Antitrust & Competition Policy Blog

Competition Law Develops in Southern Africa

Posted by D. Daniel Sokol

Heather Irvine & Candice Upfold (Norton Rose) note that Competition Law Develops in Southern Africa.

ABSTRACT: African countries are increasingly adopting competition law. To date, sixteen countries in Africa have adopted legislation to regulate mergers, and 11 are in the process of promulgating competition statutes. In particular, Southern Africa has seen some interesting developments in the last few years.

A Roadmap to the Smartphone Patent Wars and FRAND Licensing

Posted by D. Daniel Sokol

Michael Carrier (Rutgers) provides A Roadmap to the Smartphone Patent Wars and FRAND Licensing.

ABSTRACT: The smartphone industry today is characterized by a thicket of patents and wars based on those patents. Every day brings a new lawsuit or development between Apple, HTC, Microsoft, Motorola Mobility ("MMI"), Nokia, and Samsung. The lawsuits span numerous courts and several continents. And they often pit Apple or Microsoft on one side and manufacturers of Google's Android operating system-HTC, MMI, and Samsung-on the other.

Revising the Technology Transfer Guidelines

Posted by D. Daniel Sokol

Pierre Regibeau (CRAI & Imperial Coll.) & Katharine E. Rockett (Univ. of Essex) analyze Revising the Technology Transfer Guidelines.

ABSTRACT: We were asked by DG Competition to provide an economic evaluation of the 2004 Technology Transfer Guidelines that would serve as an input into the formal review process initiated a few months ago. When assessing a long-standing piece of competition policy, the best approach is certainly to turn to the related cases that have arisen since the policy document came into force. However, for better or for worse, very few "technology transfer" cases have appeared on the European Competition radar since 2004. A priori then, it seems that the 2004 Guidelines have done a decent job of giving a reasonably clear picture of the types of conducts that might land an undertaking in hot water.

We therefore decided to organize our report around two different questions. First, have there been developments in industry practice that might call for a revision, clarification, or extension of the current Guidelines? Second, do we, as economists, feel that the current Guidelines are logically consistent, both internally and with respect to other policy documents emanating from DG Competition?

The Global Limits of Competition Law - Stanford University Press

Posted by D. Daniel Sokol

My newest book is now out. The Global Limits of Competition Law, edited by Ioannis Lianos (UCL) and D. Daniel Sokol (University of Florida).

BOOK ABSTRACT: Over the last three decades, the field of antitrust law has grown increasingly prominent, and more than one hundred countries have enacted competition law statutes. As competition law expands to jurisdictions with very different economic, social, cultural, and institutional backgrounds, the debates over its usefulness have similarly evolved.

This book, the first in a new series on global competition law, critically assesses the importance of competition law, its development and modern practice, and the global limits that have emerged. This volume will be a key resource to both scholars and practitioners interested in antitrust, competition law, economics, business strategy, and administrative sciences.

Contents

Preface
Contributors

Introduction
Ioannis Lianos and D. Daniel Sokol

Part I. The Competition Law Process

1. The Limits of Antitrust and the Chicago School Tradition
George L. Priest

2. Competition Law and Human Rights: Striking a Balance Between Business Freedom and Regulatory Intervention
Arianna Andreangeli

Part II. The Real Limits of Competition Law

3. Limits of Imports from Economics into Competition Law
Anne-Lise Sibony

4. Complications in the Antitrust Response to Monopsony
Jeffrey L. Harrison

5. Antitrust and the Close Look: Transaction Cost Economics in Competition Policy
Herbert Hovenkamp

Part III. Competition Law and Its Synergies with Other Areas of Law

6. Anticompetitive Government Regulation
D. Daniel Sokol

7. A Global Perspective on State Action
Damien M. B. Gerard

8. IP’s Advantages over Antitrust
Daniel A. Crane

9. Competition Law and Consumer Protection Against Unfair Commercial Practices: A More-than-Complementary Relationship?
Paolisa Nebbia

Part IV. Competition Law and Institutional Design

10. Judicial Scrutiny and Competition Authorities: The Institutional Limits of Antitrust
Javier Tapia and Santiago Montt

11. Competition Authorities: Independence and Advocacy
Frederic Jenny

12. Competition Law Remedies: In Search of a Theory
Ioannis Lianos

Part V. Competition Law and Culture

13. How Culture May Change Assumptions in Antitrust Policy
Thomas K. Cheng

14. Promoting Convergence of Competition Policies in Northeast Asia: Culture-Competition Correlation and Its Implications
Ki Jong Lee

15. The Limits of Competition Law in Latin America
Julian Pena

Notes

Index

 

Technology Licensing: Evolving Antitrust Standards in the Smartphone and Other Sectors

Posted by D. Daniel Sokol

Paul Lugard (TILEC) discusses Technology Licensing: Evolving Antitrust Standards in the Smartphone and Other Sectors.

ABSTRACT: Antitrust review of business transactions involving intellectual property has never been entirely undisputed. On the one hand, there is a general belief that antitrust intervention in R&D-, intellectual property-, and innovation-intense industries should be centered on the preservation of innovation incentives. On the other hand, day-to-day practice demonstrates that even in sectors where the intellectual property landscape is relatively easily accessible, but where innovation is nonetheless important, the proper application of antitrust law is highly fact-specific and complex.

For instance, intuition tells us that grant-back clauses in technology licensing agreements may decrease licensees' incentives to innovate unless they are properly compensated for their innovative efforts. But it also obvious that appropriate compensation schemes for future innovations may be impossible to set up, and that some licensors may not be willing to license their technology, without grant-back clauses, as a result of which the positive welfare effects associated with technology licensing may not materialize to start with. How does one distinguish the good and the bad cases?

And, to add a particularly topical example, how should one ensure that-given evidence of the ability and incentive to foreclose rivals-the acquisition of a portfolio of hundreds of Standard Essential Patents ("SEPs") relevant to wireless devices by Apple, Microsoft, or Google will not result in post-merger exclusionary conduct as a result of those companies repudiating prior fair, reasonable, and non-discriminatory ("FRAND") commitments, or a failure to adhere to those commitments in a meaningful manner as the prior owners would have done?

Faced with fast-moving, innovative industries, antitrust enforcement agencies are up against difficult tasks. Indeed, they need to have a well-informed opinion on the nature and drivers of innovation and the durability of market power, as well as the potential of the industry at hand to correct itself, especially in light of dominance. In these settings, over-enforcement resulting in the loss of valuable dynamic efficiencies is often a real risk, while devising and implementing adequate remedies is difficult and takes time. This certainly applies to the one sector that takes a prominent place in this issue of the CPI Antitrust Chronicle, the sector of mobile devices.

This issue comes at a critical time. Only a few weeks ago, on February 13, 2012, the Department of Justice ("DOJ") issued its closing statement following its investigations into three cases: Google's acquisition of Motorola Mobility, a manufacturer of smartphones and computer tables and the holder of a portfolio of approximately 17,000 issued patents and 6,800 applications; the acquisition by Rockstar Bidco (a partnership including, among others, Apple, Microsoft, and Research in Motion ("RIM")) of approximately 6,000 Nortel patents; and the acquisition by Apple of a portfolio of Novell patents. Each of these three acquisitions involved a large number of SEPs relevant to wireless devices, many of which the pre-existing owners had committed to license through their participation in Standard Setting Organizations ("SSOs") on FRAND terms.

Most Cited Antitrust Articles of All Time

Posted by D. Daniel Sokol

A new article in the Michigan Law Review by Shapiro undertakes a citation analysis of law reviews. The most cited Antitrust articles are:

1. 636 Philip Areeda & Donald F. Turner, Predatory Pricing and Related Practices under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697 (1975).

2. 463 William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 Harv. L. Rev. 937 (1981).

3. 451 Frank H. Easterbrook, Limits of Antitrust, 63 Tex. L. Rev. 1 (1984).

4. 448 Donald F. Turner, The Definition of Agreement under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv. L. Rev. 655 (1962).

5. 402 Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925 (1979).

6. 365 Derek C. Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 Harv. L. Rev. 226 (1960).

7. 362 Ward S. Bowman, Jr., Tying Arrangements and the Leverage Problem, 67 Yale L.J. 19 (1957).

8. 359 Robert H. Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division II, 75 Yale L.J. 373 (1966).

9. 349 Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power over Price, 96 Yale L.J. 209 (1986).

10. 340 Robert H. Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 74 Yale L.J. 775 (1965).

Shapiro does not examine citations for books. Had he done so, one would have found that Bork's Antitrust Paradox dwarfs every article cited by a significant amount (2,127 citations). I am also curious about the most cited article in the Antitrust Law Journal. Does anyone happen to know what article it might be?

Competitive Effects of Exchanges or Sales of Airport Landing Slots

Posted by D. Daniel Sokol

James D. Reitzes, The Brattle Group Brendan McVeigh, The Brattle Group Nicholas Powers, The Brattle Group and Samuel Moy, The Brattle Group analyze Competitive Effects of Exchanges or Sales of Airport Landing Slots.

ABSTRACT: We investigate the competitive effects of exchanges or sales of airport landing slots. In our model, airlines with potentially asymmetric slot allocations must decide upon which routes to use their landing slots. When all airlines serve the same routes in a slot-constrained Cournot Nash equilibrium, small changes in slot allocations among airlines do not affect the overall allocation of slots across routes or air fares. In a symmetric equilibrium where slot holding airlines have the same number of slots, we find that an increase in the number of slot-holding airlines leads to higher social welfare and consumer surplus, although the number of served routes may decline. Under asymmetric slot allocations, larger slot holders serve "thin" demand routes that are not served by smaller slot holders. In this situation, transfers of slots from larger to smaller slot holders increase social welfare and consumer surplus, even though fewer routes may be served. More generally, our results suggest that increases in slot concentration are harmful to consumers and social welfare, although consumers on relatively thin routes may gain air transportation service as a result.

Most Downloaded New Papers for SSRN Journal of Antitrust: Antitrust Law & Policy eJournal April 4, 2012 to June 3, 2012

Posted by D. Daniel Sokol

RECENT HITS (for all papers announced in the last 60 days)

TOP Papers for Journal of Antitrust: Antitrust Law & Policy eJournal April 4, 2012 to June 3, 2012

Rank Downloads Paper Title

1 165 Markets in IP and Antitrust Herbert J. Hovenkamp, University of Iowa - College of Law,

2 160 The Rule of Reason and the Goals of Antitrust: An Economic Approach Roger D. Blair, D. Daniel Sokol, University of Florida - Department of Economics, University of Florida - Levin College of Law,

3 157 Is Pepsi Really a Substitute for Coke? Market Definition in Antitrust and IP Mark A. Lemley, Mark P. McKenna, Stanford Law School, Notre Dame Law School,

4 138 Competition-Based Reform of the National Health Service in England: A One-Way Street? Lucy Reynolds, Amir Attaran, Tamara K. Hervey, Martin McKee, London School of Hygiene and Tropical Medicine, University of Ottawa - Faculties of Law and Medicine, University of Sheffield - Faculty of Law, London School of Hygiene and Tropical Medicine,

5 136 The Single Entity Theory: An Antitrust Time-Bomb for Chinese State-Owned Enterprises? Angela Huyue Zhang, University of Chicago - Law School,

6 123 The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy D. Daniel Sokol, University of Florida - Levin College of Law,

7 103 The Regulation/Competition Interaction Javier Tapia, Despoina Mantzari, Centre for Regulation and Competition, Universidad de Chile, University College London-Faculty of Laws,

8 88 Do Developing Countries Enforce Their Antitrust Laws? A Statistical Study of Public Antitrust Enforcement in Developing Countries Dina I. Waked, Harvard University - Law School - Faculty,

Islam, Islamic Countries, and Competition Law: From Past Glory to Modern Day Challenges

Posted by D. Daniel Sokol

Maher Dabbah (Queen Mary, Univ. of London) provides historical context on Islam, Islamic Countries, and Competition Law: From Past Glory to Modern Day Challenges.

ABSTRACT: Despite this rich history and past glory, Islamic countries did not carry the mechanism of economic regulation, in the form of Hisba, into modern times. Indeed, there has been inadequate recognition given by these countries to the importance of Hisba as an institution for market regulation. More generally, these countries have been among the latecomers to arrive properly at the competition law scene. And in doing so, they have not made use of their Islamic identity, but rather have-quite comfortably-become part of the generic category known as "developing countries" or "emerging economies" in the field of competition law.

While for some people it may be quite difficult to understand why-in light of the past Islam had in economic regulation-Islamic countries have been such latecomers, this development is understandable because, since their inception, competition law and policy have been dominated by particular political, economic, and legal forces. These forces have mandated that certain changes and evolutions ought to occur for "modern" competition law and policy to become relevant in a given economy. Nonetheless, this does not mean that Islamic countries should take a backseat in the development of competition law and policy globally. Indeed, with these countries increasingly turning their attention to competition law, they are in a good position to contribute to the debate on global competition law and policy and to offer a fresh perspective that can help put competition law into its proper cultural and socio-political context.

What the European Commission seems to demand of Google

Posted by D. Daniel Sokol

There are news reports suggesting the nature of what Google must do to avoid litigation by the European Commission. The Guardian reports:

Europe's antitrust chief has given Google until 2 July to offer changes in its search results and advertising rules or face the threat of being taken to court and potentially huge fines.

Cartel Pricing Dynamics, Price Wars and Cartel Breakdown

Posted by D. Daniel Sokol

Anton-Giulio Manganelli (Toulouse) discusses Cartel Pricing Dynamics, Price Wars and Cartel Breakdown.

ABSTRACT: This paper gives an unified explanation of some of the most widely known facts of the cartel literature: prices gradually rise, then remain constant, there can be price wars and some cartels break down. In this model consumers are loss averse and efficiency of a competitive fringe is not publicly observable. In the best collusive equilibrium, the price expectation can be so low that loss aversion makes consumers not buy at the maximal collusive price: firms then set a lower price that rises in time with consumers’ expectations. This increasing price path is bounded from above by the presence of the fringe. If the fringe sets a low price during a sufficient number of periods, there can be price wars and collusion can eventually break down.

Local Competition Bodies and Antimonopoly Policy Effectiveness in Transition Economies

Posted by D. Daniel Sokol

Aldash Aitzhanov (Kazakhstan) describes Local Competition Bodies and Antimonopoly Policy Effectiveness in Transition Economies.

ABSTRACT: There is some empirical evidence that the effectiveness of antimonopoly policy (hereinafter referred to as the "EAP") depends on different aspects of policy design, like engaging in leniency policy and competition authority independence.

However, these features of competition policy design do not explain how countries can effectively implement competition policy within their internal territories. How can local competition bodies influence the EAP? This has not been researched from a bottom-up perspective, although local policy implementers have expertise and knowledge of the true problems. Therefore, they are in a better position to propose purposeful policy.

To investigate the question I chose two transitional countries, Russia and Kazakhstan. The results of the study suggest that the competition authorities can increase the effectiveness of antimonopoly policy through an active stance against significant cases of competition law violence and use of large fines.

Standard Oil, the Origins of Dual Antitrust Jurisdiction in the U.S., and the Modern Justification for Unified Enforcement

Posted by D. Daniel Sokol

George Priest (Yale) discusses Standard Oil, the Origins of Dual Antitrust Jurisdiction in the U.S., and the Modern Justification for Unified Enforcement.

ABSTRACT: Professor William Kovacic’s spirited and articulate advocacy of unified and coordinated antitrust enforcement as between the dual U.S. antitrust agencies - the Justice Department and the FTC - gains force from a more complete historical understanding of the origins of the FTC and of the changes in antitrust understanding in the years since. Congress created the FTC in 1914, giving it independent antitrust enforcement authority, explicitly because it was disappointed in the antitrust efforts of the Justice Department, in particular with the outcome of the 1911 Standard Oil case, and wanted separate and more aggressive enforcement. In the years since the creation of the FTC, however, there has developed a consensus on the economic analysis of antitrust that eliminates the need for competing enforcement agencies, providing support for Professor Kovacic’s recommendations.

The Deterrent Impact of Cartel Criminalisation: Supplementary Report on a Survey of Australian Public Opinion Regarding Business People's Views on Anti-Cartel Laws and Enforcement

Posted by D. Daniel Sokol

Christine Parker, Monash University - Faculty of Law and Chris Platania-Phung, University of Melbourne have written on The Deterrent Impact of Cartel Criminalisation: Supplementary Report on a Survey of Australian Public Opinion Regarding Business People's Views on Anti-Cartel Laws and Enforcement.

ABSTRACT: In July 2009 the Australian Parliament passed legislation criminalising cartel conduct and introducing jail penalties for individuals who engage in cartel behaviour. The rhetoric justifying criminalisation assumes that compliance can be induced through the mechanism of deterrence. This in turn assumes that business people know about the law, and that they believe they are likely to be caught and face enforcement action and jail if they break the law. This paper reports evidence on these issues from a survey of 567 Australian business people whose role makes compliance with anti-cartel law salient.

De-monopolization Toward Long-Term Prosperity in China

Posted by D. Daniel Sokol

Ashvin Ahuja (IMF) discusses De-monopolization Toward Long-Term Prosperity in China.

ABSTRACT: During the past decade, the average Chinese earns roughly 9 times less and is 10 times less productive than the average American at purchasing power parity. Current consensus attributes large differences in output per worker to differences in total factor productivity (TFP). Evidence suggests that most of the US-China TFP differences lie in the inefficiency of China’s domesticoriented service and agricultural sectors. This paper focuses on (1) the evidence of monopoly rights and its influence on work practice improvement at China’s firms and plants and (2) the evidence that policy arrangement there has encouraged more competition in merchandise manufacturing and heavy industries while barriers to market access remain high against new firms in the domestic market (especially in services). A numerical experiment is provided, which suggests that China can enhance long-term income per capita by a factor of 10 largely through TFP gains by implementing reform to weaken protection of monopolies and encourage entry in all industries.

An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection

Posted by D. Daniel Sokol

Shunya Sugawara (Graduate School of Economics, University of Tokyo) and Yasuhiro Omori (Faculty of Economics, University of Tokyo) undertake An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection.

ABSTRACT: This paper proposes a simple econometric framework that can identify moral hazard and selection problems separately in insurance markets. Although our methodology requires behavioral assumptions on the consumer's optimization, we show that these assumptions are necessary for the separate identification of the two sources of information asymmetry. Our method is applied to the dental insurance market in the United States. In addition to standard moral hazard, we find advantageous selection, which is not detected by a conventional methodology.

Impacts of Patent Expiry and Regulatory Policies on Daily Cost of Pharmaceutical Treatments: OECD Countries, 2004-2010

Posted by D. Daniel Sokol

Ernst R. Berndt (MIT) and Pierre Dubois (Toulouse) discuss Impacts of Patent Expiry and Regulatory Policies on Daily Cost of Pharmaceutical Treatments: OECD Countries, 2004-2010.

ABSTRACT: Cross-country variability in regulatory frameworks, industrial policy, physician/pharmacy autonomy, brand/generic distinctions, and in the practice of medicine contributes to ambiguous interpretations of pharmaceutical cost comparisons. Here we report cross-country comparisons that: (i) focus on 11 therapeutic classes experiencing patent expiration and loss of exclusivity 2004-2010 in eight industrialized countries; (ii) convert revenues and unit sales to cost per day of treatment and number patient days treated using the World Health Organizations’ Defined Daily Dosage metrics; (iii) compare patterns in costs per day of treatment with price index measures based on average price per day of treatment for each molecule computed over all molecule versions; (iv) utilizing econometric methods, model and quantify various factors affecting variations in daily treatment price indexes such as national regulatory and reimburseme! nt policy changes, physician/pharmacy autonomy, and other factors; and (v) simulate changes in expenditures by country and therapeutic class had counterfactual policies been implemented.

The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data

Posted by D. Daniel Sokol

Erwan Gautiery (University of Nantes-LEMNA and Banque de France) and Ronan Le Saou (CREST-ENSAE and Ecole Polytechnique) explore The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data.

ABSTRACT: Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market refined oil prices are transmitted to consumer liquid fuel prices. We find that on average gasoline prices are modified once a week and the distribution of price changes displays a M-shape as predicted by a menu-cost model. Using a reduced form state-dependent pricing model with time-varying random thresholds, we find that the degree of pass through of wholesale prices to retail gasoline prices is on average 0.77 for diesel and 0.67 for petrol. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices.

Patent Disclosure in Standard Setting

Posted by D. Daniel Sokol

Bernhard Ganglmair, University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics and Emanuele Tarantino, University of Bologna - Department of Economics identify Patent Disclosure in Standard Setting.

ABSTRACT: In a model of industry standard setting with private information about firms' intellectual property, we analyze (a) firms' incentives to contribute to the development and improvement of a standard, and (b) firms' decision to disclose the existence of relevant intellectual property to other participants of the standard-setting process. If participants can disclose after the end of the process and fully exploit their bargaining leverage, then patent holders aspire to disclose always after the end of the process. However, if a patent holder cannot rely on the other participants to always contribute to the process, then it may be inclined to disclose before the end of the process. We also analyze under which conditions firms enter cross-licensing agreements that eliminate the strategic aspect of patent disclosure, and show that, in an institutional setting that implies a waiver of intellectual property rights if patents are not disclosed timely, firms aspire to disclose before the end of the process. Finally, we study the effect of product-market competition on patent disclosure.

Retailers and Consumers. The pass-through of import price changes

Posted by D. Daniel Sokol

Eike Berner (Department of Economics, Christian-Albrechts-Universitat Kiel) and Laura Birg (Department of Economics, Christian-Albrechts-Universitat Kiel) analyze Retailers and Consumers. The pass-through of import price changes.

ABSTRACT: This paper uses German household data on apparel purchases to show that, conditional on income, households differ with respect to their shopping outlets and the prices they pay. We estimate that high-price retailers are not a¤ected by changes in import prices. By contrast, the pass-through for low-price retailers is 53% within 3 months. Consequently, pass-through rates for low-income households are 58%, significantly larger than those for high-income households. We then present one explanation for these observations in a theoretical model with vertical product differentiation due to bundling an otherwise homogeneous imported good with services. Following an import price shock, retailers who sell cheaper unbundled products change prices more than retailers who sell a higher-priced bundle of product and service.