Saturday, April 21, 2018
I was interviewed by PaRR (great reporting, see here) at the ABA Antitrust Spring Meeting. I discussed 5,000 of regulation of competition from Moses at Mt. Sinai to the present (with acknowledgement of the anti-monopoly provision of the Mexican constitution of 1857) and included a discussion of convergence of practice around the world towards cartel enforcement (starting in the 1990s) and convergence toward a singular goal of economic analysis (slower moving but happening now, see Intel, which brings the courts closer in line to what DG Comp has been saying since the early 2000s that they are guided by consumer welfare, in Canada*, see this excellent new article, and Asia).
Below is a clip of the interview: https://mobile.twitter.com/PaRRGlobal/status/986306213854969856/video/1. For those interested in the economics of religion and business regulation, see this book.
* Because Canadians are awesome (as recalled in an earlier post about competition practice in Canada) and because my fourth cousin's husband is this competition law practitioner.
Friday, April 20, 2018
John Kwoka, Northeastern offers One-and-a-Half Cheers for the New FTC Remedies Study.
ABSTRACT: The Federal Trade Commission has released its study of its remedy orders between 2006 and 2012. Notice of this study was issued in early 2015, so the process has taken two full years to bring to completion. Agencies do not often review the effects and effectiveness of their past policies and practices. It takes time and resources from current activities, and then the results may not be favorable to the agency, posing risks of criticism and worse.
Assistant Attorney General Makan Delrahim Delivers Keynote Address at the University of Chicago's Antitrust and Competition Conference Chicago, IL ~ Thursday, April 19, 2018
Delrahim's comments are here. Below I extract some of the key points:
Outside the realm of naked horizontal restraints such as price fixing, bid rigging, and market allocation, antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications. As enforcers, we exercise our prosecutorial role every day using this approach to review economic evidence to determine whether a restraint, on its face, violates the antitrust laws.
Taking an evidence-based approach to antitrust law should not be mistaken for an unwillingness to bring enforcement actions. In fact, where there is clear evidence of harm to competition, it is the duty of enforcers to promptly and vigorously prosecute the antitrust laws, and to refuse to settle for ineffective behavioral band-aids that fall short of curing the underlying threat to competition and consumers. Believe me, it is a lot easier to accept some pretty promise, issue a press release congratulating ourselves, and move on to the next matter. Convenience, however, is not in the oath we take to uphold the U.S. antitrust laws.
Evidence-based enforcement also requires a readiness to adapt our existing antitrust framework and tools to new or emerging threats to competition. It is an approach of openness to persuasion, and is adaptable to new business models and emerging technologies that create novel threats to competition and consumer welfare.
I am aware that some in this audience believe that existing antitrust laws are ill-equipped to address competition issues that have arisen in the digital platform economy, and that as a result of the antitrust laws’ supposed lack of adaptability more generally, there have been harmful increases in industry concentration, along with a variety of other social ills.
Some lay the blame for this state of affairs at the feet of the consumer welfare standard itself. Others blame antitrust enforcers for falling short of taking action against companies or transactions that might harm competition. Enforcers do indeed deserve some blame, particularly for their willingness to settle for ineffective behavioral (or regulatory) fixes to mergers rather than challenging them when necessary. Yet, overall, I have reason for optimism.
Based on my collective experiences over the past 25 years, I believe the antitrust consensus approach is flexible to new business models in digital markets, and that there is no persuasive evidence that antitrust itself has “failed.” The antitrust consensus may fall short if enforcement agencies are unwilling to take action, based on credible evidence, or—even worse—if they impose ineffective fixes that transform law enforcement agencies into inefficient regulators, where free markets can do a more effective and more honest job.
Over the past several decades, antitrust law has responded to new and innovative products and markets to protect against novel threats to the competitive process. Enforcement agencies have developed a strong expertise as new types of assets emerge and consumer preferences shift, and have brought successful antitrust challenges to dismantle barriers to competition.
Whether antitrust enforcement makes sense in this area is therefore an evidence-based question: are consumers who believe that their data is digital currency facing a monopoly seller or monopsony buyer with structural barriers to competition and entry?
That is the question enforcers should answer. Admittedly, it is a complex question and we need studies and new and innovative thinking—exactly the kind of thinking that occurs and is fostered at institutions such as the University of Chicago.
The antitrust consensus approach is flexible enough to accommodate new and evolving economic wisdom, so long as it is grounded in empirical evidence. If there is an evidentiary basis for an enforcement action against any platform, and if that enforcement action is built on a sound economic foundation, antitrust agencies should fulfill their duties to the American consumer.
Antitrust enforcement requires the antitrust consensus to be subject to constant re-evaluation and scrutiny to maintain its foothold. But a “guilt by correlation” approach implying a causal connection between enforcement standards and specious concentration measures does not advance the conversation. Enforcers need to be more vigilant, but they also need to be humble.
Francisco Enrique González Díaz, Cleary Gottlieb Steen & Hamilton LLP, and Álvaro Fomperosa Rivero, Cleary Gottlieb Steen & Hamilton LLP describe European Competition Law Procedural Reform.
ABSTRACT: Since the entry into force of Council Regulation (EC) No 1/2003, national competition authorities (“NCAs”), commentators and stakeholders have suggested numerous modifications to improve European competition enforcement and fairness. The European Commission’s (hereinafter the “Commission”) proposal to strengthen the powers of NCAs — the so-called “ECN (European Competition Network) Reform” — has the potential to introduce long-awaited changes that are likely to respond to a significant part of the demand for reform. The Commission has not addressed, however, other amply and sometimes hotly debated requests. More discussion on the merits and demerits of further procedural reform appears thus necessary. In what follows we first briefly summarize the process leading to the ECN Reform and outline the most salient requests for reform made during this process. We next outline the claims to improve fairness in European competition enforcement in the wider framework of Regulation 1/2003, and identify a few areas where improvement may be necessary. We conclude with a few ideas that may contribute to the debate on the right mix between enforcement powers and due process in competition law enforcement.
CCP 14th Annual Conference 2018 Competition Policy & Industrial Policy: Is there a need for a new balance? 7-8 June 2018
CCP 14th Annual Conference 2018
Competition Policy & Industrial Policy: Is there a need for a new balance?
7-8 June 2018
The Enterprise Centre, University of East Anglia, Norwich NR4 7TJ
Keynote speaker Gert Jan Koopman, European Commission
Lord Andrew Adonis, House of Lords; Kate Collyer & Tony Curzon-Price, Department of Business, Energy and Industrial Strategy; Eugenio Miravete, University of Texas at Austin; School of Economics & Centre for Competition Policy, UEA; Justus Haucap, DICE, Heinrich-Heine-Universitaet Duesseldorf; Sabine Jacques, UEA Law School & Centre for Competition Policy; Ralf Martin, Imperial College London; Karen Mc Cullagh, UEA Law School; Carlo Scarpa, University of Brescia; Howard Shelanski, Georgetown University; Tuomas Takalo, Bank of Finland;
For many years there has been a wide consensus that competition policy should not be used as an instrument to achieve industrial policy goals. In fact, state aid policy was primarily seen as a competition policy instrument to assure that industrial policy intervention did not distort competition in markets, and thus focused on market failures.
This consensus has been increasingly challenged since the financial crisis. It has been criticized that merger policy has not allowed the emergence of national or European champions. In antitrust policy, part of the benefit of intervening against the large US-based internet companies is sometimes seen as protecting the future interests of European industries. The restrictions arising from state aid policy are increasingly seen as obstacles to nurturing industry and protecting jobs instead of creating an industry dynamic that fosters growth.
- Is competition policy too focused on prices instead of broader economic and social outcomes?
- Does the focus on competitive markets impede the competitiveness of UK and European industries?
- Is the strong position of US Internet companies creating bottlenecks that bias the playing fields of the future industrial landscape?
To help delve deeper into these issues, this conference will explore and debate a broad range of topics concerning the tensions between competition policy practice and new goals for industrial policy. It will bring together insights from legal, political science and economic perspectives on how to rebalance policy goals and how to design the competition regime of the future in light of these challenges.
Thursday, April 19, 2018
June Ma, Australian National University (ANU), Joshua S. Gans, University of Toronto - Rotman School of Management; NBER, and Rabee Tourky, Australian National University (ANU) - Research School of Economics study Market Structure in Bitcoin Mining.
ABSTRACT: We analyze the Bitcoin protocol for electronic peer-to-peer payments and the operations that support the “blockchain” that underpins it. It is shown that that protocol maps formally into a dynamic game that is an extension of standard models of R&D racing. The model provides a technical foundation for any economic analysis of ‘proof of work’ protocols. Using the model, we demonstrate that free entry is solely responsible for determining resource usage by the system for a given reward to mining. The endogenous level of computational difficulty built into the Bitcoin protocol does not mitigate this usage and serves only to determine the time taken to process transactions. Regulating market structure will mitigate resource use highlighting the importance of identifying the benefits of competition for the operation of the blockchain.
Chungsang Lam, Clemson University - John E. Walker Department of Economics and Meng Liu, Massachusetts Institute of Technology (MIT) - Sloan School of Management offer Demand and Consumer Surplus in the On-Demand Economy: The Case of Ride Sharing.
ABSTRACT: How is economic value created by on-demand ride-sharing platforms? We exploit granular data on dynamic pricing and wait time on Uber and Lyft at type-route-time level, and public data on taxi and public transit in New York City. We estimate a discrete-choice demand model that allows substitution among transportation modes. Counterfactual analyses show three main findings. First, platform users gain 72 cents per dollar spent on these platforms. Second, welfare gains are disproportionately higher in locations and times that have been underserved by taxis and public transit. Third, we estimate that 64% of welfare gains come from dynamic pricing used by these platforms.
Alan Reynolds, Cato Institute asks The Return of Antitrust?
ABSTRACT: In the middle of last century, policymakers and the courts came to accept the “Chicago school” interpretation of antitrust: unless it is demonstrated that consumers are being harmed, government should not intervene in firm concentration. Recently, some commentators have charged that this view is mistaken and that government should intervene on the simple grounds that “big is bad” regardless of whether consumers are harmed. This article argues that the reasoning behind this new view is flawed and conflicts with recent decades of antitrust history.
Tuesday, April 17, 2018
Alken-Maes/AB InBev (Bosteels) – A ‘Residual Jurisdiction’ for the Belgian Competition Authority to Assess Non-notifiable Mergers?
Philippe Jonckheere asks Alken-Maes/AB InBev (Bosteels) – A ‘Residual Jurisdiction’ for the Belgian Competition Authority to Assess Non-notifiable Mergers?
ABSTRACT: The appraisal of concentrations at the level of the European Union is regulated by the EU Merger Regulation (‘EUMR’). Pursuant to Article 21(1) EUMR, concentrations are excluded from the scope of Regulation 1/2003. This means in practice that the European Commission cannot assess concentrations failing to meet the EUMR threshold under Article 101 or 102 TFEU using its regular powers.
Luis Ortiz Blanco Sam Villiers explore British Airways v Commission: Always Aim for the Sky.
ABSTRACT: The Court of Justice of the EU, dismissing the appeal of British Airways, held that the General Court was correct in ruling that it cannot grant an annulment that goes beyond that sought by the applicant, even if the General Court has of its own motion found that there is a public policy defect which vitiates the decision in its entirety.
Martin C. Schmalz, University of Michigan, Stephen M. Ross School of Business describes Common Ownership Concentration and Corporate Conduct.
ABSTRACT: The question of whether and how partial common-ownership links between strategically interacting firms affect firm behavior has been the subject of theoretical inquiry for decades. Since then, consolidation and increasing concentration in the asset-management industry has led to more pronounced common ownership concentration (CoOCo). Moreover, recent empirical research has provided evidence consistent with the literature's key predictions. The resulting antitrust concerns have received much attention from policy makers worldwide. However, the implications are more general: CoOCo affects the objective function of the firm, and therefore has implications for all subfields of economics studying corporate conduct -- including corporate governance, strategy, industrial organization, and all of financial economics. This article connects the papers establishing the theoretical foundations, reviews the empirical and legal literatures, and discusses challenges and opportunities for future research.
Monday, April 16, 2018
Joseph Coniglio, Wilson Sonsini Goodrich & Rosati has written on Antitrust and Economic Liberty: A Policy Shift from the Trump Administration?
ABSTRACT: In both the Department of Justice (DOJ) and the Federal Trade Commission (FTC), antitrust policy appears to be increasingly associated with economic liberty. Indeed, Assistant Attorney General (AAG) Makan Delrahim has stated that “[w]hen competition policy works well, it maintains economic liberty and leaves decision-making to the markets.” This short article discusses several different meanings of “economic liberty,” and considers the possibility of a Hayek-inspired theory of negative liberty of subsidiary importance to consumer welfare as a policy paradigm for the Trump Administration. Any inclusion of negative economic liberty into antitrust law’s policy goals, however, may strain to find support in either existing antitrust precedent or the Constitution—resulting in a possible tension with general rule of law principles.
Mark Burke has written on Prioritization in practice: insights from the Competition Commission South Africa.
ABSTRACT: This article reports on a research study undertaken to explore the organizational practices and processes that make possible and enable prioritization in the Competition Commission South Africa. Priority-setting, resource marshalling and evaluative organizational processes were found to enable prioritization. Four organizational practices associated with prioritization were identified, each engendering specific organizational values. The practice of managing cases from ‘cradle-to-grave’ is an approach that encourages ownership of priority cases. The practice of constituting inter-divisional teams promotes joint responsibility and shared accountability among team members. The mid-term review provides an opportunity to calibrate organizational alignment to priorities in a structured and periodic fashion. The practice of encoding priorities in the business plan encourages communication. Furthermore, the analysis highlights how sector expertise, priority setting and project management capabilities associated with prioritization enable the organization to identify and exploit opportunities by re-configuring its resource base.
Louis Kaplow has an interesting new paper on Price-Fixing Policy. Worth downloading!
ABSTRACT: The prohibition against price fixing is competition law’s most important and least controversial provision. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings cannot be reconciled with principles of oligopoly theory. This article (1) presents a fundamental reconceptualization of our understanding of horizontal agreements, (2) develops a systematic analysis of price-fixing policy that focuses on its deterrence benefits and chilling costs, and (3) compares this direct approach to commentators’ favored formulations that typically involve some sort of formalistic communications-based prohibition. By targeting a subset of means rather than the illicit ends, conventional formulations tend to impose liability in cases with lower deterrence benefits and greater chilling costs than those reached under a direct approach and to incur greater administrative costs as well.
Riva Fire v Commission: Infringement of Essential Procedural Requirements and Temporal Succession of Procedural Rules in EU Competition Law
Massimo Merola and Filippo Caliento describe Riva Fire v Commission: Infringement of Essential Procedural Requirements and Temporal Succession of Procedural Rules in EU Competition Law.
ABSTRACT: The Court of Justice, ruling on the appeal brought by Riva, set aside the judgment of the General Court and annulled the Commission decision in Case COMP/37.956 on the ground that an essential procedural requirement was infringed following a change of applicable procedural law during the administrative proceedings.
Saturday, April 14, 2018
Vivek Ghosal, Rensselaer Polytechnic Institute; Center for Economic Studies and Ifo Institute for Economic Research (CESifo) and D. Daniel Sokol, University of Florida - Levin College of Law explain The Rise and (Potential) Fall of U.S. Cartel Enforcement.
ABSTRACT: Government enforcement against collusion, now viewed by the Supreme Court as the “supreme evil” in antitrust, has gone through various phases of enforcement. There have been periods in which cartels have been able to collude more or less effectively given various institutional tools at the disposal of the government. This article measures the attributes of cartel enforcement over time and the changing use of tools to assist with detection and punishment. First, in Section 1 we provide an overview of cartel enforcement. In Section 2, we provide a background of the intellectual context for cartel enforcement. Next, in Section 3, we provide descriptive analysis of critical cartel enforcement events and institutional developments from 1890 to the present. Thereafter, we describe the data and intertemporal patterns in cartel enforcement in Section 4. In Section 5 we develop the empirical specification and present the estimation results. In Section 6 we discuss whether there has been a potential decline in cartel enforcement in the U.S., given our data and findings. Next, in Section 7, we briefly compare some key data between U.S. and European Commission cartel prosecutions to examine potential dynamic interlinkages. Finally, we offer concluding remarks in Section 8.
Results for the 2018 Antitrust Writing Awards are now released. Winners were announced at the Gala Dinner on April 10, 2018 in Washington, DC in the presence of the Board and Steering Committee Members.
The Antitrust Writing Awards is a joint initiative between Concurrences Review and the George Washington University Law School. This 6th edition of the Awards received over 600 submissions worldwide, out of which 160 were nominated by the Editorial Committee. The Academic and Business Steering Committees then shortlisted 40 articles, and the Board selected the final 20 winners.
Read the 2018 Antitrust Writing Awards winning articles selected by the jury panel, consisting of leading antitrust enforcers, professors, and in-house counsels:
Learn more about the Awards categories and Rules on the dedicated website here. Submissions for the 2019 Antitrust Writing Awards will open soon.
Friday, April 13, 2018
Pictures from the pre-Spring Meeting Georgetown Law event on economic analysis in antitrust law (and a relevant aside about Curb Your Enthusiasm)
Those that came to the Georgetown discussion got first rate discussion about how economic analysis plays out in antitrust law across jurisdictions. I want to thank panelists Reiko Aoki (JFTC), Roger Featherston (ACCC), Luke Froeb (DOJ) and Paul Johnson (Canadian Competition Bureau) for their insights. I also want to thank Georgetown's IIEL for hosting us. There were cookies (and tongs) at the reception, which reminded me about this Curb Your Enthusiasm Episode - https://www.youtube.com/watch?v=itvew5kMFfs.
Philipp Werner, Serge Clerckx and Henry de la Barre study Commission Expansionism in EU Merger Control – Fact and Fiction.
ABSTRACT: In recent years, against the backdrop of prominent economists, in particular, who are questioning the efficiency of competition law and calling for stricter and more effective merger control enforcement, the European Commission (‘Commission’) has gained a reputation for taking a tougher stance on enforcing EU merger control rules. This perceived interventionism derives from, among other factors, the high number of Phase II proceedings in the past years, a series of much-discussed prohibition decisions and tougher enforcement of procedural rules. In parallel to these elements, the Commission has also taken steps to assess whether to extend the scope of the EU merger control regulation (‘EUMR’), in view of enabling it to review (potentially problematic) types of transactions that might have evaded EU merger control review in the past.
Wentong Zheng, Florida is Untangling the Market and the State.
ABSTRACT: The government plays increasingly active and diversified roles in the modern economy. How to draw the boundary between the market and the state has emerged as a contentious issue in various areas of law, including constitutional law, antitrust, and international trade. This Article surveys and critiques the law’s current approaches to the market-versus-state divide, embodied in four tests based on ownership, control, function, and role, respectively. This Article proposes an alternative market-versus-state test based on the nature of the power being exercised in the challenged action. This power-based test not only better distinguishes between the market and the state, but also illuminates why the market-versus-state distinction needs to be made in the first place. Applying this power-based test would bring much needed logic and clarity to many market-versus-state issues in various legal contexts.