reached a similar conclusion), the Federal Trade Commission (FTC) recently suggested that it will increase RPA enforcement as part of a broader "fairness" agenda. The FTC, however, has not fully articulated a clear rationale for its apparent change in policy. In this brief essay, we argue that the FTC might usefully consider and emulate the 1977 DOJ report, even if it reaches a different conclusion. Although we believe there is ample evidence suggesting the public would be better off if the FTC did not revive RPA enforcement, we are more concerned that the FTC has not adequately justified its views in light of the apparent costs of enforcing the Act. The costs and benefits of enhanced RPA enforcement need to be fully explored, and the FTC’s rationale for enhanced enforcement must be fully explained. Good public policy demands no less. We hope the FTC and its Congressional oversight committees ultimately see it that way too.

May 13, 2024 | Permalink | Comments (0)

Friday, May 10, 2024

Product Market Competition, Labor Mobility, and Firm-Sponsored Training: A New Perspective on Market Power

Product Market Competition, Labor Mobility, and Firm-Sponsored Training: A New Perspective on Market Power

Arghya Ghosh

UNSW Australia Business School, School of Economics

Hodaka Morita

Hitotsubashi University - Institute of Economic Research

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Abstract

Firms compete not only in the product market but also in the labor market by hiring, training, and poaching workers. We develop a model that captures the link between firms' product and labor market competition to study effects of their market power. Interdependence of competition in the two markets enriches antitrust implications of market power, where firms' incentives to train workers play a key role in establishing the link between product and labor market competition. Furthermore, due to their competition in the product market, firms may overinvest, rather than underinvest, in training. The possibility of overinvestment further enriches antitrust implications.

May 10, 2024 | Permalink | Comments (0)

Thursday, May 9, 2024

The 2023 Merger Guidelines: Law, Fact, and Method

The 2023 Merger Guidelines: Law, Fact, and Method

 

Herbert Hovenkamp

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

Abstract

The final version of the 2023 Merger Guidelines, issued in December, 2023, is a vast improvement over an earlier draft, indicating that the Agencies took the many comments they received on a draft very seriously. These Guidelines break some new ground that older Guidelines did not address, and make many positive contributions, which this paper spells out. They are also excessively nostalgic for a past era, however, and this may explain their propensity to treat empirical questions as issues of law: that is one way to insulate them from further revision. The excessive reliance on one decision, Brown Shoe, is unfortunate, particularly since that decision has been so often repudiated, even by the Supreme Court itself.

This paper pays particular attention to the Guidelines’ treatment of structural triggers and direct measures of competitive effects, its aggressive position on potential competition mergers, its willingness to weigh a “trend” toward concentration as a factor, and its treatment of serial acquisitions. It includes a welcome new section on mergers involving multi-sided networks, although its view of them is too one-sided, and it also contains an expanded section on mergers with harmful effects on suppliers, including labor. Its treatment of market definition is likely to lead to underenforcement because it defines markets too broadly. Finally, it could have made better use of recent retrospective studies, many of which would have provided further support for the substantive positions that it takes.

May 9, 2024 | Permalink | Comments (0)

Wednesday, May 8, 2024

Getting Merger Guidelines Right

Getting Merger Guidelines Right

 

Keith N. Hylton

Boston University - School of Law

Abstract

This paper is on the new Merger Guidelines. It makes several arguments. First, that the Guidelines should be understood as existing in a political equilibrium. Second, that the new structural presumption of the Merger Guidelines (HHI = 1,800) is too strict, and that an economically reasonable revision in the structural presumption would have increased rather than decreased the threshold. Whereas the new Guidelines lowers the threshold to HHI 1,800 from HHI 2,500, an economically reasonable revision would have increased the threshold to HHI 3,200. I justify this argument using a bare-bones model of Cournot competition. Third, it seems unlikely, as an empirical matter, that merger enforcement under the existing Guidelines is socially desirable. Fourth, that federal merger enforcement raises serious constitutional issues, originally discussed in 1904, and that it may be time now, in view of the new Guidelines, to return to these foundational constitutional questions.

May 8, 2024 | Permalink | Comments (0)

Tuesday, May 7, 2024

Strategic Foresight and EU Competition Law

Strategic Foresight and EU Competition Law

 

Klaudia Majcher

Vrije Universiteit Brussel (VUB); The Competition Law Hub

Viktoria H.S.E. Robertson

Vienna University of Economics and Business; The Competition Law Hub

Abstract

Competition law and policy want to ensure the long-term competitiveness of markets to the ultimate benefit of consumers. This requires thinking about and shaping the markets of tomorrow. Strategic foresight represents a powerful tool at the disposal of competition authorities that need to engage in prospective analyses, set priorities in line with their long-term strategic goals and devise pertinent soft law guidance for future enforcement. But what is strategic foresight? What are its limits, and how could it be incorporated into competition law and policy? In this primer on strategic foresight and EU competition law, we sketch areas of competition law that could benefit from incorporating strategic foresight, while also setting out the challenges such as the standard of proof, legal certainty and resource limitations.

May 7, 2024 | Permalink | Comments (0)

Monday, May 6, 2024

Production Chain Organization in the Digital Age: Information Technology Use and Vertical Integration in U.S. Manufacturing

Advances in information technology (IT) may affect the organizational design of production. Exploiting the rapid diffusion of the internet in the United States, we assess the sensitivity of production chain organization to this innovation in IT access and use. Extending theories of the firm that recognize the importance of downstream transfers (selling as opposed to sourcing) and plural governance in organizational design, we predict IT-driven shifts in downstream vertical integration. In a detailed panel of Census Bureau data for over 5,600 manufacturing plants, we observe the extent of a production unit’s downstream transactions within the firm alongside concurrent sales to external customers—a mix we refer to as plural selling. Our main finding is that the use of the internet for external coordination precipitated a significant decline in downstream vertical integration across the manufacturing sector. Instrumental variables estimation points to a causal relationship but also heterogeneous treatment effects. Key drivers of plural organization, such as complementarities and constraints across differently governed transactions, help explain such heterogeneity, as does concurrent use of internal production management IT. Our study is the first study to leverage a plural governance framework and large-scale microdata to understand how U.S. production chain organization shifted in response to this rapid and far-reaching technological change.

May 6, 2024 | Permalink | Comments (0)

Community Bank Consolidation and the Role of Technology Investment

Community Bank Consolidation and the Role of Technology Investment

Cheng "Jason" Jiang

Boston College

Jonathan A. Scott

Temple University - Department of Finance

Zhaowei Zhang

Temple University

Abstract

During the 2010s, the number of community banks in the United States declined by almost one-third, a trend that has worried many stakeholders including communities losing their primary bank, regulators, and the industry itself. This paper provides evidence that the disappearance of community banks during this time is related to the demand to exploit the economies of scale associated with technology investments. This paper empirically documents that a community bank with more technology investments is more likely to be a target for acquisition. This paper addresses the endogeneity issues using coarsened exact matching approach and instrumental variable approach. This paper documents that acquirer banks achieve economies of scale to improve operation efficiency two and three years aft

May 6, 2024 | Permalink | Comments (0)

Friday, May 3, 2024

Antitrust's Environmental Footprint: Redefining the Boundaries of Green Antitrust

Antitrust's Environmental Footprint: Redefining the Boundaries of Green Antitrust

 

Sandra Marco Colino

The Chinese University of Hong Kong (CUHK) - Faculty of Law; University of Glasgow, School of Law

Abstract

Antitrust policy is at a turning point. After a hiatus of over four decades, the 2020s have ushered in an attempt to restore the law’s full potential to quash anticompetitive conduct. The revival is fueled by a combination of pro-enforcement leadership, disenchantment with the consumer welfare standard as the lodestar of antitrust, and a realization that market power harbors undesirable ills. At the same time, the global debate as to whether antitrust should embrace environmental concerns is garnering support in the United States and threatens to interfere with the momentum for reinvigoration. The European-propelled “green antitrust” movement favors looseing up enforcement to allow sustainability-enhancing collaborations with anticompetitive effects.

This article challenges the assumptions underpinning green antitrust as currently conceptualized. Through detailed doctrinal and comparative analysis, I demonstrate that the movement ignores the theoretical foundations of corporate social responsibility, and that empirical support for antitrust’s alleged sustainability problem is feeble. Moreover, implementing a laxer policy could be particularly detrimental in the United States, where antitrust underenforcement is a documented reality. On this basis, I propose an alternative path for ensuring that competition policy fosters environmental objectives, and redefine green antitrust to underline the law’s potential to boost sustainability.

May 3, 2024 | Permalink | Comments (0)

Thursday, May 2, 2024

Economic Analysis in Antitrust Litigation: Empirical Evidence from the Courts, 1890-2018

Economic Analysis in Antitrust Litigation: Empirical Evidence from the Courts, 1890-2018

Federico Ciliberto

University of Virginia - Department of Economics; Centre for Economic Policy Research (CEPR); DIW Econ GmbH

Kenneth G. Elzinga

University of Virginia - Department of Economics

D. Daniel Sokol

USC Gould School of Law; USC Marshall School of Business

Abstract

This study investigates the evolution of economic analysis in antitrust litigation using an original dataset encompassing all decided antitrust cases since the enactment of the Sherman Act in 1890. Our analysis reveals three distinct breaks in the frequency of economists mentioned in antitrust cases: 1974, 1994, and 2007. Furthermore, we observe substantial fluctuations in the success rates of plaintiffs across various stages of litigation. Additionally, the study finds that the underlying statutory basis of cases involving economists has shifted over time, with a notable increase in Sherman Act cases and a corresponding decrease in Clayton Act and combined Clayton-Sherman Act cases.

May 2, 2024 | Permalink | Comments (0)

Common Ownership, Bidder Termination Provisions and Self-Selection in the Market for Mergers & Acquisitions

Common Ownership, Bidder Termination Provisions and Self-Selection in the Market for Mergers & Acquisitions

Max Daniel Eilert

University of Lausanne; Swiss Finance Institute

Sebastian Rötzer

Austrian Financial Market Authority

Abstract

Bidder termination provisions allow acquiring firms to abandon a takeover under adverse circumstances.

We present a simple model of optimal contracting under common ownership, where partial internalization of the return on target shares leads to a shift of the lower bound of acceptable deal to the left, i.e. towards ex ante less desirable deals.

Our theory predicts that this shift distorts the self-selection of low synergy acquirers and causes an overall loss of efficiency in the market for corporate control which is associated with an increasing share of deals that include bidder termination provisions.

We document broad empirical support for this prediction in a large sample of mergers and acquisitions of publicly listed firms in the U.S., suggesting that the rise of common ownership has detrimental effects on the wealth of acquirer shareholders without cash flow rights in target firms.

May 2, 2024 | Permalink | Comments (0)

Wednesday, May 1, 2024

Antitrust's Social "Ripple Effect"

Antitrust's Social "Ripple Effect"

 

Sandra Marco Colino

The Chinese University of Hong Kong (CUHK) - Faculty of Law; University of Glasgow, School of Law

Abstract

The relentless discussion on the value of social goals in antitrust is currently governed by two pressing concerns: rising wealth inequality and the plight for sustainability. On the one hand, the alarming upward trend in wealth concentration has been linked to issues antitrust may have the power to tackle, such as the intensification of market power. On the other hand, as the world tries to grapple with an impending environmental catastrophe, it seems unacceptable to compel companies to invest in green initiatives if there is a risk that they may incur in antitrust liability. More antitrust enforcement is usually invoked as a means to narrow the wealth gap, while less antitrust is portrayed as the best way to enable environmentally friendly collaborations. This article constructs a consistent path for competition policy to embrace non-economic goals without losing sight of its pivotal role as the guardian of well-functioning markets. It vehemently rejects calls for laxer antitrust. Instead, the article contends that robust enforcement can provide adjuvant protection to social goals, and proposes a strategy to maximize antitrust’s social “ripple effect” within the boundaries of the current competition policy.

May 1, 2024 | Permalink | Comments (0)

Tuesday, April 30, 2024

Collusion by Pricing Algorithms in Competition Law and Economics

Collusion by Pricing Algorithms in Competition Law and Economics

 

Philip Hanspach

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO); Organization for Economic Co-Operation and Development (OECD) - Policy Studies Branch

Niccolò Galli

European University Institute; Maastricht University - Faculty of Law

Abstract

Software programs based on algorithms have become common in pricing because they outperform humans at automatising tasks in terms of speed, complexity, and accuracy of analysis. In many online markets, repricing algorithms have replaced the human decision-maker. As with any other technology employed in the market, repricing algorithms empower human activity toward both positive and negative consequences. Their properties enable market transparency and efficiencies but also entail collusion risks beyond traditional oligopolies. This paper analyses why repricing algorithms can facilitate anti-competitive coordination and what is the scope for Art. 101(1) TFEU to tackle it. Acknowledging the limitations of EU competition law against collusion by autonomous algorithms, we qualify the antitrust concern through the economics and computer science understanding of pricing algorithms. Algorithmic pricing does not always lead to higher prices, although even simple algorithms can learn complex reward-punishment schemes that resemble collusive pricing strategies.

April 30, 2024 | Permalink | Comments (0)