Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Friday, April 11, 2014

Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007

Rena M. Conti and Ernst R. Berndt discuss Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007.

ABSTRACT: We examine the impact of loss of U.S. patent exclusivity (LOE) on the prices and utilization of specialty drugs between 2001 and 2007. We limit our empirical cohort to drugs commonly used to treat cancer and base our analyses on nationally representative data from IMS Health. We begin by describing the average number of manufacturers entering specialty drugs following LOE. We observe the number of firms entering the production of newly generic specialty drugs ranges between two and five per molecule in the years following LOE. However, the existence of time-varying and unobservable contract manufacturing practices complicates the definition of "manufacturers" entering the market. We use pooled data methods to examine whether the neoclassical relationship between price declines and volume increases upon LOE holds among these drugs. First, we examine the extent to which estimated prices of these drugs undergoing LOE fall w! ith generic entry. Second, we estimate reduced form random effect models of utilization subsequent to LOE. We observe substantial price erosion after generic entry; average monthly price declines appear to be larger among physician-administered drugs (38-46.4%) compared to oral drugs (25-26%). Additionally, we find average prices for drugs produced by branded firms rise and prices for drugs produced by generic firms fall upon LOE; the latter effect is particularly large among oral drugs. In pooled models, volume appears to increase following generic entry, but this result appears to be largely driven by oral drugs. Molecule characteristics, number of manufacturers and 2007Q4 revenues are significant predictors of post-2007 drug shortages. We discuss second best welfare consequences of these results.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

The EU Merger Regulation Ten Years after the 2004 Review

Johannes Luebking (DG Competition) reviews The EU Merger Regulation Ten Years after the 2004 Review.

ABSTRACT: Nearly ten years after the last major overhaul of the EU Merger Regulation (Council Regulation (EC) No 139/2004), the European Commission has now taken new initiatives in the legislative field to further strengthen EU merger control, one of the central pillars of EU competition law. The objective of the initiatives is twofold: to make EU merger control more efficient and to ensure that it addresses all sources of possible competitive harm caused by corporate restructuring.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Kamakahi v. ASRM: The Egg Donor Price Fixing Litigation

Kimberly D. Krawiec, Duke University - School of Law has written on Kamakahi v. ASRM: The Egg Donor Price Fixing Litigation.

ABSTRACT: In April 2011, Lindsay Kamakahi caused an international stir by suing the American Society for Reproductive Medicine (ASRM), the Society for Assisted Reproductive Technology (SART), SART-member fertility clinics, and a number of egg donor agencies on behalf of herself and other oocyte donors. The suit challenged the ASRM-SART oocyte donor compensation guidelines, which limit payments to egg donors to $5,000 ($10,000 under special circumstances), as an illegal price-fixing agreement in violation of United States antitrust laws. Ensuing discussion of the case has touched on familiar debates surrounding coercion, commodification, and exploitation. It has also revealed many misconceptions about oocyte donation, the allegations in the case, and antitrust law’s application to the ASRM-SART oocyte donor compensation guidelines. Regardless of outcome, the suit is an important one that could signal a change in public attitudes about the propriety of mixing money with motherhood. It should — and will — be closely watched.

April 11, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, April 10, 2014

Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at the Pen and Pad Briefing on the Justice Department and Federal Trade Commission Joint Antitrust Policy Statement on Sharing of Cybersecurity Information

Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at the Pen and Pad Briefing on the Justice Department and Federal Trade Commission Joint Antitrust Policy Statement on Sharing of Cybersecurity Information.

 

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

"Special" Treatment: State-Owned Enterprises Under Canada's Foreign Investment and Competition Laws

Sandy Walker (Dentons Canada LLP) discuss "Special" Treatment: State-Owned Enterprises Under Canada's Foreign Investment and Competition Laws.

ABSTRACT: Canada, like the United Kingdom and the United States, has witnessed a sharp decline in state ownership in the past few decades. However, investment by foreign state investors in Canada in recent years-in effect a foreign "nationalization"-has represented an interesting and significant deviation from this trend, particularly in the natural resources sector. Such investment has not gone unnoticed: the acquisition of Canadian resource companies by foreign state-owned enterprises and sovereign wealth funds has become the subject of heated political debate and extensive press attention in Canada over the last few years including the acquisition by Chinese SOE, CNOOC, of Canadian oil company, Nexen in 2013.

This wave of foreign state ownership has been remarkable not only because of the state status of the acquirers but also because the sources of foreign direct investment in Canada are no longer limited to Western countries (particularly the United States) but include a growing number of emerging economies such as China, Malaysia, Korea, Russia, Singapore and the Middle Eastern oil states. As illustrated in Table 1, which lists recent SOE investments in Canada, investment by SOEs in Canada has focused primarily on natural resources and, in particular, oil and gas. Also of note is that Chinese investment has expanded dramatically: cumulative foreign direct investment into Canada from China (both state and non-state) was U.S. $10.7 billion at the end of 2011, an increase of 3500 percent in the last decade. From 2011 to 2012, Chinese investment in Canada doubled to reach U.S. $21.3 billion, $15.2 billion of which can be attributed to the CNOOC-Nexen deal. SOEs are also investing in related industries, moving up the energy sector's "value chain;" for example, PetroChina had expressed interest in building Enbridge's Northern Gateway pipeline to transport Canadian oil to the west coast of Canada. It is also noteworthy that Chinese companies have increasingly invested in Canadian companies with assets in Canada rather than Canadian companies with assets outside of Canada (e.g., China National Petroleum Corporation's acquisition of PetroKazakhstan in 2005). The sometimes nationalist response by Canadians to SOE investments is in part a response to already existing concerns about foreign investment. These concerns rose to a fevered pitch in the wake of a spate of foreign (non-SOE) takeovers of Canadian icons beginning in the mid 2000s with the acquisitions of companies such as mining company Inco, aluminum producer Alcan, natural resources giant Falconbridge, and retailer Hudson's Bay Company (founded in 1670 in Canada). The loss of head office jobs (the so-called "hollowing out" of corporate Canada) and the elimination of Canadian companies as national champions were key themes of critics of these

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Negotiated Remedies in the Modernization Era: The Limits of Effectiveness

Damien M. B. Gerard, University of Louvain - CeDIE discusses Negotiated Remedies in the Modernization Era: The Limits of Effectiveness.

ABSTRACT: Over the past ten years, the nature, scope and design of remedies have taken a growing importance in the enforcement of competition law in the European Union. That evolution can be viewed as one of the many consequences of the process known as the modernization of EU competition law, understood as a comprehensive attempt to experiment with a utility-maximizing approach to the regulation of economic competition with substantive, procedural and institutional dimensions. In effect, modernization has notably entailed a revamp of enforcement strategies driven by effectiveness considerations. In turn, that effectiveness paradigm has led to a shift toward a “negotiated” form of enforcement by means of tools such as leniency, settlements and commitment proceedings. Commitments, in particular, have developed into the default mechanism to enforce the antitrust provisions of the EU Treaties outside of the field of “cartels,” where the two other instruments are steadily relied upon.

The shift toward negotiated enforcement has moved remedies to the core of antitrust adjudication. However, the effectiveness rationality driving negotiated procedures is as such inapt to ensure the design of efficient remedies, it was submitted, i.e., effectiveness has limits when it comes to define optimal remedies, which in turn affects the legitimacy of those negotiated remedies. In the EU context, these limits are magnified by the relaxation in commitment proceedings of these safeguards that have historically limited the Commission’s remedial discretion, as captured by the concepts of proportionality and due process. While there is a case for relaxing proportionality requirements in commitment cases, doing away with both concepts creates a gap that threatens the legitimacy of competition law itself. In turn, filling that gap requires a review of the sequencing of commitment proceedings and associated procedural rights, as well as the (re-)development of a credible alternative thereto, in order to salvage the voluntary character of commitments as a guarantee of proportionality and to turn commitment proceedings into a collaborative process capable of delivering optimal outcomes both from an effectiveness and an efficiency point of view.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Scottish Minimum Alcohol Pricing & EU Law

Angus MacCulloch, Lancaster University - Law School describes Scottish Minimum Alcohol Pricing & EU Law.

ABSTRACT: The SNP Government in Scotland introduced Minimum Price per Unit (MPU) for alcohol in the Alcohol (Minimum Pricing) (Scotland) Act 2012. A challenge to those provisions was brought by the Scotch Whisky Association and others in SWA and Others for Judicial Review of the Alcohol (Minimum Pricing) (Scotland) Act 2012 [2013] CSOH 70. This article examines the impact of the first phase of that legal challenge. The analysis is broadly in three parts: first, an analysis of the Commission Opinion on MPU which went on to have significance in the case itself; second, an analysis of the Outer House judgment itself; and, finally, a discussion of the policy choices which underlie some of the arguments advanced in the case and what they tell us about the balance between free movement and undistorted competition in the internal market.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Mexico’s Proposed Reform of Competition Law A Critique from Europe

Anne Perrot, Universite Paris 1 Pantheon-Sorbonne and Assimakis Komninos, University College London, Department of Law offer Mexico’s Proposed Reform of Competition Law A Critique from Europe.

ABSTRACT: On 19 February 2014, sweeping amendments to the Mexican Competition Act were presented, which include a number of problematic elements. Most alarmingly, the proposals refer to a newly introduced concept of "barriers to competition" and would make it a violation of competition law to create a "barrier to competition". They also intend to empower the Mexican competition authority to carry out market investigations leading potentially to behavioural and/or structural measures. The applicable test is again "barriers to competition", which is a flawed concept and would harm both competition on the merits and consumer welfare in Mexico, if adopted.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Agricultural Cooperatives and the Law: Obsolete Statutes in a Dynamic Economy

Peter Carstensen, University of Wisconsin Law School explains Agricultural Cooperatives and the Law: Obsolete Statutes in a Dynamic Economy.

ABSTRACT: Farm cooperatives are important vehicles for the marketing of agricultural production. The Capper-Volstead Act's limited antitrust immunity and the Agricultural Marketing Agreement Act's authorization of cartels along with some other equally old statutes still structure much of the marketing process for cooperatives. The results are anti-competitive harms to both farmers and consumers. In addition, despite the very large scale and vast membership of some cooperatives, no state or federal law provides membership governance rights and information disclosure comparable to that imposed on similarly sized corporations. Current judicial interpretation has constrained some of the worst aspects of these statutory schemes, but only a fundamental revision of the legislation can address the full range of current issues.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?

David Besanko, Northwestern University - Kellogg School of Management, Ulrich Doraszelski, Harvard University - Department of Economics; University of Pennsylvania - Business & Public Policy Department, and Yaroslav Kryukov, Tepper School of Business, CMU ask The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?

ABSTRACT: We formally characterize predatory pricing in a modern industry-dynamics framework that endogenizes competitive advantage and industry structure. As an illustrative example we focus on learning-by-doing. To disentangle predatory pricing from mere competition for efficiency on a learning curve we decompose the equilibrium pricing condition. We show that forcing firms to ignore the predatory incentives in setting their prices can have a large impact and that this impact stems from eliminating equilibria with predation-like behavior. Along with the predation-like behavior, however, a fair amount of competition for the market is eliminated.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

A US Court Issues Formalistic Ruling on Reverse-Payment Settlements After 'Actavis' (GlaxoSmithKline/Teva Pharmaceuticals/Louisiana Wholesale Drug Company/King Drug Company)

Mike Carrier (Rutgers - Camden) explains A US Court Issues Formalistic Ruling on Reverse-Payment Settlements After 'Actavis' (GlaxoSmithKline/Teva Pharmaceuticals/Louisiana Wholesale Drug Company/King Drug Company).

ABSTRACT: In FTC v. Actavis, the Supreme Court held that a brand firm's payment to a generic to delay entering the market could violate the antitrust laws. In one of the first post-Actavis decisions, the New Jersey district court in In re Lamictal Direct Purchaser Antitrust Litigation issued a narrow, formalistic ruling on the question of what constitutes a payment. In the settlement at issue, GlaxoSmithKline agreed (in what is known as a no-authorized-generic provision) not to launch its own generic version of epilepsy- and bipolar-disorder-treating Lamictal during Teva’s 180-day exclusivity period, which the Hatch-Waxman Act reserves for the first generic to challenge a brand firm’s patent. This short article highlights two flaws in the opinion. First, the ruling was formalistic in concluding that Actavis was limited to cash payments. And second, the court invoked Actavis’s “five considerations” (which explained why antitrust immunity was not appropriate) as defenses the settling parties could offer. The article concludes that future courts would benefit from more directly focusing on the substance of brand conveyances to generics and more carefully following the Supreme Court’s guidance.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Abuse of Dominance: Exclusionary Pricing Abuses

Alison Jones, King's College London – The Dickson Poon School of Law and Liza Lovdahl Gormsen, University of Manchester address Abuse of Dominance: Exclusionary Pricing Abuses.

ABSTRACT: This chapter examines the way that EU competition law applies to exclusionary pricing abuses, focusing on predatory pricing, selective low pricing, margin squeeze, rebates and other forms of price discrimination. It considers whether the evolution in the jurisprudence reflects a less formalistic approach to Article 102 and a trend towards a more economic one, based on a consumer welfare objective. The Chapter concludes that in seeking to identify unlawful exclusionary behaviour, the judgments of the EU Courts seem, to date, to prefer a construction of Article 102 that will ensure that the process of competition and rivalry between firms is preserved and protected. The anti-competitive effects of a dominant firm’s conduct thus tend to be assumed where that conduct is capable of excluding equally efficient competitors or is liable to remove or restrict a buyer’s freedom to choose its sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition. Critics complain that the EU rules in this area may, in consequence, be over-inclusive and may unduly deter pro-competitive low cost pricing by dominant firms. Although the Commission, in its Guidance Paper and more recent decisions, has sought to meet this criticism, promising to focus more closely on the question of whether a pricing practice will exclude equally efficient competitors and cause consumer harm, it is too early to determine to what extent this new policy will result in a concomitant evolution in the jurisprudence of the Court of Justice.

April 10, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 9, 2014

Readers - I am in need of Passover seder help

Does any reader of this blog have a good set of powerpoint slides that are kid friendly that we can use for the Passover seder? The kids want us to try something high tech this year to keep things interesting in addition to the regular Haggadah led service.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Frozen Passover Video

There is no movie more loved in the Sokol household than Frozen, a movie about the love of sisters. Of course, no Passover can be complete without five (yes, five) Frozen Passover parodies.  See here for the link to all five.

 

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Canada's Proposed Legislation to Prohibit Cross-Border Price Differentials

Marissa Ginn & Marc Van Audenrode (Analysis Group) describe a really bad situation in Canada's Proposed Legislation to Prohibit Cross-Border Price Differentials.

ABSTRACT: In its most recent budget released on February 11, 2014, the Government of Canada announced its intent to introduce new legislation guarding against what it terms "unjustified cross-border price discrimination" resulting from "country pricing strategies-that is, when companies use their market power to charge higher prices in Canada that are not reflective of legitimate higher costs." Some evidence exists that Canadians pay more than Americans for identical goods: recent estimates from various sources of the Canada-U.S. price gap range from 10 to 25 percent, after adjusting for sales tax differentials.

In this article, we discuss the potential economic factors driving such price differentials, and provide our views, as economists, on the implications of this proposed amendment to the Competition Act on consumers and on the Canadian economy.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Recasting Competition Concurrency under the Enterprise and Regulatory Reform Act 2013

Niahme Dunne, University of Cambridge, has a piece on Recasting Competition Concurrency under the Enterprise and Regulatory Reform Act 2013.

ABSTRACT: The concurrent enforcement power granted to certain sector economic regulators is one of the more remarkable features of UK competition law. In practice, regulators have tended to under-enforce their competition powers, preferring to resolve market difficulties through regulatory interventions. Recent amendments to the concurrency framework, introduced by sections 51 to 53 of the Enterprise and Regulatory Reform Act 2013, seek both to strengthen the priority of competition enforcement and to provide plausible sanctions – including, ultimately, the removal of competition jurisdiction from regulators – for continued underuse. This article assesses these reforms in light of the history and (limited) application of the concurrent competition powers of regulators to date. It argues that the absence of an overarching policy rationale for this curious example of UK antitrust ‘exceptionalism’ complicates the determination of whether the reforms, which ostensibly seek to reinforce but potentially also undermine concurrency, are likely to have a positive market impact in practice.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Negotiated Remedies in the Modernization Era: The Limits of Effectiveness

Damien M. B. Gerard, University of Louvain discusses Negotiated Remedies in the Modernization Era: The Limits of Effectiveness.

ABSTRACT: Over the past ten years, the nature, scope and design of remedies have taken a growing importance in the enforcement of competition law in the European Union. That evolution can be viewed as one of the many consequences of the process known as the modernization of EU competition law, understood as a comprehensive attempt to experiment with a utility-maximizing approach to the regulation of economic competition with substantive, procedural and institutional dimensions. In effect, modernization has notably entailed a revamp of enforcement strategies driven by effectiveness considerations. In turn, that effectiveness paradigm has led to a shift toward a “negotiated” form of enforcement by means of tools such as leniency, settlements and commitment proceedings. Commitments, in particular, have developed into the default mechanism to enforce the antitrust provisions of the EU Treaties outside of the field of “cartels,” where the two other instruments are steadily relied upon.

The shift toward negotiated enforcement has moved remedies to the core of antitrust adjudication. However, the effectiveness rationality driving negotiated procedures is as such inapt to ensure the design of efficient remedies, it was submitted, i.e., effectiveness has limits when it comes to define optimal remedies, which in turn affects the legitimacy of those negotiated remedies. In the EU context, these limits are magnified by the relaxation in commitment proceedings of these safeguards that have historically limited the Commission’s remedial discretion, as captured by the concepts of proportionality and due process. While there is a case for relaxing proportionality requirements in commitment cases, doing away with both concepts creates a gap that threatens the legitimacy of competition law itself. In turn, filling that gap requires a review of the sequencing of commitment proceedings and associated procedural rights, as well as the (re-)development of a credible alternative thereto, in order to salvage the voluntary character of commitments as a guarantee of proportionality and to turn commitment proceedings into a collaborative process capable of delivering optimal outcomes both from an effectiveness and an efficiency point of view.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

When Competition Law Analysis Goes Wrong – The Italian Pfizer/Pharmacia Case

Damien Geradin, George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC); Covington & Burling LLP describes When Competition Law Analysis Goes Wrong – The Italian Pfizer/Pharmacia Case.

ABSTRACT: The January 2012 decision of the Italian Competition Authority (“ICA”) to fine Pfizer and Pharmacia €10.6 million is an illustration of the more aggressive trend taken by competition authorities in the pharmaceutical sector. In this case, the ICA alleges that the parties sought to delay entry of generic suppliers by implementing a “complex strategy” to “artificially” extend its patent rights, hence committing an abuse of a dominant position in breach of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”).

The purpose of this paper is to show that the decision of the ICA is fundamentally flawed as it fails to provide any evidence that the parties’ patent filings were misleading or “artificial” under the applicable patent laws. Instead, the decision is based solely on the ICA’s unsubstantiated view that Pfizer’s conduct did not constitute “competition on the merits”, a vague standard unable to satisfy the basic requirements of the rule of law and legal certainty. Following this unreasoned decision, pharmaceutical companies and their counsel face an impossible task of assessing which IP strategies are compatible with competition law. This legal uncertainty, combined with the risk of large fines, means that pharmaceutical firms may no longer dare to take steps to obtain patent protection to which they are legally entitled, and more importantly, may have less incentive to invest in future research and development.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Lending a Hand to the Invisible Hand? Assessing the Effects of Newly Enacted Competition Laws

Jerg Gutmann, University of Hamburg - Institute of Law and Economics and Stefan Voigt, University of Hamburg - Institute of Law & Economics ask Lending a Hand to the Invisible Hand? Assessing the Effects of Newly Enacted Competition Laws

ABSTRACT: Far more than 100 countries have adopted competition laws. Their macro-economic consequences, however, are rarely dealt with. The few available studies inquiring into the macro-economic effects of competition laws mostly rely on subjective indicators and employ an inadequate instrumental variable approach. This paper adds to the literature by relying on objective macro-economic indicators and on a differences-in-differences approach. We find robust evidence that competition laws do enhance economic growth. In low-income countries this effect can be traced back to an increase in investment levels. Competition laws have, however, no significant effect on total factor productivity or foreign direct investment. Finally, corruption appears to be declining after the introduction of competition laws in low-income countries.

April 9, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 8, 2014

Exclusive Dealing: Where a Tree Can Be Called a Forest