Monday, March 3, 2014
The Future of Amateurism after Antitrust Scrutiny: Why a Win for the Plaintiffs in the NCAA Student-Athlete Name & Likeness Licensing Litigation Will Not Lead to the Demise of College Sports
Marc Edelman, Zicklin School of Business, Baruch College, City University of New York discusses The Future of Amateurism after Antitrust Scrutiny: Why a Win for the Plaintiffs in the NCAA Student-Athlete Name & Likeness Licensing Litigation Will Not Lead to the Demise of College Sports.
ABSTRACT: On June 21, 2009, twelve former Division I student-athletes filed an antitrust complaint against the National Collegiate Athletic Association ("NCAA"), alleging that the NCAA rules that prevent student-athletes from controlling the commercial rights to their names and likenesses violate Section 1 of the Sherman Act. In response, the NCAA has argued that its restraints on student-athlete names and likenesses serve the necessary purpose of maintaining competitive balance in college sports. In addition, the NCAA has asserted that if its nationwide restraints are overturned, it would financially "destroy college sports for the vast majority of student-athletes."
This article analyzes the pertinent legal issues in the NCAA Student-Athlete Name & Likeness Licensing Litigation, and explains why a plaintiffs’ victory would not lead to the demise of college sports as the NCAA suggests. Part I of this article provides a history of the college sports marketplace, including its historic governance structure and its transition of economic power from individual colleges to the NCAA. Part II discusses the NCAA Student-Athlete Name & Likeness Licensing Litigation in terms of its procedural history and core legal principles. Part III explains why a win for the plaintiffs in the NCAA Student-Athlete Name & Likeness Licensing Litigation would not truly destroy competitive balance in college sports. Finally, Part IV explains why a win for the plaintiffs similarly would not destroy the financial viability of college sports.
Roger Lederman, IBM Research, Marcelo Olivares, Columbia University - Columbia Business School - Decision Risk and Operations; University of Chile - Departamento de Ingenieria Industrial and Garrett Van Ryzin, Columbia Business School - Decision Risk and Operations are Identifying Competitors in Markets with Fixed Product Offerings.
ABSTRACT: We develop a novel methodology to identify competitors in markets where spatial location is an important factor of differentiation. In differentiated product markets, determining the key competitors of a focal product requires a characterization of customer demand that includes the identification of heterogeneous customer segments. The prevalent approach to characterize such a demand system is through a random utility model of customer choice. The existing methods used to estimate these models based on aggregate product sales data exploit variation in the set of product offerings to identify customer heterogeneity. Our proposed methodology uses a different empirical strategy: we use variation in observable attributes that determine the size of the distinct customer segments. This approach is useful to study markets where the set of product offerings and their characteristics are fixed or change infrequently. We apply our methodology in the hotel travel industry, where the characterization of key competitors is commonly used in practice to benchmark hotel performance. We collect publicly available data on local events to explain variation in customer segments, differentiating events by location and business/leisure purposes. Our methodology can be used effectively to characterize customer heterogeneity and identify the closest competitors to any focal hotel.
Neale Mahoney, University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)and E. Glen Weyl, University of Chicago; University of Toulouse 1 - Toulouse School of Economics address Imperfect Competition in Selection Markets.
ABSTRACT: Many standard intuitions about the distortions created by market power and selection are reversed when these forces co-exist. Adverse selection may be socially beneficial under monopoly, for example, and market power may be beneficial in the presence of advantageous selection. We develop a simple, but quite general, model of symmetric imperfect competition in selection markets that parameterizes the degree of both market power and selection. We derive basic comparative statics verbally and illustrate them graphically to build intuition. We emphasize the relevance of the most counterintuitive effects with a calibrated model of the insurance market and empirical results from the credit card industry. Among other policy insights, we show that in selection markets four core principles of the United States Horizontal Merger Guidelines are reversed.
Sunday, March 2, 2014
Einer Elhauge (Harvard Law) discusses Treating RAND Commitments Neutrally.
ABSTRACT: This Article argues that the same legal standards should apply to RAND commitments whether they are made to standard-setting organizations or not. The arguments for concluding that RAND commitments should limit injunctive patent relief or trigger antitrust liability turn on whether the commitment reasonably induces lock-in that generates hold-up effects or market power when that commitment is breached. But RAND commitments can induce such lock-in effects when they are made outside of standard-setting organizations and do not always induce them when they are made to standard-setting organizations. Thus, any special legal rules for RAND commitments should turn on whether the commitments induced such lock-in, rather than on the institutional context. The arguments against using special legal rules for RAND commitments turn on the extent to which lock-in might fail to generate holdup problems, denying patent injunctions might generate reverse-holdup problems, and contract or promissory estoppel remedies might obviate the need for antirust liability. But those arguments likewise apply equally inside and outside of standard-setting organizations. Thus, however one resolves the arguments for and against applying special legal rules to RAND commitments, the resulting legal standards should be the same whether or not the commitment is made to a standard-setting organization.
Friday, February 28, 2014
Philip Marsden, The British Institute of International and Comparative Law, Spencer Weber Waller, Loyola University of Chicago, School of Law - Institute for Consumer Antitrust Studies, and Philipp Fabbio, Mediterranea University of Reggio Calabria - School of Law have posted Antitrust Marathon V: When in Rome Public and Private Enforcement of Competition Law.
ABSTRACT: The Antitrust Marathon is a long-running series of roundtable discussions sponsored by the Institute for Consumer Antitrust Studies of Loyola University Chicago School of Law and the Competition Law Forum of the British Institute of International and Comparative Law, focusing on enduring issues of comparative competition law. These discussions always take place the day before or after the great marathon races of the world which some of the participants also endure. However, no running is required for the roundtable discussion itself. Past Antitrust Marathons have focused on Abuse of Dominance, Antitrust and the Rule of Law; Competition and Consumer Protection, and other topics, and have been held in Chicago, London, Boston and Dublin. We are grateful to the Italian Competition Authority and the University of Rome I (Sapienza) for hosting and being co-sponsors of the 2013 Antitrust Marathon. Our topics this year are: • Public-Private Partnerships for Effective Enforcement • Effective Injunctive Relief • Private Actions for Damages • Criminal Enforcement
Oivind Anti Nilsen, Norwegian School of Economics (NHH) - Department of Economics; Institute for the Study of Labor (IZA), Lars Sorgard, Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics, and Simen Ulsaker, Norwegian School of Economics (NHH) - Department of Economics ask Upstream Merger in a Successive Oligopoly: Who Pays the Price?
ABSTRACT: This study develops and uses a successive oligopoly model, with an unobservable non-linear tariff between upstream and downstream firms, to analyze the possible anti-competitive effects of an upstream merger. We find that an upstream merger may lead to higher average prices paid by downstream firms, but that there is no change in the prices paid by consumers. The model is tested empirically on data for an upstream merger in the Norwegian food sector (specifically, the market for eggs). Consistent with the theoretical predictions of the model, we find that the merger had no effect on consumer prices, but led to higher average prices from the downstream to the upstream firm.
Jay Pil Choi, Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) and Heiko A. Gerlach, University of Queensland - School of Economics discuss Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement.
ABSTRACT: This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand‐related markets. We show that cartel prosecution can have a knock‐on effect: bringing down a cartel in one market reduces profits and cartel stability and leads to the break‐up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We discuss the impact of dynamic cartel formation on consumer surplus, explore antitrust spillovers, the optimal scope of antitrust interventions and cartel formation with local firms.
Thursday, February 27, 2014
Mel Marquis, European University Institute; European University Institute - Department of Law (LAW) describes Perchance to Dream: Well Integrated Public and Private Antitrust Enforcement in the European Union.
ABSTRACT: This chapter, in proof form, introduces an edited collection of papers written by 27 authors concerning the rise of private antitrust enforcement in Europe and its interaction with enforcement by competition authorities. This chapter and the book cover several jurisdictions and provide initial assessments of the European Commission’s proposed Directive on damages actions and its Recommendation on collective redress, each of June 2013. The book, 'Integrating Public and Private Enforcement of Competition Law -- Implications for Courts and Agencies', is edited by Philip Lowe and Mel Marquis and will be published by Hart of Oxford in early 2014.
Miguel Moura e Silva, University of Lisbon Law School; CIDEEFF; Autoridade da Concorrencia; IDEFF has written on Antitrust in Distress: Causes and Consequences of the Financial Crisis.
ABSTRACT: This article examines the role of antitrust in the causes and consequences of the crisis. If market turmoil and financial upheaval can shatter the groundwork of competitive markets that antitrust seeks to protect, the shockwaves are sure to be felt in the intellectual foundations of competition policy. Section 2 considers whether antitrust contributed to the financial crisis and briefly describes the pre-crisis role of competition policy on both sides of the Atlantic with regard to the transformations that the banking sector underwent in recent decades. Section 3 analyses the crisis response on the antitrust front. Of particular importance are the two areas where the bailouts tend to collide with antitrust: mergers and, in the European context, State aid. Section 4 then looks at the challenges that economic crises have placed on antitrust enforcers. It is submitted that as the crisis deepens and recovery fails to take hold, the risks to antitrust are far more dangerous and less visible today. Although overall, antitrust enforcement does not seem to be seriously weakened in the US and at the EU level, there are troubling signs that as the current sovereign debt crisis deepens, at least some Member States may want to put a lid on antitrust. A global economic slowdown will tend to make it easier for those claiming a less aggressive antitrust policy is necessary to foster growth. Section 5 concludes that the financial crisis may increase the bias toward accepting ever-larger bank mergers. After all, if an orderly takeover is needed, to whom will central banks look to? The recent crisis showed who the usual suspects are.
Debapriya Sen, Ryerson University and Giorgos Stamatopoulos, University of Crete discuss When an Inefficient Competitor Makes Higher Profit than its Efficient Rival.
ABSTRACT: We present examples of cost-asymmetric duopoly games where the inefficient firm can obtain higher payoff than its efficient rival. Firms compete in a Cournot fashion and their quantities are chosen by their managers. We assume that managers are offered two types of incentive contracts, the pure profit or the pure revenue contract. We allow for mixed and correlated strategies in the contract stage and derive the implications of the resulting choices. Surprisingly, we show that in equilibrium the less efficient firm can obtain higher market share and also higher profit than its more efficient rival. This result holds under both pure and mixed Nash equilibria and also under a robust set of correlated equilibria.
The nominees are:
Matter of the Year
Merger Control Matter of the Year – Americas
Merger Control Matter of the Year – Asia-Pacific, Middle East & Africa
Ultratech Cement/Jaypee Cement, India
Virgin Australia/Tiger Airways, Australia
Merger Control Matter of the Year – Europe
Behavioural Matter of the Year – Americas
Behavioural Matter of the Year – Asia-Pacific, Middle East & Africa
Defence of Daum in abuse of dominance case, Korea
Behavioural Matter of the Year – Europe
Litigation of the Year
Lawyer of the Year
Antoine Winckler - Cleary Gottlieb Steen & Hamilton
Christine Varney - Cravath Swaine & Moore
Deirdre Trapp - Freshfields Bruckhaus Deringer
Ilene Knable Gotts - Wachtell Lipton Rosen & Katz
Michael Egge - Latham & Watkins
Paul Denis - Dechert
Richard Parker - O'Melveny & Myers
Steven Sunshine - Skadden Arps Slate Meagher & Flom
Lawyer of the Year - 40 and under
Alastair Chapman - Freshfields Bruckhaus Deringer
Amanda Reeves - Latham & Watkins
Ana Paula Martinez - Levy & Salomao
Casey Halladay - McMillan
Claire Jeffs - Slaughter and May
Leonor Cordovil - Grinberg Cordovil
Pierre Zelenko - Linklaters
Warren Rosborough - McDermott Will & Emery
Economist of the Year
Carl Shapiro - Charles River Associates
Christina Caffara - Charles River Associates
David Dranove - Bates White
Dennis Carlton - Compass Lexecon
Helen Jenkins - Oxera
Peter Boberg - Charles River Associates
Corporate Counsel of the Year
Adam Eaton - Visa
Calvin Park - Qualcomm Korea
Christoph Klahold - ThyssenKrupp
Dina Kallay - Ericsson
Howard Kass - US Airways (American Airlines)
Kent Walker - Google
Academic Excellence Award
C Scott Hemphill
Article of the year
A Paul Victor, Seth C Farber and Brandon Duke, “The Policy Case for Eliminating The Public Identification of Carve-Outs In Antitrust Plea Agreements"
Herbert Hovenkamp, "Anticompetitive Patent Settlements and the Supreme Court's Actavis Decision"
John D Harkrider, "Seeing the Forest through the SEPs"
Joshua D Wright and Judge Douglas H Ginsburg, "The Goals of Antitrust: Welfare Trumps Choice"
Agency of the Year – Americas
Chile's National Economic Prosecutor
Ecuador's Superintendency for the Control of Market Power
US Department of Justice’s antitrust division
US Federal Trade Commission
Agency of the Year – Asia-Pacific, Middle East & Africa
Australian Competition & Consumer Commission
China's National Development & Reform Commission
Competition Commission of India
Japan’s Fair Trade Commission
Korea's Fair Trade Commission
Agency of the Year – Europe
European Commission’s Directorate General of Competition
France’s Competition Authority
Germany’s Federal Cartel Office
Norway’s Competition Authority
Poland's Office of Competition and Consumer Protection
Enforcement Matter of the Year
Regional firm of the year – Europe
Gide Loyrette Nouel
Regional firm of the year – Asia-Pacific, the Middle East and Africa
Amarchand & Mangaldas & Suresh A Shroff & Co
Anderson Mori & Tomotsune
Edward Nathan Sonnenbergs
Gilbert + Tobin
Kim & Chang
Regional firm of the year - Americas
Axinn Veltrop & Harkrider
Blake Cassels & Graydon
Robins Kaplan Miller & Ciresi
Wachtell Lipton Rosen & Katz
Tom Cotter (Minnesota) explains Patents, Antitrust, and the High Cost of Health Care.
ABSTRACT: Americans pay much more for health care than do consumers in other countries, but whether the expense is worth it is, to say the least, debatable. This essay discusses the comparative role of patents, antitrust, and other bodies of law in contributing to the high cost of health care in the United States. I argue that, although patents play a part in raising health care costs, that effect is offset to some degree by substantial countervailing benefits. More troubling has been a two-decade-long failure of antitrust law to prevent anticompetitive hospital mergers and other welfare-reducing practices, though in recent years the courts and agencies have begun to correct some of the worst abuses. Arguably more significant than the failures of either of these two bodies of law, however, are the many ways in which hospitals, drug companies, and other health-related industries often have been able to capture Congress and other entities that supposedly regulate their behavior.
Wednesday, February 26, 2014
Steve Salop (Georgetown) explores The Evolution and Vitality of Merger Presumptions: A Decision-Theoretic Approach.
ABSTRACT: This article reviews the formulation and evolution of the Philadelphia National Bank anticompetitive presumption through the lens of decision theory and Bayes Law. It explains how the economic theory, empirical evidence and experience are used to determine a presumption and how that presumption interacts with the reliability of relevant evidence to rationally set the appropriate burden of production and burden of persuasion to rebut the presumption. The article applies this reasoning to merger presumptions. It also sketches out a number of non-market share structural factors that might be used to supplement or replace the current legal and enforcement presumptions for mergers. It also discusses the potential for conflicting presumptions and how such conflicts might best be resolved.
Timothy Bresnahan Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER) and Jonathan Levin Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER) analyze Vertical Integration and Market Structure.
ABSTRACT: Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization.
Mathias Dewatripont, Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) and Patrick Legros, Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR) discuss ‘Essential’ Patents, Frand Royalties and Technological Standards.
ABSTRACT: Standard Setting Organizations have developed FRAND agreements in order to prevent firms from holding up other participants once a standard is created. We analyze here the consequences of such agreements - in particular the requirements of fairness and non‐discrimination - for the creation of technological standards that require the participation of existing patent holders. We abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one's patent portfolio, as is implicitly the case in FRAND agreements, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to ‘pad’ by contributing patents that are ‘inessential’ for the given standard, a phenomenon that seems to be widespread. Several results emerge from the analysis: (i) the number of inessential patents co‐varies positively with the number of essential patents; (ii) there is over‐investment relative to the second‐best, that is when padding cannot be avoided and (iii) the threat of disputes reduces incentives to pad but at the cost of lower production of strong patents; (iv) mitigating this undesirable side‐effect calls for a simultaneous increase in the cost of padding, through a better filtering of patent applications.
Rhetoric and Reality: You Protect Competitors, We Protect Competition – Except When We Protect Competitors
Florian Wagner-von Papp, University College London Faculty of Laws has a new paper on Rhetoric and Reality: You Protect Competitors, We Protect Competition – Except When We Protect Competitors. The topic is a great one.
ABSTRACT: The aim of this paper is threefold. First, it seeks to contribute to a more fine-grained comparison between US antitrust and EU competition law by (selectively) including state antitrust laws as well as laws that pursue objectives different from the antitrust laws but interfere with the aims of the antitrust laws ("non-antitrust laws"). Secondly, the paper highlights the degree to which such state antitrust laws and non-antitrust laws may interfere with the error-cost framework employed in antitrust law which finely balances Type I and Type II errors. Thirdly, as a consequence of the first two points, the paper seeks to raise awareness of the importance of clearly defining the relationship between antitrust law on the federal (or EU) level and antitrust laws as well as non-antitrust laws on the (Member) state level.
Federal antitrust law in the United States has come a long way since the 1970s. Interventionism has since been replaced by the use of an error-cost framework. This error-cost framework takes into account that Type I errors (false positives, overenforcement) may actually stifle competition and be counterproductive, for example, where antitrust protection of intrabrand competition has negative effects on interbrand competition, or where the antitrust laws are used to restrict vigorous competition by a firm with monopoly power in order to protect less efficient competitors to the detriment of consumers. When comparing US antitrust law to EU competition law, EU law is usually portrayed as not having made this transition, or at least not being consist in the implementation of the error-cost framework. EU competition law is seen as interventionist and disproportionately concerned with Type II errors (false negatives, underenforcement). This contribution acknowledges that the enforcement of EU competition law is more interventionist than the enforcement of US federal antitrust law. However, the comparison of US antitrust law on the *federal* level with competition rules on the *EU* level is an incomplete one. In comparative law, the focus must be on the "law in action" as it applies to a given factual scenario and must take "functional equivalents" into account. Using these insights from comparative law has the consequence that in the US one has to take into account not only federal antitrust law, but also state antitrust laws and non-antitrust laws. Some state antitrust laws are more interventionist than the federal antitrust laws, for example in the treatment of resale price maintenance, and they may apply concurrently to federal law, undermining the federal law's non-interventionist stance. Alternatively or cumulatively, non-antitrust laws (on the federal or state level) may disturb the fine balance struck by the error-cost framework employed in federal antitrust law. This is, for example, the case where contract law makes resale price maintenance contracts unenforceable even though they would be considered reasonable under federal antitrust law, where franchise or car dealership laws make it difficult for the franchisor or manufacturer to structure or restructure their distribution schemes, undermining the federal law's reluctance to interfere with unilateral decision-making even by the monopolist, or where sales-below-cost statutes in the states undermine the error-cost framework employed in predatory-pricing analysis under the federal antitrust laws. Taking these functional equivalents into account narrows the seemingly wide gap between interventionist EU competition law and the non-interventionist US antitrust law to some degree. In the EU, conversely, one also has to consider the competition laws of the Member States, and the effect of functional equivalents of laws outside competition law. A similar picture emerges: the Member States' competition laws are generally more interventionist than EU competition law (especially where competition laws apply to "economic dependency" scenarios), and non-antitrust laws, such as unfair trade law, prohibit conduct that would pass muster under EU competition law. As most of the laws interfering with the error-cost framework analysis are enacted on the state level (or Member State level), the question of the relationship between federal and state law arises. In the US, the courts have been extremely reluctant to consider federal preemption of state antitrust laws, and state non-antitrust laws generally benefit from the non-interventionist state action doctrine. In the EU, the relationship between the national competition laws and EU competition law has changed in 2004, in a political compromise that I consider unsatisfactory: while restrictions of competition by agreement are, roughly speaking, fully harmonized across the EU, Member States are completely free to be as interventionist as they like as far as unilateral conduct is concerned. While it is arguably unrealistic to draft an error-cost framework that comprises all antitrust and non-antitrust objectives, and at the same time takes account of federalism issues, this paper seeks to raise the awareness of the interactions between the various antitrust/non-antitrust and federal/state laws.
Tuesday, February 25, 2014
Martin S. Gaynor, Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation, Katherine Ho Columbia University - Department of Economics; National Bureau of Economic Research (NBER) and Robert J. Town University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)have a nice overview on The Industrial Organization of Health Care Markets.
ABSTRACT: The US health care sector is large and growing – health care spending in 2011 amounted to $2.7 trillion and 18% of GDP. Approximately half of health care output is allocated via markets. In this paper, we analyze the industrial organization literature on health care markets focusing on the impact of competition on price, quality and treatment decisions for health care providers and health insurers. We conclude with a discussion of research opportunities for industrial organization economists, including opportunities created by the US Patient Protection and Affordable Care Act.
Competition Rules and Regulation in the Telecommunications Sector: Evidence from Recent EU Margin Squeeze Cases
Margherita Colangelo, Roma Tre University - Department of Law explores Competition Rules and Regulation in the Telecommunications Sector: Evidence from Recent EU Margin Squeeze Cases.
ABSTRACT: In recent decades the relationship between competition law and regulation has become a very controversial issue, in particular in respect of the interface between competition rules and sector-specific regulation in liberalized network industries. The paper examines the controversial practice of margin squeeze, engaging in a detailed analysis of the relevant US and EU case-law in regulated industries in order to conduct a tentative critical exploration of these respective approaches and to consider whether a reconciliation between such regimes is possible. Moreover, it aims at examining some relevant open issues related to price squeeze, particularly with regard to the concurrent application of competition rules and sector-specific regulation and the risks connected with the coexistence of different sets of rules and also of different competent authorities.
Rule of Law in China - Legislation Reasoning and Enforcement of Anti-Monopoly Law in China and the West
Tat Chee Tsui, University of Dublin - Trinity College analyzes Rule of Law in China - Legislation Reasoning and Enforcement of Anti-Monopoly Law in China and the West.
ABSTRACT: It is a long debate over whether rule of law is reliable in China, when some Chinese regulations are considered to be decided for political interests rather than the law itself. Furthermore, Chinese court decisions are often criticized for not according with statutes, even though the latter are properly written. The author examines these issues by comparing the legislation reasoning and enforcement of competition law in China, the European Union and the United States, which will not lead to endorsement of or objection to the view that rule of law is properly enforced in China, but it shall be an inevitable responsibility for the Chinese judiciary to demonstrate efforts it has taken.
Pierre Marcel Regibeau, Imperial College; Charles River Associates asks 'Pay for Delay': What Do We Disagree On?
ABSTRACT: Antitrust concerns about “Pay For Delay” patent settlements are based on two theory of harms, one that stresses the need for Courts to review the validity of patents and one that emphasises the “probabilistic” nature of patent rights. The main weakness of the first theory of harm is that it fails to explain why some forms of patent settlements would be less desirable than others. The “probabilistic” theory of harm raises fundamental questions about the legal obligations of a patent-holder, the type of uncertainty that should be reflected in the probabilistic nature of the patents and whether the theory can be applied to anything but the simplest PFD settlements. The paper also discusses the likely effect of a PDF ban on innovation and reviews both the European approach to recent and on-going PDF cases and the recent Actavis decision of the US Supreme Court.