Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Monday, October 20, 2014

Who Killed the Nokia Phone?

Pekka Nykanen and Marina Salminen have an op-ed in which they ask Who Killed the Nokia Phone?

October 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Patent Protection as a Tax on Competition and Innovation

Pedro Bento (West Virginia University, College of Business and Economics) explores Patent Protection as a Tax on Competition and Innovation.

ABSTRACT: I introduce patents into a general equilibrium model of innovation, where innovators choose between creating a new product market and competing in an existing market. Patent holders demand royalties from sequential innovators, but are constrained by the ability of innovators to work around patents. I show patent protection acts as a net tax on sequential innovators, reducing both competition and productivity growth. Calibrated to match moments from U.S. data, the model predicts that eliminating patent protection in the U.S. would generate a 23% increase in steady-state productivity growth as well as an increase in welfare equivalent to that from a 16% increase in annual consumption. I test several implications of the model using both U.S. and cross-country data. Consistent with the model, the data suggests an increase in the strength of patent protection reduces both productivity growth and the average quality of innovations.

October 20, 2014 | Permalink | Comments (0) | TrackBack (0)

Sunday, October 19, 2014

Resale Price Maintenance in China: An Economic Perspective

Shan Jiang, University of International Business and Economics (UIBE) School of Law and D. Daniel Sokol, University of Florida - Levin College of Law discuss Resale Price Maintenance in China: An Economic Perspective.

ABSTRACT: This article analyzes resale price maintenance (RPM), its economic principles, and its application in the United States, Europe and China. The application of RPM varies across each of these three jurisdictions. In China, there are competing economic goals, no clear standard (per se illegality versus rule of reason) and case outcomes that do not necessarily fully embrace an economic based approach. We identify those areas in Chinese antitrust jurisprudence that will shape enforcement and offer an economic approach that allows for internal consistency for decision-making.

October 19, 2014 | Permalink | Comments (0) | TrackBack (0)

Friday, October 17, 2014

Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation

Pedro Bento (West Virginia University, College of Business and Economics) analyzes Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation.

ABSTRACT: I incorporate an insight of Friedrich Hayek - that competition allows a thousand flowers to bloom, and discovers the best among them - into a model of Schumpeterian innovation. Firms face uncertainty about the optimal direction of innovation, so more innovations implies a higher expected value of the `best' innovation. The model accounts for two seemingly contradictory relationships reported in recent empirical studies - a positive relationship between competition and industry-level productivity growth, and an inverted-U relationship between competition and firm-level innovation. Notwithstanding the positive relationship between competition and growth, I find antitrust policy reduces industry-level growth.

October 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Product Market Competition and Industry Returns

M. Cecilia Bustamante (LSE) and Andres Donangelo (University of Texas) address Product Market Competition and Industry Returns.

ABSTRACT: This paper shows that product market competition has two opposing effects on asset returns. The first relates to the procyclical nature of the value destruction from expansion of competitors, which lowers exposure to systematic risk in more competitive industries. The second is related to the narrower profit margins due to competition, which increase exposure to systematic risk. We find that the first effect dominates the second, so that firms in more competitive industries generally earn lower asset returns. Our results are robust to using five alternative measures of competition and to controlling for the sample selection bias of publiclylisted firms.

October 17, 2014 | Permalink | Comments (0) | TrackBack (0)

Thursday, October 16, 2014

Modeling Strategic Investment Decisions in Spatial Markets

Stefan Lorenczik (Energiewirtschaftliches Institut an der Universitaet zu Koeln) Raimund Malischek (Energiewirtschaftliches Institut an der Universitaet zu Koeln) and Johannes Truby (Energiewirtschaftliches Institut an der Universitaet zu Koeln) are Modeling Strategic Investment Decisions in Spatial Markets.

ABSTRACT: Markets for natural resources and commodities are often oligopolistic. In these markets, production capacities are key for strategic interaction between the oligopolists. We analyze how different market structures influence oligopolistic capacity investments and thereby affect supply, prices and rents in spatial natural resource markets using mathematical programing models. The models comprise an investment period and a supply period in which players compete in quantities. We compare three models, one perfect competition and two Cournot models, in which the product is either traded through long-term contracts or on spot markets in the supply period. Tractability and practicality of the approach are demonstrated in an application to the international metallurgical coal market. Results may vary substantially between the different models. The metallurgical coal market has recently made progress in moving away from long-term! contracts and more towards spot market-based trade. Based on our results, we conclude that this regime switch is likely to raise consumer rents but lower producer rents. The total welfare differs only negligibly.

October 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Search and Ripoff Externalities

Mark Amstrong, Oxford has a new paper on Search and Ripoff Externalities.

ABSTRACT: This paper surveys models of markets in which some consumers are "savvy" while others are not.� We discuss when the presence of savvy consumers improves the deals available to non-savvy consumers in the market (the case of search externalities), and when the non-savvy fund generous deals for savvy consumers (ripoff externalities).� We also discuss when the two groups of consumers have aligned or divergent views about market interventions.� The analysis covers two overlapping families of models: those which examine markets with price/quality dispersion, and those which exhibit forms of consumer hold-up.

October 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Search, Price Dispersion, and Local Competition: Estimating Heterogeneous Search Costs in Retail Gasoline Markets

Mitsukuni Nishida (The Johns Hopkins Carey Business School) and Marc Remer (Economic Analysis Group, U.S. Department of Justice) analyze Search, Price Dispersion, and Local Competition: Estimating Heterogeneous Search Costs in Retail Gasoline Markets.

ABSTRACT: Information frictions play a key role in a wide array of economic environments and are frequently incorporated into formal models as search costs. Yet, as search costs are typically unobserved, little empirical work investigates the determinants of the distribution of consumer search costs and the implications for policy. This paper explores the sources of heterogeneity in consumer search costs and how this heterogeneity and market structure shape firms' equilibrium pricing and consumers' search behavior in retail gasoline markets. We estimate the distribution of consumer search costs using price data for a large number of geographically isolated markets across the United States. The results demonstrate that the distribution of consumer search costs varies significantly across geographic markets and that market and population characteristics, such as household income, explain some of the variation. Policy counterfactuals! suggest that the shape of the consumer search cost distribution has important implications for both government policy and firms' strategic pricing behavior. The experiments reveal that (1) the search cost distribution needs to be sufficiently heterogeneous to generate equilibrium price dispersion, and (2) the market-level expected price paid decreases in the number of firms, but consumers with high search costs may be worse off from an increased number of firms.

October 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Merger Incentives and the Failing Firm Defense

Jan Bouckaert, University of Antwerp - Department of Economics and Peter M. Kort, Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER) offer Merger Incentives and the Failing Firm Defense.

ABSTRACT: The merger incentives between profitable firms differ fundamentally from the incentives of a profitable firm to merge with a failing firm. We investigate these incentives under different modes of price competition and Cournot behavior. Our main finding is that firms strictly prefer exit of the failing firm to acquisition. This result may imply that other than strategic reasons, like economies of scale, must be looked for to understand why firms make use of the failing firm defense. However, when products are sufficiently heterogenous, we find that (i) the failing firm defense can be welfare enhancing and (ii) a government bail‐out increases total welfare when the number of firms is sufficiently low.

October 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Swedish Competition Authority Pros and Cons 2014

Pros and Cons 2014            

The seminars, which are open for competition authority employees, researchers, lawyers and competition consultants, have been appreciated for the open discussion among the participants and we hope that this year’s seminar will be no exception.

Seminar in Stockholm on Friday 28 November

This year’s seminar theme is The Pros and Cons of Antitrust in Two-Sided Markets. The contributors will present their papers and leading officials from competition authorities around the world will act as discussants. The seminar takes place in Stockholm on Friday 28 November.

Preliminary Seminar Program

8.30  Registration
9.20  Introduction by the moderator: Cristina Caffarra, Vice President, Head of European Competition Practice, Charles River Associates
9.15  Alfonso Lamadrid, Senior Associate, Garrigues, Brussels: The Double Duality of Two-Sided Markets
Discussant: Salvatore Rebecchini, Commissioner, Italian Competition Authority
10.15  Coffee
10.45 Lapo Filistrucchi, Assistant Professor at the University of Florence: Two-Sided Markets versus Complement Products: Pricing and Welfare
Discussant: Chris Walters, Director of Economics, Enforcement, UK Competition and  Consumer Authority
11.45 Markus Reisinger, Professor and Chairholder, WHU – Otto Beisheim School of Management: Media Markets as Two-Sided Markets: Consumer Behaviour and Search Engines
Discussant: Birgit Schwabl-Drobir, Senior Economist, Austrian Competition Authority
12.45  Lunch
13.45 Özlem Bedre-Defolie, Assistant Professor, European School of Management and Technology: The Economics of the Payment Card Industry and Perspectives on Regulation of Card Fees and Vertical Restraints
Discussant: Alexis Walckiers, Chief Economist, Belgian Competition Authority
14.45 Katarzyna Czapracka, Associate, White & Case, Brussels: Interchange Fees in Payment Systems: Antitrust Enforcement and the Two-Sided Market Theory
Discussant: Sheldon Mills, Senior Director, Mergers, UK Competition and Markets Authority
15.45 Coffee
16.15 Nicolas Petit, Professor at the Law School of the University of Liège: Is the Theory of Two-Sided Markets an Economic “Fable”?
Discussant: Rita Wezenbeek, Head of Unit Antitrust & Payment Systems, DG Comp
17.15 Closing of seminar

Each speaker has 30 minutes for their presentations and the discussants have 15 minutes each, leaving 15 minutes for general discussion.

Please note that the program may be subject to change.


The seminar venue is Konferens Spårvagnshallarna at Birger Jarlsgatan 57 A in the centre of Stockholm. See map


Registrations are now open via the follwing link:

All matters regarding registration are handled by Meetagain, 


If you have any questions, please do not hesitate to contact our head of the organizing committee Dr Lena Fredriksson at

October 16, 2014 | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 15, 2014

FOURTH EDITION: EU Competition Law An Analytical Guide to the Leading Cases

Ariel Ezrachi has come out with the FOURTH EDITION of EU Competition Law An Analytical Guide to the Leading Cases.

BOOK ABSTRACT: This book is the fourth edition of a highly practical guide to the leading cases in European Competition Law, focusing primarily on Article 101 TFEU, Article 102 TFEU and the European Merger Regulation. In addition it explores the public and private enforcement of Competition Law, the intersection between Intellectual Property Rights and Competition Law and the application of Competition Law to State action. Each chapter outlines the relevant laws, regulations and guidelines for each of the topics. Within this framework, cases are reviewed in summary form, accompanied by analysis and commentary.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Do More Patents Mean Less Entry?

Henri De Belsunce, Max Planck Institute for Innovation and Competition asks Do More Patents Mean Less Entry?

ABSTRACT: This paper investigates the entry decision of a firm into a market that is protected by a patent. It shows how entrants use the possibility to study existing prior art before taking their entry decision. Studying prior art reduces the information asymmetry that arises due to the fact that patent strengths are private information. The paper analyses the incumbent’s incentives to pursue a raising rivals’ cost strategy by excessive patenting. The application of the model shows that the treble damages doctrine reduces the incentives for an incumbent to patent excessively.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Standard Essential Patents, Trolls and the Smartphone Wars: Triangulating the End Game

Daryl Lim, John Marshall Law has a paper on Standard Essential Patents, Trolls and the Smartphone Wars: Triangulating the End Game.

ABSTRACT: Few legal issues in recent years have captured the public’s attention more powerfully than litigation over standard essential patents (“SEPs”). This Article explains how SEP litigation overlaps with two other major centers of patent litigation – litigation involving smartphones and patent assertion entities (“PAEs”). It observes that attempting to pre-empt patent hold-ups by imposing blanket ex ante disclosure obligations and royalty caps on standard setting organizations (“SSOs”) is misdirected and counterproductive. Instead, the solution lies in clear and balanced rules to determine “fair, reasonable and non-discriminatory” (FRAND) royalties and injunctive relief. This solution will help parties make more realistic assessments of their options and help adjudicators resolve SEP disputes.
Correctly framed, implementers bear the burden of proving the breach of a FRAND commitment. FRAND royalties should, in the absence of comparable licenses, focus on apportioning the profits based on the relative importance of the patented technology in the covered product. Royalties should be measured at the time the standard is set but generally should not be discounted for the possibility of invalidity and non-infringement. Discriminatory licenses can be hard to detect, but targeted initiatives and improved transparency would make the task easier. Injunctions should be granted based the wording and intent of the relevant FRAND commitment, conduct of the parties, and proof that the technology drove the sales of the component or product on which the relief is sought. More broadly, courts must understand both the limits and opportunities of the antitrust and patent laws.  While useful in arresting ex ante misconduct, antitrust is largely irrelevant to SEP litigation; patent law has a role in both improving patent quality and deterring vexatious litigation.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Frequently Asked Antitrust Questions, Second Edition

The ABA Section of Antitrust Law has published Frequently Asked Antitrust Questions, Second Edition.

BOOK ABSTRACT: Frequently Asked Antitrust Questions is a tremendous resource for practitioners who need quick, plain language answers to questions that arise every day for every business. The book is useful both for the non-expert who needs easy access to the basic rules of the road and lawyers with significant experience in antitrust law who need to respond quickly and efficiently to questions from clients. This revision includes two new chapters addressing emerging issues in the areas of intellectual property and antitrust compliance. The prior edition's discussion of trade associations has also been expanded and now makes up its own chapter. Other chapters also contain expanded material, including additional references and footnotes for practitioners who need to delve deeper into specific issues. Expanded topics include:

  • communications with competitors,
  • dealing with antitrust authorities in the United States and abroad,
  • the Robinson-Patman Act and other pricing issues,
  • vertical arrangements between customers and suppliers, and more.

Even with this increased content, however, Frequently Asked Antitrust Questions remains a user-friendly and unique go-to resource for attorneys of all experience levels.

October 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2014

Market Structure Control and Restriction of Anticompetitive M&As and 'Concentration' of Enterprises' Market Power in BRICS Countries: General Approaches (Asia - China and India, Euro-Asia - Russia and Africa - South Africa - In Focus)

Ksenia Belikova, Peoples' Friendship University of Russia discusses Market Structure Control and Restriction of Anticompetitive M&As and 'Concentration' of Enterprises' Market Power in BRICS Countries: General Approaches (Asia - China and India, Euro-Asia - Russia and Africa - South Africa - In Focus).

ABSTRACT: The articles represents a research of general approaches of BRICS countries legislation and legal order to counteraction against such an anticompetitive market strategy as abuse of dominant market power in legal orders of China, India, Russia and South Africa. The author pays particular attention to current legislation of BRICS countries in the field of competition protection with regard to provisions related to market structure control and restrictions of anticompetitive mergers & acquisitions (further on - M&As) and “concentration” of enterprises' market power control fixed by Asian (China and India), Euro-Asian (Russia) and African (South Africa) legal orders. The analysis of substantial contents of laws on competition and monopolies of the above mentioned BRICS countries and relevant case law shows the existence of a number of conventional generally acknowledged (unified) provisions and norms. At the same time there are specific features making them different. These generally acknowledged provisions and peculiarities will be in focus in the article.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Tacit Collusion under Multimarket Contact with Identical Firms and Markets

Niklas Horstmann, Karlsruhe Institute of Technology and Jan Kraemer, University of Passau; Karlsruhe Institute of Technology identify Tacit Collusion under Multimarket Contact with Identical Firms and Markets.

ABSTRACT: According to Bernheim and Whinston’s (The RAND Journal of Economics 21 (1), 1990) irrelevance result, multimarket contact may not facilitate tacit collusion if identical firms meet in identical markets. In contrast, we offer a novel behavioral explanation why multimarket contact may facilitate tacit collusion for this case. By means of an economic laboratory experiment without explicit communication, we show that a firm can implicitly communicate the collusive intention through its price setting behavior, i.e., by price signaling. We find that multimarket contact facilitates tacit collusion because, in contrast to single market contact, firms can send differentiated price signals.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

The Cost of Antitrust Law to Malaysia's Financial Services Sector

Bryane Michael, University of Hong Kong Faculty of Law; University of Oxford; Columbia Law School - Centre for the Advancement of Public Integrity, Mark Williams, Hong Kong Polytechnic University, and Susila Munisamy, University of Malaya analyze The Cost of Antitrust Law to Malaysia's Financial Services Sector.

ABSTRACT: Judging by only economic incentives, Malaysian financial institutions (particularly banks) should completely ignore the Competition Act. The data show that Malaysian banks probably benefit from anti-competitive behaviour. Political and family connections likely facilitate such behaviour. Given that the Malaysian Competition Commission will likely lack the resources to investigate and sanction anti-competitive behaviour in Malaysia’s banking industry – the banks’ best response to the Act probably consists of ignoring it. Maximum fines of 10 million ringgit and revenue-tied penalties of only 10% of worldwide revenue mean that banks still have strong incentives to engage in anti-competitive behaviour and to pay any low fine that might be levied. The best compliance programme for banks in Malaysia likely consists of actions that avoid detection rather than detecting and preventing anti-competitive behaviour. Private rights of action are unlikely to provide any stronger economic incentives for Malaysian banks to adopt strong antitrust compliance programmes and internal audit programmes. By staying the course, Malaysian banks can continue to earn about 15 billion ringgits (approximately US $4.6 billion in anti-competitive rents).

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Market Structure and Political Law: A Taxonomy of Power

Zephyr Teachout, Fordham University School of Law and Lina Khan, Yale University - Law School address Market Structure and Political Law: A Taxonomy of Power.

ABSTRACT: The goal of this Article is to create a way of seeing how market structure is innately political. It provides a taxonomy of ways in which large companies frequently exercise powers that possess the character of governance. Broadly, these exercises of power map onto three bodies of activity we generally assign to government: to set policy, to regulate markets, and to tax. We add a fourth category — which we call "dominance," after Brandeis — as a kind of catchall describing the other political impacts. The activities we outline will not always fit neatly into these categories, nor do all companies engage in all of these levels of power — that is not the point. The point is that Bank of America and Exxon govern our lives in a way that, say, the local ice cream store in your hometown does not. Explicitly understanding the power these companies wield as a form of political power expands the range of legal tools we should consider when setting policy around them.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Promoting Innovation

Spencer Weber Waller, Loyola University of Chicago, School of Law - Institute for Consumer Antitrust Studies and Matthew Sag, Loyola University Chicago School of Law are Promoting Innovation.

ABSTRACT: The economist Joseph Schumpeter recognized two essential facts of modern capitalism: the sudden displacement of the old by the new, a process he eloquently termed “creative destruction”; and the significance of innovation over incremental improvements in allocative efficiency to long-run economic growth. The twin Schumpeterian insights are now well accepted. How these insights should be incorporated into laws regulating the marketplace, such as antitrust and intellectual property, is far less clear.
Antitrust minimalists and skeptics tend to equate Schumpeter with laissez faire. After all, if even the most entrenched market behemoths are vulnerable to seismic shifts in technology, are not all supposed monopolies merely fleeting? We disagree. This view misreads Schumpeter and misunderstands markets and business strategy. Modern businesses are well aware of the threat of disruptive outsiders and, left unchecked, will do their utmost to prevent future waves of creative destruction from threatening the status quo. We propose thinking of creative destructive and competition policy as a two-stage process rather than a single event where the victor enjoys the spoils of innovation indefinitely without legal constraints. Instead, competition law as we currently understand it would remain in place while being somewhat more forgiving as to the acquisition of market power, yet still vigilant in policing the maintenance of such power.
We focus on historical, current, and hypothetical examples from US and EU competition and intellectual property law to show how contemporary law has already incorporated many of these insights and the law can maximize consumer welfare by doing so more thoroughly. Under such a two-step approach, some areas of antitrust and IP law would expand, some would contract, but all areas of the law would more clearly promote innovation and help create real Schumpeterian antitrust.

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

Monday, October 13, 2014

Competition and macroeconomic outcomes factsheet

The OECD has produced a Competition and macroeconomic outcomes factsheet.

ABSTRACT: When customers can choose between different providers, they benefit and so does the economy as a whole. Customer's abilityto choose forces firms to compete with one another which leads to increased productivity, more innovation and economic growth.

However, it can be challenging to measure and find evidence of the link between competition policy and macroeconomic outcomes - such as productivity, innovation and growth, as well as other determinants of well-being such as inequality and employment.

This factsheet summarises existing evidence on the wider economic effects of competition and competition policy and helps competition agencies all over the world to advocate their work. The factsheet was built in form of a narrative and provides suggestions and references to the existing evidence. It was produced as part of the OECD work on the evaluation of competition agencies' interventions.

October 13, 2014 | Permalink | Comments (0) | TrackBack (0)