Antitrust & Competition Policy Blog

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

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Friday, December 12, 2014

The changing structure of competition enforcement in the UK: the Competition Appeal Tribunal between present challenges and an uncertain future

Arianna Andreangeli, Lecturer in Competition Law, School of Law, University of Edinburgh was written on The changing structure of competition enforcement in the UK: the Competition Appeal Tribunal between present challenges and an uncertain future.

ABSTRACT: This article seeks to analyse the role and function of the Competition Appeal Tribunal (CAT) in the face of the current debate arising from the proposals for reform tabled by the UK Government and concerning both the Tribunal’s powers to hear competition damages claims and its jurisdiction in respect of the scrutiny of competition decisions. In respect to the former, it will be argued that the reforms being tabled and potentially affecting its powers to hear actions for damages under section 47A and B of the Competition Act 1998 should be welcomed as a means of facilitating access to justice on the part of the victims of competition infringements. Although concerns remain as to the practicalities of these actions, including the availability of funding, these proposals remain consistent with the Government’s commitment to endowing would-be competition plaintiffs with an effective remedy to obtain relief from their injuries. As regards the latter, the article will submit that the outright abolition of the ‘on the merits’ review, while being easier to justify in respect of ‘regulatory appeals’, may lead to a ‘disproportionate’ inroad in the right to a fair trial and to a fair procedure enjoyed by the addressees of competition infringement decisions. This article will conclude that an undeniable tension seems to characterize the future development of the CAT's jurisdictional remit: if the UK Government is resolved to invest it with stronger powers vis-a-vis damages’ actions, its attempt at introducing less intensive forms of judicial scrutiny of appeals brought against CMA's or sector regulators’ decisions is likely to have unpredictable consequences for the continuing observance of the due process standards to which the public enforcement of the competition rules is subject.

December 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Unfair Methods of Competition”: The Legislative Intent Underlying Section 5 of the FTC Act

Bill Kolasky, Highes Hubbard has a new working paper on Unfair Methods of Competition”: The Legislative Intent Underlying Section 5 of the FTC Act.

ABSTRACT: In the debate over the scope of Section 5 of the Federal Trade Commission Act, the Section’s legislative history has been largely neglected.  Most commentators seem simply to assume that the Section’s legislative history provides little guidance as to how the FTC should exercise its authority to prohibit as “unfair methods of competition” business practices.  This same assumption has led the Supreme Court in at least one case to suggest in dicta that the Commission has broad authority to use Section 5 to prohibit practices that violate the “spirit,” but not the letter, of the antitrust laws without explaining what that means.

        Inspired by Robert Bork’s seminal article, Legislative Intent and the Policy of the Sherman Act, this Working Paper undertakes a closer examination of the legislative history of the Section 5.  It shows that while Congress intended Section 5 to reach beyond the Sherman Act to enable the FTC to prohibit anticompetitive practices in their incipiency before they become full-blown Sherman Act violations, it intended that the Commission’s authority to do so would be constrained by three critical governing principles.  First, the Commission would have authority only to outlaw exclusionary, not exploitative, practices.  Second, the Commission would have authority to prohibit only those practices that were likely to harm competition and hence consumer welfare, and not practices whose only effect was to harm less efficient competitors.  Third, the Commission would be required to apply a rule of reason analysis, similar to that used under the Sherman Act,  to declare unfair only those methods of competition “which shut out competitors who, by reason of their efficiency, might otherwise be able to continue in business and prosper.”  This paper’s review of the legislative history shows, therefore, that Congress intended Section 5 to be a “consumer welfare prescription,” just as Robert Bork found to be the case for the Sherman Act.

 

December 12, 2014 | Permalink | Comments (0) | TrackBack (0)

What Do We Know About the Effectiveness of Leniency Policies? A Survey of the Empirical and Experimental Evidence

Catarina Moura Pinto Marvao, Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE); Trinity College Dublin and Giancarlo Spagnolo, Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; ask What Do We Know About the Effectiveness of Leniency Policies? A Survey of the Empirical and Experimental EvidenceWorth reading!

ABSTRACT: Over the last decade a large body of economic research has emerged that has sought to empirically test the effectiveness of leniency policies as tools to enhance the detection, prosecution and deterrence of cartel conduct. This research has considerable potential value in assisting competition authorities design optimal policies by having a better understanding of the impact that such policies, their specific features and manner of administration, have on the behaviour of cartel participants. Some researchers have taken the approach of testing empirically the effects of actual policies – predominantly those administered by the United States Department of Justice (USDOJ) and the European Commission (EC) – while others have tested different hypothetical policies in the lab. This section reviews the key studies which have been undertaken to date, it highlights the main findings and compares their results. After appreciating the main contributions and limitations of these studies, it concludes with a general assessment and an agenda for future research.

 

December 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Competition with Multi-Services: Pickup or Delivery?

Yuta Yasui, University of Tokyo - Graduate School of Economics asks Competition with Multi-Services: Pickup or Delivery?

ABSTRACT: In this paper, I examined competition with multi-services, where firms offer delivery price and mill price at the same time. In the equilibria, firms specialize in delivery services even if their transport costs are higher than consumers'. This result is robust in monopoly setting, too. The results are also robust to the shape of transport cost functions.

December 12, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 11, 2014

If Professions are Just 'Cartels by Another Name,' What Should We Do About it?

David A. Hyman, University of Illinois College of Law and Shirley Svorny, California State University, Northridge - College of Business & Economics ask If Professions are Just 'Cartels by Another Name,' What Should We Do About it?

ABSTRACT: The state action doctrine has been a significant impediment in the campaign against anticompetitive conduct by provider-dominated state licensing boards. In Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?, Professors Edlin and Haw argue that state licensing boards operate as a “massive exception” to the Sherman Act’s ban on cartels, and that the Supreme Court should use a pending case (North Carolina State Board of Dental Examiners v. FTC) to “hold boards composed of competitors to the strictest version of its test for state action immunity, regardless of how the board’s members are appointed.” They also propose the application of a modified rule of reason when deciding similar cases on the merits. We suggest three modifications to Edlin and Haw’s proposal. These modifications should help limit occupational licensing’s anticompetitive tendencies and licensing boards’ anticompetitive behavior. First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant-licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.

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

The Object of Effects

Alexander Italianer, Director-General for Competition gave a speech yesterday at the CRA Annual Brussels Conference – Economic Developments in Competition Policy on The Object of Effects.

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

Frand Royalties and Injunctions for Standard Essential Patents

Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) theorizes on Frand Royalties and Injunctions for Standard Essential Patents.

ABSTRACT: I develop a stylized model of court procedures that resolve disputes concerning FRAND-encumbered standard essential patents (SEPs). I analyze the effects of injunctions and potential court-imposed FRAND rates on negotiated royalty rates. The SEP-holders’ ability to hold-up is constrained by the prospect of the court-imposed license terms in case of disputes, but is not completely eliminated. Possible mechanisms to address the residual hold-up power of the SEP-holders are discussed.

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

Holiday Reading (oldie but goodie) - Scroogenomics: Why You Shouldn't Buy Presents for the Holidays

Scroogenomics: Why You Shouldn't Buy Presents for the Holidays
Joel Waldfogel
Princeton University Press 2009

BOOK ABSTRACT: Christmas is a time of seasonal cheer, family get-togethers, holiday parties, and-gift giving. Lots and lots--and lots--of gift giving. It's hard to imagine any Christmas without this time-honored custom. But let's stop to consider the gifts we receive--the rooster sweater from Grandma or the singing fish from Uncle Mike. How many of us get gifts we like? How many of us give gifts not knowing what recipients want? Did your cousin really look excited about that jumping alarm clock? Lively and informed, Scroogenomics illustrates how our consumer spending generates vast amounts of economic waste--to the shocking tune of eighty-five billion dollars each winter. Economist Joel Waldfogel provides solid explanations to show us why it's time to stop the madness and think twice before buying gifts for the holidays.

When we buy for ourselves, every dollar we spend produces at least a dollar in satisfaction, because we shop carefully and purchase items that are worth more than they cost. Gift giving is different. We make less-informed choices, max out on credit to buy gifts worth less than the money spent, and leave recipients less than satisfied, creating what Waldfogel calls "deadweight loss." Waldfogel indicates that this waste isn't confined to Americans--most major economies share in this orgy of wealth destruction. While recognizing the difficulties of altering current trends, Waldfogel offers viable gift-giving alternatives. By reprioritizing our gift-giving habits, Scroogenomics proves that we can still maintain the economy without gouging our wallets, and reclaim the true spirit of the holiday season.

December 11, 2014 | Permalink | Comments (1) | TrackBack (0)

The Limits for the Global Proliferation of Competition Law: The Case of Macao SAR

Alexandr Svetlicinii, University of Macau - Faculty of Law describes The Limits for the Global Proliferation of Competition Law: The Case of Macao SAR.

ABSTRACT: The adoption and enforcement of competition rules which replace or supplement state regulation of markets has become a global trend that led to almost universal proliferation of competition law regimes. Following the lead of the developed market economies an increasing number of developing countries and transition economies have introduced competition rules in their national legal systems. Macao SAR, as a small developed economy concentrated around booming gaming industry, stands among few jurisdictions that do not have comprehensive competition legislation. Present paper analyses current situation with regulation of market competition in Macao with special focus on the gaming industry. While general competition rules embedded in the Commercial Code are left to the private enforcement by interested parties, specific competition rules applied to the gaming activities have to be enforced by the sector regulator lacking the knowledge and experience in antitrust enforcement. As a result, the effective antitrust enforcement is largely non-existent. The international trade obligations of Macao SAR under the WTO framework or its bilateral trade relations with China and European Union have not prompted the adoption of competition law either. The study is an attempt to provide explanations as to the current state of affairs with competition rules and to anticipate further developments in this field.

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

Jean Tirole Nobel Prize Lecture

This is worth watching.

 

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

Gene Kimmelman: Stop ‘Mega Comcast’

Gene Kimmelman, formerly DOJ and now Gene Kimmelman has an op-ed in which he advocates Stop ‘Mega Comcast’.

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

Efficiencies and Antitrust Reconsidered: An Evolutionary Perspective

Thomas Jeffrey Horton, University of South Dakota, School of Law explores Efficiencies and Antitrust Reconsidered: An Evolutionary Perspective.

ABSTRACT: This article reconsiders the issue of efficiencies and antitrust from a fresh new perspective: the perspective of evolutionary biology and economics. Building on this author’s earlier work applying evolutionary biology and economics to structural and behavioral antitrust analyses, this article examines efficiencies and antitrust from a dynamic and systemic evolutionary perspective. The article recommends: 1) increased and more aggressive enforcement against horizontal mergers between competitors; 2) renewed interest in vertical mergers and agreements; and 3) more aggressive guarding of competitive diversity and opportunity against unfair predatory conduct by dominant firms, monopolies, and oligopolies.

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

Wednesday, December 10, 2014

The Reception and Application of EU Competition Rules in Hungary: An Organic Evolution

Tihamer Toth, Competition Law Research Centre, Hungary; Peter Pazmany Catholic University - Faculty of Law explains The Reception and Application of EU Competition Rules in Hungary: An Organic Evolution.

ABSTRACT: I will present how Hungarian competition rules and the practice of the Hungarian Competition Authority were influenced by the EU acquis. The Constitutional Court's decision will be presented that paved the way for a decision of the Association Council adopting new Implementing Rules of the Europe Agreement, mirroring the approach of the European Economic Area’s competition rules. The legally binding obligation to bring domestic competition rules in line with Community standards turned later into a process of drawing inspiration not only from EU hard law but also from soft law instruments in cases where Hungarian competition rules were applied. The paper recalls how the authority GVH prepared both itself and the business sphere during the pre-accession period for the EU membership era. The most important changes in legislation following EU accession and also the most important features of law enforcement are analyzed to show how autonomous the legislative and enforcement activity of a new Member State can be. The functioning and the leading role of the European Competition Network (ECN) in promoting a soft form of harmonization, known as ‘convergence’, will be presented. The paper discusses how the Hungarian Competition Authority applied and sometimes disregarded EU competition law provisions. Finally, a couple of actual competition law issues are discussed, like the harmonization of fining and leniency policies, recent development in private enforcement legislation and the problems with parallel investigations by several European competition authorities.

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

Litigation in Europe after Passage of the EU Directive on Antitrust Damages Actions

Litigation in Europe after Passage of the EU Directive on Antitrust Damages Actions

 

Date: December 15, 2014

Time: 12:00 pm ‑ 1:30 pm EST/1800-1930 CET

Sponsors: Joint Conduct, International, and Civil Redress Committees

 

On 26 November 2014, the European Union adopted a long-awaited European Directive on private damages for antitrust violations. EU Member States have until 27 December 2016 to implement the Directive into national law. The Directive concludes an almost 10 year effort by the European Commission to harmonize the laws of 28 Member States -- at least regarding certain aspects of private damages actions. The incoming EU Competition Commissioner, Margaret Vestager, welcomed the Directive as “making it easier for European citizens and companies to receive effective compensation for harm caused by antitrust violations”. Since the Directive does not aim at full harmonization, what are the aspects it addresses? Which issues have been left open and what are the implications for private damages actions in Europe after implementation of the Directive?

 

Speakers:

Emanuela Canetta                                     Luke Haasbeek

DG Competition, EU Comm'n                DG Competition, EU Comm'n

Brussels                                                       Brussels

 

Mary Lehner                                             Kaarli Eichhorn

Freshfields Bruckhaus Deringer           General Electric

Washington                                               Brussels

 

D. Daniel Sokol

University of Florida Levin College of Law
Gainesville

 

Moderator:

 

Juergen Schindler

Allen & Overy

Brussels

 

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

Damages’ Claims in the Spanish Sugar Cartel

Francisco Marcos, IE Law School is bittersweet about Damages’ Claims in the Spanish Sugar Cartel.

ABSTRACT: As an example of collusive behaviour in the sugar industry, this paper looks at the Spanish sugar cartel, uncovered and sanctioned by the Spanish competition authority. It then turns into the subsequent private enforcement actions that concluded successfully last year with a €5 million award in damages by the Supreme Court. Several lessons can be extracted from the Supreme Court’s decisions that will have an impact in future private claims for damages arising from competition law violations. They clarify the relevance and legal force of public enforcement decisions for private enforcement, how damages’ calculations should be done, and how expert forensic opinions on the matter should be assessed by the courts and, finally, they rule on the availability of the passing-on defence. In all, the Spanish Supreme Court dicta from its decisions in the sugar cartel case may well open the gateway for new private claims in the future.

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

U.S. Tech Giants Battle Europe’s Sovereign States

Yesterday the Wall Street Journal ran a story on how U.S. Tech Giants Battle Europe’s Sovereign States. The story focuses on growing protectionism in Europe.  I agree and suggest that nothing will hurt European economic growth and innovation more than a number of current policies being pursued. My occassional co-author Vivek Ghosal of Georgia Tech (we have a follow up cartel paper to this one and a new empirical project on medical devices in the works) was quoted in the story. 

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

If Professions are Just 'Cartels by Another Name,' What Should We Do About it?

David A. Hyman, University of Illinois College of Law and Shirley Svorny, California State University, Northridge - College of Business & Economics ask If Professions are Just 'Cartels by Another Name,' What Should We Do About it?

ABSTRACT: The state action doctrine has been a significant impediment in the campaign against anticompetitive conduct by provider-dominated state licensing boards. In Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?, Professors Edlin and Haw argue that state licensing boards operate as a “massive exception” to the Sherman Act’s ban on cartels, and that the Supreme Court should use a pending case (North Carolina State Board of Dental Examiners v. FTC) to “hold boards composed of competitors to the strictest version of its test for state action immunity, regardless of how the board’s members are appointed.” They also propose the application of a modified rule of reason when deciding similar cases on the merits.

We suggest three modifications to Edlin and Haw’s proposal. These modifications should help limit occupational licensing’s anticompetitive tendencies and licensing boards’ anticompetitive behavior. First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant-licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.

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

Better Together? Retail Chain Performance Dynamics in Store Expansion Before and After Mergers

Mitsukuni Nishida (Johns Hopkins Carey Business School) and Nathan Yang (Yale School of Management) ask Better Together? Retail Chain Performance Dynamics in Store Expansion Before and After Mergers.

ABSTRACT: We study firm performance dynamics in retail growth using a dynamic model of expansion that allow these dynamics to operate through an unobserved serially correlated process. The model is estimated with data on convenience-store chain diffusion across Japanese prefectures from 1982 to 2012, whereby an actual merger between two chains takes place in 2001. Given the presence of serial correlation and selection biases in observed revenue, we combine particle filtering methods for dynamic games with control functions in revenue regressions. The estimated structural model provides us insights about how performance dynamics evolve before and after the merger. In particular, we demonstrate that the performance dynamics for the merged entity do not improve following the merger.

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

Tuesday, December 9, 2014

Consumer Learning on Social Networks and Retailer Digital Platform Strategies Access

Zheyin (Jane) Gu (University of Connecticut) and Yunchuan Liu (University of Illinois, Urbana-Champaign) have a new paper on Consumer Learning on Social Networks and Retailer Digital Platform Strategies Access.

Abstract: We model consumer social networks as information collection media and examine two major issues: first, how consumers construct product fit signals based on product feedbacks collected from their social connections to assist with their purchase decisions, and second, how a retailer can benefit from setting up a digital platform and helping consumers collect more product feedbacks on social networks. Our analysis identifies two important structure features of consumer social networks that affect the outcome of consumer social learning: social group inter-connectivity and overall social connectivity. In particular, when the consumer social network is not well-connected, characterized by low social group inter-connectivity and low overall social connectivity, with more product feedbacks collected on social networks consumers are more likely to form informative prior beliefs about which product has a good fit. In contrast, when the consumer social network is well-connected, characterized by either high social group inter-connectivity or high overall social connectivity, more product feedbacks collected on social networks are more likely to constitute uninformative product fit signals and leave consumers uncertain about which product has a good fit. Furthermore, our analysis shows that a retailer's incentive to set up a digital platform and help consumers collect more product feedbacks on social networks depends on the supplier market structure as well as the structure of consumer social networks. In particular, a big retailer that carries horizontally differentiated products offered by competing manufacturers has incentive to facilitate consumer social learning on well-connected social networks and when without retailer assistance consumers still collect product feedbacks from a good number of social connections. The big retailer's activity of facilitating consumer social learning can also enhance total channel surplus. In contrast, a small retailer that carries product(s) offered by a single manufacturer has incentive to facilitate consumer social learning only on social networks that are not well-connected and when without retailer assistance consumers only collect a small number of social feedbacks. And the total channel efficiency suffers when the small retailer withholds from facilitating consumer social learning. Our result highlights the unique motive of big retailers to embrace the digital era when internet, mobile networks, and social media have profoundly changed consumers' shopping habits as well as the unique contribution big retailers bring in channel efficiency through their efforts of facilitating consumer social learning.

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

Horizontal Mergers in the Presence of Capacity Constraints

Zhiqi Chen (Department of Economics, Carleton University) and Gang Li (School of Economics, Nanjing University) describe Horizontal Mergers in the Presence of Capacity Constraints.

ABSTRACT: We analyze the effects of a merger between two competitors in a Bertrand-Edgeworth model. The merger has no effect on equilibrium prices if a pure strategy equilibrium prevails both before and after the merger. Otherwise, the merger leads to higher prices. In the case where a mixed strategy equilibrium prevails before and after the merger, for example, the support of the price distributions shifts rightward after the merger and the post-merger price distribution of each firm stochastically dominates its pre-merger counterpart. The pre-merger capacity level of each firm plays a crucial role in determining the effects of the merger.

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