Monday, May 22, 2017
Mark Anderson, University of Idaho - College of Law and Max Huffman, Indiana University Robert H. McKinney School of Law ask The Sharing Economy Meets the Sherman Act: Is Uber a Firm, a Cartel, or Something in Between?
ABSTRACT: The sharing economy is a new industrial structure that is made possible by instantaneous internet communication and changes in life, work, and purchasing habits of individual entrepreneurs and consumers. Antitrust law is an economic regulatory scheme dating to 1890 (in the United States) and designed to address centrally controlled concentrations of economic power and threats that those concentrations would operate to contravene both consumer interest and economic efficiency. Antitrust needs reenvisioning and careful application to accommodate a modern enterprise structure in which thousands or millions of independent contractors joint forces to provide a service by agreement among themselves. The success of Uber, Airbnb, and other sharing economy firms, and the consumer benefits those firms promise, show both how difficult and how important that reenvisioning can be.
Friday, May 19, 2017
The Competition and Regulation Issues of the Sharing Economy – An Analysis Based on China’s Ride-hailing Service Regulations
Wei Huang, Tian Yuan Law Firm, Bei Yin, Tian Yuan Law Firm and Wen Zhou, Tian Yuan Law Firm have described The Competition and Regulation Issues of the Sharing Economy – An Analysis Based on China’s Ride-hailing Service Regulations.
ABSTRACT: This article starts with an overview of the regulatory challenges brought by the ride-hailing service, collates how China’s ride-hailing regulatory measures react to these challenges, and discusses the possible anti-competitive impact of the constraints imposed by ride-hailing regulatory measures. On that basis, this article explores how the anti-competitive impact can be mitigated from the perspectives of the AML and China’s fair competition review system. While clarifying whether ride-hailing is a form of the sharing economy, this article reveals from a macro level what competition and regulation problems the sharing economy has brought to us, and stimulate the thinking of proper governance of the sharing economy.
Koren Wong-Ervin, George Mason Law has authored Tying and Bundling Involving Standard-Essential Patents.
ABSTRACT: Competition agencies around the world, including in Canada, China, India, Japan, Korea, and the United States (at least prior to the current administration), have taken the unwarranted position that antitrust enforcement involving standard-essential patents (SEPs) upon which a patent holder has made an assurance to license on fair, reasonable, and nondiscriminatory (FRAND) terms should be subject to special rules or unique presumptions and burdens of proof. Recently, this approach has manifested itself in contentions (and in the case of the Korea Fair Trade Commission, an administrative decision) that it is somehow “unfair” (and therefore unlawful) for a SEP holder to license its patents, including both SEPs and non-SEPs, on a portfolio basis. This is because, as the contention goes, the SEP holder is either unfairly forcing implementers to license more than they desire or evading its FRAND assurance through package licensing. This article explains that neither of these are economically sound theories of harm, particularly in jurisdictions like the United States that do not punish the mere extraction of monopoly profits, but instead focus on the unlawful acquisition or maintenance of monopoly power. We set forth the mainstream alternative theories of harm—namely leveraging and monopoly maintenance—and apply them to common portfolio licensing practices of SEP holders, particularly those in the SEP-intensive telecommunications sector. We also address allegations that a vertically-integrated SEP holder’s decision to license at the end-user device level amounts to de facto bundling, relying on a recent paper by Dr. Jorge Padilla and Koren W. Wong-Ervin. In that paper, the authors show through a simple model that a vertically integrated firm’s de facto bundling of a component and its SEP portfolio will not result in foreclosure of the component market if: (i) the vertically integrated SEP holder does not assert its patents at the component level, and (ii) it licenses its SEP portfolio to end-device manufacturers on FRAND terms irrespective of whether they source components from its own subsidiary or from the non-integrated rival.
Gregory Scopino, Georgetown University Law Center explains Expanding the Reach of the Commodity Exchange Act's Antitrust Considerations.
ABSTRACT: In recent years, a small group of financial institutions have paid billions of dollars to settle civil and criminal claims that they formed cartels to rig the prices of certain critically important financial instruments and to stifle competition in others. For example, bankers would rig global benchmark interest rates for the purposes of benefitting their trading positions in over-the-counter (OTC) interest-rate swaps, which are bets on future interest rate movements. By conspiring with horizontal competitors to fix the benchmarks that were components of the prices of financial instruments, financial institutions and their employees harmed competition by warping the normal market factors that governed the prices of those instruments.
The U.S. regulator for these markets, the Commodity Futures Trading Commission (CFTC), has broad authority to combat fraud and market manipulation, but it is not feasible to place all relevant forms of misconduct into one of those two categories. Antifraud claims generally require proof of misrepresentations or deceit, but institutions can engage in anticompetitive conduct without being deceptive. Likewise, market manipulation claims require proof that the defendants acted with the specific intent to cause an artificial price, which is nearly unprovable. An overlooked provision of the Dodd-Frank Act of 2010 gave the CFTC “Antitrust Considerations” authority to combat anticompetitive conduct, but this provision only applies to 100 or so large firms, which is a loophole so wide that the vast majority of market participants are beyond the provision’s reach. This Article argues that antitrust law is the ideal tool to use to address collusive schemes by horizontal competitors to fix the prices of financial instruments and that the CFTC should promulgate a regulation enabling the agency to bring civil enforcement actions against any person who causes (or attempts to cause) unreasonable restraints of trade or material anticompetitive burdens in the markets for derivatives. This would provide the agency that is the congressionally-designated expert on the markets for derivatives with broad authority to prevent anticompetitive conduct in those markets.
Thursday, May 18, 2017
David Evans, Global Economics Group and UCL describes The Emerging High-Court Jurisprudence on the Antitrust Analysis of Multisided Platforms.
ABSTRACT: Between September 2014 and September 2016 high courts in multiple jurisdictions released five decisions that address applying competition law to matchmakers that operate virtual or physical platforms for connecting multiple groups of customers. The decisions rely, directly or indirectly, on the economic literature on multisided platforms that commenced around 2000. The high courts all recognize that it is necessary to consider the several distinct groups of customers and their interactions in evaluating whether business practices are anticompetitive.
Protecting Intellectual Property Rights Abroad: Due Process, Public Interest Factors, and Extra-Jurisdictional Remedies
Koren Wong-Ervin, George Mason has published Protecting Intellectual Property Rights Abroad: Due Process, Public Interest Factors, and Extra-Jurisdictional Remedies.
ABSTRACT: Several recent antitrust investigations involving the licensing of intellectual property rights (IPR) have raised concerns about fundamental due process and the alleged use of industrial policy in antitrust investigations to lower royalty rates, particularly for standard-essential patents (SEPs), in favor of local implementers. These concerns raise serious problems for innovation, economic growth, and consumers, and are likely compounded by the use of extra-jurisdictional remedies whereby one agency imposes worldwide portfolio licensing remedies, including on foreign patents, for conduct that may be deemed procompetitive or benign in other jurisdictions, which may facilitate a lowest-common denominator approach.
Marek Martyniszyn, Queen's Belfast explores JAPANESE APPROACHES TO EXTRATERRITORIALITY IN COMPETITION LAW.
ABSTRACT: Extraterritorial application of domestic competition law is an important feature of the current regulatory framework governing anticompetitive conduct. Japan was initially hesitant to apply its Antimonopoly Act in such a manner. However, over the last two decades there has been a significant shift in its approach. Japan has gradually embraced extraterritoriality and the Japan Fair Trade Commission has actively enforced competition law in a purely offshore context. This article investigates this evolution and considered the most recent and controversial cases in which Japan has applied its laws in a distinctive fashion.
Steven S. Nam Center for East Asian Studies, Stanford University describes Our Country, Right or Wrong: The FTC Act's Influence on National Silos in Antitrust Enforcement.
ABSTRACT: The Federal Trade Commission Act of 1914 (“FTC Act”), a model for many other countries that set up their own competition agencies, combines the control afforded by presidential appointment and removal powers over FTC commissioners with an exceedingly discretionary mandate. This Article contends that the FTC Act’s outmoded openness to strong presidential direction, where adapted abroad, has helped detract from antitrust regulator independence. Even advanced players in the liberal international economic order such as South Korea have made use of the U.S.’s original blueprint for unitary executive-stamped antitrust enforcement without sharing a long historical evolution of counterbalancing regulatory norms, e.g. the judicial check that was Humphrey’s Executor v. United States, 295 U.S. 602 (1935).
Strong executive direction in antitrust enforcement is particularly suited to state-sponsored capitalist economies and moreover the mercantilist administrations among them, given their belief that the state and big business must cooperate in the face of zero-sum international competition. South Korean President Lee Myung-Bak’s term (2008-2013) serves as an apt recent case study, featuring dirigiste calibration of antitrust enforcement against a backdrop of global recession. This Article examines the parallels between the FTC Act and the South Korean Monopoly Regulation and Fair Trade Act before scrutinizing the enabled silo-like enforcement patterns of the Korean Fair Trade Commission under the Lee administration. Increasingly widespread erosion of public confidence in free and competitive trade demands a better understanding of the forces preventing global convergence in antitrust enforcement, and of their roots.
Wednesday, May 17, 2017
Antitrust in the Financial Sector: Hot Issues & Global Perspectives Tuesday, May 23, 2017 from 5:30 PM to 8:00 PM
Tuesday, May 23, 2017 from 5:30 PM to 8:00 PM (EDT)
05.00 - 05.30pm
Coffee & Registration
05.30 - 05.35pm
Richard TAFFET | Partner, Morgan, Lewis & Bockius, New York
05.35 - 06.00pm
Maureen K. OHLHAUSEN | Acting Chairman, US Federal Trade Commission, Washington DC
Financial Products Antitrust Litigation
D. Scott TUCKER | Managing Director, Morgan Stanley, New York
David E. SWARTS | Executive Director, Assistant General Counsel, JPMorgan Chase, New York
John ASKER | Professor of Economics, University of California | Senior Advisor, Cornerstone Research, Los Angeles
Moderator: Jon R. ROELLKE | Partner, Morgan, Lewis & Bockius, Washington DC
J. Christopher WARD | Executive Vice President | Head of Product Management | Treasury Management, PNC Bank, New York
Michael SALINGER | Professor, Boston University Questrom School of Business | Senior Academic Adviser, Charles River Associates, Boston
Philip E. BRUNO | Partner, McKinsey & Company, New York
Mary P. HARMAN | Managing Director, Enterprise Payments Executive, Bank of America, New York
Moderator: Greg BAER | General Counsel, The Clearing House Payments Company, New York
08.00 - 08.15pm
H. Rodgin COHEN | Senior Chairman, Sullivan & Cromwell, New York
Morgan, Lewis & Bockius
Charles River Associates
Rainer Kulms investigates Competition Law Enforcement Under Informational Asymmetry.
ABSTRACT: Competition law enforcement, whether by public officials, private parties and consumers or the courts, has to resolve informational and resource asymmetries. Current EU competition law establishes an interface between government enforcement action and private litigation. For the EU Commission, informational asymmetries will be primarily addressed under positive comity agreements with other countries and its leniency programme. For private parties, the success of a stand-alone or follow-on action for damages critically depends on disclosure of documents. The Court of Justice of the European Union attempts to strike a balance between disclosure and the Commission's preference for confidentiality. Nonetheless, the EU law concept of effectiveness and equivalence of competition law enforcement does not supersede national law rules on procedure or liability of private parties. The Court of Justice applies a negative harmonisation strategy towards national laws. Where appropriate, the paper will assess enforcement practice under U.S. law.
John Kwoka (Northeastern) has written on Mergers, Merger Control, and Remedies: A Response to the FTC Critique.
ABSTRACT: It has now been two years since publication of my research monograph Mergers, Merger Control, and Remedies: A Retrospective Analysis of U.S. Policy (MIT Press, 2015; hereafter MMCR). During this time, the book has received attention from economists and lawyers, from policymakers in the U.S. and elsewhere, from think tanks and consultants, from reporters and others. This has been due in part to the fact that the focus of the research – mergers, their effects, and their control – have become matters of wider public concern in the U.S. economy. MMCR also received attention since its methodology – distilling the results of careful studies of mergers – was relatively novel and also since its findings included a number of conclusions that ran counter to some strongly held opinions. I therefore expected it to be challenged, and that challenge has now come from the Federal Trade Commission.
In this review and update, I will first provide a brief overview of what my book in fact says, and then respond to the FTC’s various criticisms of its methodology and conclusions. I acknowledge an oversight that affects the strength of one conclusion, but otherwise, as I will show, there is nothing in the FTC critique that undermines the methodology or alters the conclusions of the book. Indeed, that critique makes clear the fundamental objectivity and strength of the underlying research.
Is information diffusion a threat to market power for financial access? Insights from the African banking industry
Asongu, Simplice ; Batuo, Enowbi ; Nwachukwu, Jacinta and Tchamyou, Vanessa ask Is information diffusion a threat to market power for financial access? Insights from the African banking industry.
ABSTRACT: This study assesses how information diffusion dampens the adverse effect of market power on the price and quantity of loans provided by a panel of 162 banks from 39 African countries for the period 2001-2011. The empirical evidence is based on three endogenity-robust estimation techniques, namely: (i) Two Stage Least Squares (2SLS), (ii) Generalised Method of Moments (GMM) and (iii) Instrumental Variable Quantile Regressions (QR). Three key results emerge. First, from the GMM results, a mobile phone penetration rate of 54.29, rising to 57 per 100 people are predicted to neutralise the adverse effect of market power on the average loan price and quantity respectively. Second, from the QR, mobile phone penetration rates of 56.20, 52.04 and 42.76 per 100 people is needed to nullify the negative effect of market power on loan quantity at the 0.10th, 0.25th and 0.90th quintiles respectively. Third, a considerably lower internet penetration rate of 9.49 per 100 people is required to counteract the negative impact of market power on loan quantity at the 0.90th quintile.
Gobillon, Laurent and Milcent, Carine examine Competition and hospital quality: Evidence from a French natural experiment.
ABSTRACT: We evaluate the effect of a pro-competition reform gradually introduced in France over the 2004-2008 period on hospital quality measured with the mortality of heart-attack patients. Our analysis distinguishes between hospitals depending on their status: public (university or non-teaching), non-profit or for-profit. These hospitals differ in their degree of managerial and financial autonomy as well as their reimbursement systems and incentives for competition before the reform, but they are all under a DRG-based payment system after the reform. For each hospital status, we assess the benefits of local competition in terms of decrease in mortality after the reform. We estimate a duration model for mortality stratified at the hospital level to take into account hospital unobserved heterogeneity and censorship in the duration of stays in a flexible way. Estimations are conducted using an exhaustive dataset at the patient level over the 1999-2011 period. We find that non-profit hospitals, which have managerial autonomy and no incentive for competition before the reform, enjoyed larger declines in mortality in places where there is greater competition than in less competitive markets.
Tuesday, May 16, 2017
Competition and Entry: Do Entrants Deserve Special Protection in India and Other Emerging Economies?
Daniel Sokol (University of Florida) and Jan Peter van der Veer (RBB) ask Competition and Entry: Do Entrants Deserve Special Protection in India and Other Emerging Economies?
ABSTRACT: We discuss the question whether competition policy should provide entrants with special protection in the Indian competition law context. Under an effects based approach, competition enforcement should to protect consumers rather than the interests of individual competitors. Entrants deserve special protection only in recently liberalized markets characterized by the presence of a former state monopoly or a current SOE that display specific characteristics such as natural monopoly. Barring such highly specific circumstances, promoting competitors over consumers hurts consumer welfare and innovation. India’s Competition Act is an essential tool for policymakers to promote a transition to greater country competitiveness, innovation, and economic prosperity for India. To achieve these objectives, CCI must implement the Competition Act in a manner that promotes consumers over competitors, and minimizes the distortions of industrial policies instead of amplifying them.
L. Chauvet and L. Jacolin examine Financial Inclusion, Bank Concentration and Firm Performance.
ABSTRACT: This study focuses on the impact of financial inclusion and bank concentration on the performance of firms in developing and emerging countries. Using firm-level data for a sample of 55,596 firms in 79 countries, we find that financial inclusion, i.e. the distribution of financial services across firms, has a positive impact on firm growth. This positive impact is magnified when bank markets are less concentrated, a proxy for more competition among banks. We also find that more competitive banks favor firm growth only at high levels of financial inclusion, while bank concentration is particularly favorable to foreign and state-owned firms, and increases firm growth for low levels of financial inclusion. In countries with limited financial deepening, the quality of the banking system (financial inclusion and bank competition) may be as important to promote firm performance as its overall size.
Monday, May 15, 2017
ABSTRACT: This paper attempts to determine if beer is a separate relevant product market from rum and soft drinks. Three conventional statistical tests - Pearson’s correlation, unit root and Granger causality - are applied to average monthly retail price data from Barbados for the three categories of beverages for the period January 2012 to July 2015. The results of both the correlation and Granger causality tests suggest that beer is a distinct product market from rum and soft drinks, while the result of the unit root test was inconclusive. The results of the paper should interest practitioners of competition law in the Caribbean region as it shows that price tests could be used as quantitative proof on market boundaries to support the intuition and evidence the traditional Small but Significant Non-transitory Increase in Price (SSNIP) test provides.
Jeanjean, François and Houngbonon, Georges Vivien theorize Optimal Market Structure in the Mobile Industry.
ABSTRACT: The optimal market structure in the mobile industry is an important topic in the mobile industry. In this paper, we use two theoretical frameworks and a structural estimation approach to assess the effects of market structure on consumer surplus in symmetric mobile markets. When mobile services are viewed as homogeneous products under Cournot competition, we find that consumer surplus falls with the number of operators. However, when mobile services are considered as differentiated products under Salop competition, we find an inverted-U relationship between consumer surplus and the number of mobile operators. These findings call for a case-by-case analysis of the optimal market structure in the mobile industry.
The different effect of consumer learning on incentives to differentiate in Cournot and Bertrand competition
Conze, Maximilian and Kramm, Michael describe The different effect of consumer learning on incentives to differentiate in Cournot and Bertrand competition.
ABSTRACT: We combine two extensions of the differentiated duopoly model of Dixit (1979), namely Caminal and Vives (1996) and Brander and Spencer (2015a,b), to analyze the effect of consumer learning on firms' incentives to differentiate their products in models of Cournot and Bertrand competition. Products are of different quality, consumers buy sequentially and are imperfectly informed about the quality of the goods. Before simultaneously competing in quantities, firms simultaneously choose their investment into differentiation. Late consumers can observe earlier consumers' decisions and extract information about the quality of the goods. This influences the firms' incentives to differentiate. If firms compete in quantities, they are more likely to invest in differentiation with consumer learning than without. This is in line with implications of the recommendation effect introduced in Conze and Kramm (2016) in a model of spatial differentiation. We also examine the case in which firms compete in prices. Here, the effect of consumer learning is reversed, so that differentiation is less likely with consumer learning. Thus, we find an information-based difference between Cournot and Bertrand competition: in the Bertrand setting consumer learning increases the competition, i.e. products are more likely to be substitutes, and it weakens it in the Cournot model.
Hviid, Morten; Izquierdo Sanchez, Sofia; and Jaques Sabine discuss From publishers to self-publishing: The disruptive effects of digitalisation on the book industry.
ABSTRACT: This paper explores the structure of the book publishing industry post- digitalisation. We argue that the introduction of successful e-book readers has belatedly given digitalisation the characteristics of a disruptive technology by making self-publishing a serious option for authors. This has been supported by the entry of new types of intermediaries and the strengthening of others. These changes have reduced the overall complexities for an author to get a book self-published. As a result, a larger share of the surplus from the book industry is likely going to authors, explaining the significant increase in the supply of books. The potential over-supply of books has created a new problem by making consumer search more difficult. We argue that digitalisation has shifted the potential market failure from inadequate supply of books to asymmetric information about quality. It remains to be seen whether the market will provide appropriate intermediaries to solve the associated asymmetric information problem and, if not, what appropriate interventions should be contemplated.
Friday, May 12, 2017
Emanuel Holler and Maarten Pieter Schinkel discuss UMBRELLA EFFECTS: CORRECTION AND EXTENSION.
Roman Inderst, Frank Maier-Rigaud, and Ulrich Schwalbe's “Umbrella Effects” contains a misspecification of the profit functions that affects the numerical findings reported in the article (Roman Inderst, Frank Maier-Rigaud & Ulrich Schwalbe, Umbrella Effects 10 J. Competition L. & Econ. 739 (2014)). We offer the standard economic model of oligopolistic price competition in differentiated goods as a better basis for further development of umbrella damages cases.