Antitrust & Competition Policy Blog

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

Friday, February 5, 2016

The Competition Act 2010—the Issues and Development since Coming into Force

Vince Eng Teong SEE (University of Malaya Centre of Regulatory Studies) analyzes The Competition Act 2010—the Issues and Development since Coming into Force.

ABSTRACT: Competition law was almost unheard of in the first hundred years after the Sherman Act was passed. However, the number of jurisdictions with a competition law increased dramatically in the last 20 years. One of the countries that joined the rank is Malaysia when it passed Competition Act 2010 and Competition Commission Act 2010. Competition Act 2010 represents an attempt to reduce the hitherto European competition jurisprudence to a concise piece of legislation supported by other guidelines. This paper will attempt to examine the two pieces of legislation, and explore various issues, both normative and practical. It will also look at some development that has taken place since the law came into force in January 2012, some cases, and initiatives of the Commission.

February 5, 2016 | Permalink | Comments (0)

Competitive Bundling

Jidong Zhou theorizes Competitive Bundling.

ABSTRACT: This paper proposes a model of competitive bundling with an arbitrary number of firms. In the regime of pure bundling, we find that relative to separate sales pure bundling tends to raise market prices, benefit firms, and harm consumers when the number of firms is above a threshold. This is in contrast to the findings in the duopoly case on which the existing literature often focuses. Our analysis also sheds new light on how consumer valuation dispersion affects price competition more generally. In the regime of mixed bundling, having more than two firms raises new challenges in solving the model. We derive the equilibrium pricing conditions and show that when the number of firms is large, the equilibrium prices have simple approximations and mixed bundling is generally pro-competitive relative to separate sales. Firms' incentives to bundle are also investigated.

February 5, 2016 | Permalink | Comments (0)

Thursday, February 4, 2016

Evolution of Standards and Innovation

AOKI Reiko and ARAI Yasuhiro describe Evolution of Standards and Innovation.

ABSTRACT: We examine how a standard evolves when both a standard consortium or firm (incumbent) and an outside firm (potential entrant) innovate to improve the technology. The incumbent improves to deter entry, and the entrant can invest to counter the incumbent's attempt. We show that only when the technology is mature and inertia is sufficiently low will there be entry leading to the coexistence of both standards. When the technology is in its infancy, the incumbent deters entry by technology improvement (upgrade) for any level of inertia. The entrant is never able to drive the incumbent out of the market (replacement). Our results suggest that competition policy to control inertia is not a substitute for policies to promote technological innovation, and that coordination of the two policies is essential.

February 4, 2016 | Permalink | Comments (0)

UPP Analysis in Five Recent Merger Cases

Apostolos Baltzopoulos (Konkurrensverket); Jaewon Kim (Konkurrensverket) and Martin Mandorff (Konkurrensverket) offer UPP Analysis in Five Recent Merger Cases.

ABSTRACT: A recent development in merger review has been the shift from an approach committed to market definitions, market shares and concentration index appraisals to more effect-based analyses. In this paper we Review and summarize the underpinnings of what has become a popular tool in identifying potentially problematic mergers, known as the Upwards Pricing Pressure (UPP) methodology and discuss how it has been applied in five recent cases reviewed by Konkurrensverket (the Swedish Competition Authority). The paper attempts to provide an all-in one guide for practitioners who are interested in getting a full grasp of how the UPP framework has been developed and how to apply it.

February 4, 2016 | Permalink | Comments (0)

Foreign competition and banking industry dynamics: an application to Mexico

Corbae, Dean (University of Wisconsin‒Madison) and D'Erasmo, Pablo (Federal Reserve Bank of Philadelphia) analyze Foreign competition and banking industry dynamics: an application to Mexico.

ABSTRACT: The authors develop a simple general equilibrium framework to study the effects of global competition on banking industry dynamics and welfare. They apply the framework to the Mexican banking industry, which underwent a major structural change in the 1990s as a consequence of both government policy and external shocks. Given the high concentration in the Mexican banking industry, domestic and foreign banks act strategically in the authors’ framework. After calibrating the model to Mexican data, the authors examine the welfare consequences of government policies that promote global competition. They find relatively high economy-wide welfare gains from allowing foreign bank entry.

February 4, 2016 | Permalink | Comments (0)

Agency and incentives: vertical integration in the mortgage foreclosure industry

Lambie-Hanson, Lauren (Federal Reserve Bank of Philadelphia) and Lambie-Hanson, Timothy (Haverford College) explore Agency and incentives: vertical integration in the mortgage foreclosure industry.

ABSTRACT: In many U.S. states, the law firms that represent lenders in foreclosure proceedings must hire auctioneers to carry out the foreclosure auctions. The authors empirically test whether processing times differ for law firms that integrate the mortgage foreclosure auction process compared with law firms that contract with independent auction companies. They find that independent firms are able to initially schedule auctions more quickly, but when postponements occur, they are no faster to adapt. Since firms schedule the initial auction before contracting, independent auction companies have an incentive to conform to the law firms’ schedules in order to secure the contracts. The authors argue that this is evidence of a cost of integration stemming from poorly aligned incentives within the firm.

February 4, 2016 | Permalink | Comments (0)

Wednesday, February 3, 2016

GCR Awards 2016: Polling is Open

Readers are invited to vote for the cases, law firms, lawyers, economists and enforcers they believe excelled in 2015. You can vote for the 2016 awards here, until midnight EST on Friday 26 February.

Votes are limited to one per person.

The winners will be announced at GCR’s 6th Annual Awards Dinner on Tuesday 5 April in Washington, DC. At the dinner, we also will recognise the Lifetime Achievement Award honouree. Click here for more information on the awards dinner.

All nominations link to the relevant GCR news article on the matter in question. If you feel you or your organisation have not been properly represented on a case, please email GCRAwards@globalcompetitionreview.com

Thank you to everyone who submitted nominations. Vote early, and...just once!

The nominees are:

Case Awards

Merger control matter of the year – Americas

Creative, strategic and innovative competition work on a landmark merger control matter in the Americas.

Reynolds/Lorillard

Zillow/Trulia

Expedia/Orbitz

Steris/Synergy

Directv/AT&T

Family Dollar/Dollar Tree

Merger control matter of the year – Europe

Creative, strategic and innovative competition work on a landmark merger control matter in Europe.

Ball/Rexam

GE/Alstom

BT/EE

Aer Lingus/Ryanair/IAG

TNT/FedEx

Zimmer/Biomet

Medialaan/Jim Mobile/Mobile Vikings

Merger control matter of the year – Asia-Pacific, Middle East and Africa

Creative, strategic and innovative competition work on a landmark merger matter in Asia-Pacific, the Middle East or Africa.

Microsoft/Nokia

ITOCHU/CP and CITIC

CSR/CNR

Ten Network/Foxtel

DENKA/DuPont Neoprene business

Tokyo Electron/Applied Materials

Litigation of the year – Cartel defence

Creative, strategic and innovative litigation on behalf of a defendant.

Air Cargo (British Airways defence)

K-Line marine transportation

Elevator cartel - government plaintiffs

Bread cartel leniency applicant avoids damages liability

Litigation of the year – Non-cartel defence

Creative, strategic and innovative litigation on behalf of a defendant.

Huawei Technologies v ZTE patent infringement litigation

Watson v Bank of America

It’s My Party Inc v Live Nation

Warner Chilcott - In re Doryx

Direct and indirect purchasers v Eaton, DaimlerChrysler, VolvoMack, Navistar and PACCAR

Cox Communications class action

Litigation of the year – Cartel prosecution

Creative, strategic and innovative litigation on behalf of a plaintiff or class.

Forex settlements in the US

Polyurethane Foam settlements in the US

CDS settlements in the US

Litigation of the year – Non-cartel prosecution

Creative, strategic and innovative litigation on behalf of a plaintiff or class.

Teladoc v TMB

Streetmaps v Google

Oracle v HP in Spain

Nationwide v South African Airways

KPN/Base abuse of dominance challenge

Behavioural matter of the year (Agency) – Americas

Creative, strategic and innovative work carried out in a behavioural matter on behalf of a defendant, a competition authority or a third party in the Americas.

Leniency for Construções e Comércio Camargo Correa in Brazil

Ambev settlement in Brazil

Chocolate cartel in Canada goes without charges

Auto parts cartel - KYB corporation

Barclays Forex settlement

Behavioural matter of the year (Agency) – Europe

Creative, strategic and innovative work carried out in a behavioural matter on behalf of a defendant, a competition authority or a third party in Europe.

European Commission CDS investigation

Booking.com MFNs parallel investigations

European Commission pay-tv investigation

European Commission optical disk drives investigation

Airplane engines and components inquiry

UnipolSai insurance cartel investigation

Behavioural matter of the year (Agency) – Asia-Pacific, Middle East and Africa

Creative, strategic and innovative work carried out in a behavioural matter on behalf of a defendant, a competition authority or a third party in Asia-Pacific, the Middle East or Africa.

NDRC investigation into roll-on, roll-off carrier services cartel

BGF bid data in Korea

Court success against ACCC Flight Centre decision

Overturning cement cartel in India

Matter of the year

Merger control, cartel, unilateral conduct, litigation or any other competition matter worldwide. Creative, strategic and innovative work by teams of in-house and external lawyers and economists.

Air Cargo investigation

Ball/Rexam

FedEx/TNT

GE/Alstom

Reynold/Lorillard

Steris/Synergy

Enforcement Awards

Agency of the year – Americas

An agency in the Americas whose work in 2015 was particularly effective, strategic or innovative.

Canada’s Competition Bureau

US Federal Trade Commission

Mexico’s Federal Economic Competition Commission

Brazil’s CADE

Chile’s National Economic Prosecutor

Agency of the year – Europe

An agency in Europe whose work in 2015 was particularly creative, strategic and innovative.

Hellenic Competition Commission

Germany’s Federal Cartel Office

France's Competition Authority

Switzerland’s Competition Commission

Portugal’s Competition Authority

Agency of the year – Asia-Pacific, Middle East and Africa

An agency in Asia-Pacific, the Middle East or Africa whose work in 2015 was particularly creative, strategic and innovative.

Taiwan’s Fair Trade Commission

NDRC

KFTC

Competition Commission of Singapore

Enforcement action of the year

The best decision or enforcement action from a competition authority or court in 2015.

Germany in hotel bookings

Lithuania Gazprom fine

China’s Qualcomm fine

US Department of Justice v Electrolux/GE

US Federal Trade Commission v Sysco/US Foods

Individual Awards

Academic Excellence Award

An academic competition specialist who has made an outstanding contribution to national and/or international competition policy in 2015.

George Mason University’s Global Antitrust Institute

Gregory Sidak - founder and chairman of Criterion Economics

Ariel Ezrachi – Oxford University

American Antitrust Institute

Einer Elhauge - Harvard University

Rebecca Haw Allensworth – Vanderbilt University

Economist of the year

A competition economist whose superior technical skill, practical judgement and excellence in client service in 2015 demonstrates that he or she is among the very best in the field.

Neil Dryden - Executive Vice President at Compass Lexecon

Michael Whinston - partner at Bates White, Professor of Economics at MIT

Rainer Nitsche - ECA Economics

Jeffrey Leitzinger – EconOne

Helen Jenkins - Oxera

Corporate counsel of the year

An in-house competition lawyer whose superior technical skill and practical judgement on behalf of his or her company in 2015 demonstrates that he or she is among the very best in the field.

Munesh Mahtani - Senior Competition Counsel at Google

Greg Sivinski - Assistant General Counsel at Microsoft

Juhani Kostka - LafargeHolcim

Arthur Sanchez Badin – General Counsel at Camargo Correa Group

Bruce Breckenridge - Head of Comp/Regulatory at BT Group

Michael Ray - Western Digital

Litigator of the year

A competition litigator whose superior technical skill, practical judgement and excellence in serving clients in court in 2015 demonstrate that he or she is among the very best in the field.

Michael Hausfeld - Hausfeld

John Majoras - Jones Day

Stephen Weissmann - US FTC & Baker Botts

Leah Brannon - Cleary Gottlieb Steen & Hamilton

Jonathan Jacobson - Wilson Sonsini Goodrich & Rosati

Jack Pace III - White & Case

Dealmaker of the year

A lawyer whose superior knowledge, practical judgement and negotiation skills in merger clearance matters in 2015 demonstrate that he or she is among the very best in the field.

Scott Sher – Wilson Sonsini Goodrich & Rosati

Neil Campbell – McMillan

Helmut Bergmann Freshfield Bruckhaus Deringer

Brian Byrne Cleary Gottlieb Steen & Hamilton

Lawyer of the year - Under 40

A competition lawyer under the age of 40 whose superior technical skill, practical judgement and excellence in client service in 2015 demonstrates that he or she is among the very best in the field.

Logan Breed Hogan Lovells

Ana Paula Martinez Levy & Salomao

Annamaria Mangiaracina – Linklaters

Fay Zhou – Linklaters

Jordan Ellison Slaughter and May

Fernando Carreño Von Wobeser y Sierra

Patrick Bock Cleary Gottlieb Steen & Hamilton

Leonor Cordovil Grinberg e Cordovil Advogados

Brian Rocca Morgan Lewis & Bockius

Martin McElwee Freshfields Bruckhaus Deringer

Lawyer of the year

A competition lawyer whose superior skill, practical judgement and excellence in client service in 2015 demonstrate that he or she is among the very best in the field.

Philippe Chappatte – Slaughter and May

John Davies – Freshfields Bruckhaus Deringer

Brian Facey – Blake Cassels & Graydon

Adam Fanaki Davies Ward Phillips & Vineberg

John Harkrider – Axinn Veltrop & Harkrider

Suyong Kim Hogan Lovells

Joe Sims Jones Day

Stephen Weissmann US FTC & Baker Botts

Firm Awards

Regional firm of the year – Americas

A firm based solely in North, South or Central America that has had an outstandingly successful 2015in terms of the quality and quantity of its competition work.

Axinn Veltrop & Harkrider

Blake Cassels & Graydon

Cravath Swaine & Moore

Levy & Salomão Advogados

Mattos Filho, Veiga Filho, Marry Jr e Quiroga

Morgan Lewis & Bockius

Regional firm of the year – Europe

A firm based solely in Europe which has had an outstandingly successful 2015 in terms of the quality and quantity of its competition work.

Slaughter and May

Garrigues

Stibbe

Gleiss Lutz

Van Bael & Bellis

Regional firm of the year – Asia-Pacific, Middle East and Africa

A firm based solely in Asia-Pacific, the Middle East and Africa which has excelled in 2015 through the quality and quantity of its competition work.

Nortons

Gilbert + Tobin

Yulchon

Shin & Kim

Johnson Winter & Slattery

February 3, 2016 | Permalink | Comments (0)

Using spatial econometrics to test for collusive behavior in procurement auction data

Bergman, Mats A. (Department of Economics, Sodertorn University); Lundberg, Johan (Department of Economics, Umea University); Lundberg, Sofia (Department of Economics, Umea University) and Stake, Johan Y. (Department of Economics, Sodertorn University) are Using spatial econometrics to test for collusive behavior in procurement auction data.

ABSTRACT: In this paper we evaluate whether spatial econometric techniques can be used to test for collusive bidder behavior in public procurement auctions, using the submitted bids and procurement characteristics. The proposed method is applied to the so-called Swedish asphalt cartel, which was discovered in 2001. As our dataset covers the period 1995-2009, we are able to test for conditional independence between complementary cartel bids before and after the detection. Our estimates show a significant positive correlation between complementary cartel bids during the cartel period, whereas a non-significant (and negative) correlation is shown during the later period. The parameter estimate of interest also differs in magnitude between periods. Hence, we argue that the method suggested can be used to verify or possibly screen for collusive bidding behavior. The main advantage of this method is its relatively small data requirements.

February 3, 2016 | Permalink | Comments (0)

Identifying Competition Neutrality of SOEs in China

Mariko WATANABE is Identifying Competition Neutrality of SOEs in China.

ABSTRACT: This paper attempts to identify competition neutrality of state-owned enterprises (SOEs) in three consumer electronics industries in China. First, I draw a benefit-price indifference curve at the mode of consumer surplus for each year, and a benefit-price supply curve by manufacturers and ownership types based on the demand estimates for the color TV (CTV), mobile phone, and air conditioning industries in the 2000s. These exercises indicate heterogeneous situations of market neutrality of SOEs in the Chinese consumer electronics industries. The air conditioning market shows a clear positive relationship between benefit and price for all ownership types. At the same time, no clear correlation between ownership and strategies focusing on price or benefit is observed. On the other hand, SOEs and privately-owned enterprises (POEs) in CTV and mobile phone markets concentrate their products based on lower prices and lower benefit area, namely, cost advantage strategies. Ownership type and strategies appear to have a correlation. Furthermore, prices become independent to the level of benefit for local firms. These tendencies are clearly observed in the price-benefit supply curve of the two markets. A simple model of differentiated competition with one agent committing predatory pricing in expropriating soft financial constraint shows that the price set by the rivals of a soft constrained firm is independent to the benefit.

February 3, 2016 | Permalink | Comments (0)

Standardisation, Innovation and Consumers – What is Next in FRAND Licensing? 2 March 2016, 14:00-18:00

Standardisation, Innovation and Consumers – What is Next in FRAND Licensing? 2

March 2016, 14:00-18:00 BIICL, 17 Russell Square, London

This is a public event, open to both Competition Law Forum (CLF) members and non-members. This event will foster a balanced debate on antitrust issues in FRAND licensing in light of recent developments such the CJEU's Huawei v. ZTE ruling and the IEEE's patent policy change and their implications on consumer protection and innovation. The event will be followed by a drinks reception and networking.

Speakers

  •         Mathew Heim, Vice President, Government Affairs, Qualcomm Inc.
  •         James Killick, Partner, White & Case LLP
  •         Dr Liza Lovdahl-Gormsen, Director of Competition Law Forum and Senior Research Fellow in Competition Law, BIICL
  •         Adrian Majumdar, Partner with RBB Economics London
  •         Thomas Vinje, Partner, Chairman, Global Antitrust Practice Group at Clifford Chance US LLP
  •         Dr Mike Walker, Chief Economic Adviser, Competition Markets Authority

Further speakers tbc
Find out more at www.biicl.org/event/1156

  
  

February 3, 2016 | Permalink | Comments (0)

Development of Competition Laws in Korea

Hwang LEE (Professor of Law, Korea University School of Law/ICR Law Center, Korea) provides an overview of Development of Competition Laws in Korea.

ABSTRACT: Economic development policies that were export-focused and biased toward unbalanced growth were initially implemented through government-led initiatives in Korea since the 1960s. These resulted in many problems as well as a big success. Korean competition policies were born and developed to take the role of correcting and complementing economic development policies. Today competition policies have become a major force in Korea’s economic policy. Many parts of industrial policies were replaced by sectoral competition policy in substance. After the 2008 global financial crisis, Korea is faced with new challenges. Recent economic difficulties seem to ask for a bigger role to protect SMEs and fairness in society to address so-called bipolarisation. The economic policy to improve productivity in the name of so-called ‘creative economy’, designed to overcome limits of existing growth strategy, requires proper regulations against abuse of IPRs to supplemen! t strengthened protection of intellectual property rights. All in all, Korea’s antitrust policy remains generally very active in building sound market competition

February 3, 2016 | Permalink | Comments (0)

Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field

NGUYEN Anh Tuan (LNT & Partners, Viet Nam) advocates Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field.

ABSTRACT: Despite Vietnamese competition authorities’ attempts to control state monopolies in domestic markets during the last 10 year of establishment, this appears to be the key challenge of Vietnamese competition regime. In the process of transitioning from a centrally planned economy to a market economy, the State-owned enterprises (SOEs) sector is perceived as a means to ensure the socialist orientation of the economy as well as preserve national economic goals. For these purposes, SOEs have been offered several advantages ranging from tangible incentives to latent conveniences over the privately owned enterprises. In this context, competition laws and policies should be able to neutralise the advantages of SOEs to level the playing field or else it would be used a shield to protect SOEs from their private rivals. This paper looks into the issues with the SOE sector in the context of Viet Nam’s political economy and identifies the factors inhibiting the country’s effort to control State monopolies in the last 10 years of competition law enforcement. It provides commentaries on the implementation of competition laws and policies in Viet Nam from the perspective of economic integration, particularly the on-going negotiation Trans-Pacific Partnership.

February 3, 2016 | Permalink | Comments (0)

Tuesday, February 2, 2016

Conglomerate Mergers: Comparison with Vertical Foreclosure

Adrian Proctor examines Conglomerate Mergers: Comparison with Vertical Foreclosure.

ABSTRACT: This article compares and contrasts the approach to merger issues in vertical and conglomerate cases including likely efficiencies, useful data, and the approach to looking at each of ability, incentive, and effect in turn. The paper considers when conglomerate mergers are more likely to mirror vertical cases and result in static price rises. The article considers the relationship between conglomerate foreclosure and predatory pricing to determine whether merger analysis is the most suitable place to intervene and stop short-term benefits that may harm competition in the longer term. Finally, potential amendments to the existing framework are discussed.

February 2, 2016 | Permalink | Comments (0)

Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly

Gabriel Desgranges (THEMA - Universite de Cergy) and Stephane Gauthier (Centre d'Economie de la Sorbonne - Paris School of Economics) discuss Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly.

ABSTRACT: This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favors uniqueness of the rationalizable outcome. When requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic ‘coordination’ uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers

February 2, 2016 | Permalink | Comments (0)

Digging itself out of the hole? A critical assessment of the European Commission’s attempt to revitalize State aid enforcement after the crisis

Albert Sanchez-Graells, University of Bristol asks Digging itself out of the hole? A critical assessment of the European Commission’s attempt to revitalize State aid enforcement after the crisis.

ABSTRACT: This article aims to assess the likelihood that State aid enforcement can be revitalized in the post-crisis period as a result of the 2012–2014 State aid modernization process (SAM). The article takes the view that State aid enforcement was left in a difficult impasse as a result of the extraordinary measures the European Commission implemented during and immediately after the 2008 economic breakdown. These measures left the Commission in a difficult position due to the unavoidable concessions and lowering of standards that dealing with the soaring volume of State aid required. To overcome that situation, the Commission subsequently promoted procedural reforms as part of SAM, and is now praising a State aid control 2.0 that it perceives to have solved the problem. This article builds on the premise of the Commission’s weakness as a result of the crisis-related changes in State aid enforcement to critically assess whether a scenario of stronger enforcement can be foreseen under the modernized State aid control 2.0 and, particularly, in the post-SAM procedural framework. It pays particular attention to the need for the Commission to (re)engage in a more substantive assessment of aid measures and to promote judicial (or private) enforcement of State aid rules in an effective manner. It concludes that, in the absence of a fundamental rethink of the enforcement system, a revitalization of State aid post-SAM is highly unlikely.

February 2, 2016 | Permalink | Comments (0)

Cartels Destroy Productivity: Evidence from the New Deal Sugar Manufacturing Cartel, 1934-74

Benjamin Bridgman (Bureau of Economic Analysis); Shi Qi (Florida State University) and James A. Schmitz (Federal Reserve Bank of Minneapolis) have an empirical paper on Cartels Destroy Productivity: Evidence from the New Deal Sugar Manufacturing Cartel, 1934-74.

ABSTRACT: The idea that cartels might reduce industry productivity by misallocating production from high to low productivity producers is as old as Adam. However, the study of the economic consequences of cartels has almost exclusively focused on the losses from higher prices (i.e., Harberger triangles). Yet, as the old idea suggests, we show that the rules for quotas and side payments in the New Deal sugar cartel led to significant misallocation of production. The resulting productivity declines essentially destroyed the entire cartel profit. The magnitude of the deadweight losses (relative to value added) was large: we estimate a lower bound for the losses equal to 25 percent and 42 percent in the beet and cane industries, respectively.

February 2, 2016 | Permalink | Comments (0)

Monday, February 1, 2016

Resale price maintenance in two-sided markets

Tommy S. Gabrielsen (Department of Economics, University of Bergen); Bjorn Olav Johansen (Department of Economics, University of Bergen); Teis L. Lomo (Department of Economics, University of Bergen) examine Resale price maintenance in two-sided markets.

ABSTRACT: In many two-sided markets, platforms use intermediary agents to reach consumers at one side of the market. In addition to the usual externalities in two-sided markets, the use of agents creates an additional externality for the platforms. We study if and how competing platforms can internalize the externalities by imposing resale price maintenance (RPM) on the agents. By the appropriate use of RPM, the platforms can induce the fully integrated outcome. Using a speci…c example, we show that consumers’surplus is reduced when the equilibrium involves the use of minimum RPM, and consumers benefit when maximum RPM is used.

February 1, 2016 | Permalink | Comments (0)

Cross-Licensing and Competition

Doh-Shin Jeon and Yassine Lefouili study Cross-Licensing and Competition.

ABSTRACT: We study bilateral cross-licensing agreements among N (>2) competing firms. We find that the industry-profit-maximizing royalty can be sustained as the outcome of bilaterally efficient agreements. This holds regardless of whether agreements are public or private and whether firms compete in quantities or prices. We extend this monopolization result to a general class of two-stage games in which firms bilaterally agree in the first stage to make each other payments that depend on their second-stage non-cooperative actions. Policy implications regarding the antitrust treatment of cross-licensing agreements are derived.

February 1, 2016 | Permalink | Comments (0)

Vertical Mergers and Downstream Spatial Competition with Different Product Varieties, Revised and Corrected

Konstantinos Eleftheriou and Nickolas Michelacakis have authored Vertical Mergers and Downstream Spatial Competition with Different Product Varieties, Revised and Corrected.

ABSTRACT: The aim of this paper is to revise and correct the results obtained in Beladi et al. [Beladi, H., Chakrabarti, A., Marjit, S., 2008. Vertical mergers and downstream spatial competition with different product varieties. Economics Letters 101, 262-264]. Specifically, we prove that in the pre-merger case, Nash equilibrium locations are socially optimal, whereas a vertical merger will relocate downstream firms by making them move to the right of their socially optimal positions while keeping their in-between distance intact.

February 1, 2016 | Permalink | Comments (0)

Net Neutrality, Vertical Integration, and Competition Between Content Providers

Juliane Fudickar (Freie Universitat Berlin) has a theory paper on Net Neutrality, Vertical Integration, and Competition Between Content Providers.

ABSTRACT: This paper investigates the effects of a net neutrality regulation on the competition between content providers and the investment incentives of the internet service provider. We consider a situation where the monopoly internet service provider is vertically integrated with one of the content providers, and content providers compete in prices. Without net neutrality the vertical integrated firm can prioritise the delivery of its own content. We find that, under prioritisation, the integrated internet service provider and consumers as a whole are unambiguously better off. The competing content providers might also be better off under prioritisation if the congestion intensity is high. From a social welfare perspective prioritisation is also desirable unless product differentiation and congestion intensity are low. Contrary to some claims by internet service providers, we find that investment incentives are not always higher under prioritisation.

February 1, 2016 | Permalink | Comments (0)