Antitrust & Competition Policy Blog

Why Hong Kong Needs an Antitrust Regime

Posted by D. Daniel Sokol

Mark Williams makes the case in an op-ed in the Financial Times on Why Hong Kong Needs an Antitrust Regime.  I agree with Mark.   Hong Kong faces market failures because of highly concentrated markets that allow incumbent monopolists to create barriers to entry.  An antitrust system can help facilitate a more competitive market. 

An antitrust agency can also help to prevent private firms from using government to shield anti-competitive conduct through competition advocacy.  I just made suggested revisions a chapter for my forthcoming book on Latin American Antitrust Developments in which Todd Zywicki of George Mason Law School draws upon the US experience to illustrate the importance of competition advocacy and how it can work in Latin America.  You can download Todd's draft here.  Todd's paper has equally important implications for Hong Kong on the importance of an effective competition advocacy program.

Final FTC/DOJ Single-Firm Conduct Hearing on May 8

Posted by D. Daniel Sokol

The final FTC/DOJ Single-Firm Conduct hearing will take place on May 8.  According to the FTC press release, "This final session will review a wide range of enforcement and policy issues regarding single-firm conduct, including analysis of monopoly power, various proposed standards for exclusionary conduct, and challenges in applying those standards to specific practices."  Speakers include:

May 8, 2007 (9:00 A.M. - 1:00 P.M.)        

Susan A. Creighton is a Partner at Wilson Sonsini Goodrich & Rosati PC and former Director of the Federal Trade Commission’s Bureau of Competition.

Jeffrey A. Eisenach is the Chairman of Criterion Economics, L.L.C. and an Adjunct Professor at George Mason University School of Law.

A. Douglas Melamed is a Partner and Co-chair of WilmerHale’s Antitrust and Competition Department and former Deputy Assistant Attorney General of the Department of Justice’s Antitrust Division.

Timothy J. Muris is a George Mason University Foundation Professor of Law, Of Counsel at O’Melveny & Myers LLP, and former Chairman of the Federal Trade Commission.          

Robert Pitofsky is the Joseph and Madeline Sheehy professor in Antitrust and Trade Regulation Law, Georgetown University Law Center, Counsel at Arnold & Porter LLP, and former Chairman of the Federal Trade Commission.

James F. Rill is a Partner at Howrey LLP and former Assistant Attorney General of the Department of Justice’s Antitrust Division.          

Charles F. (Rick) Rule is a Partner at Cadwalader, Wickersham & Taft LLP and former Assistant Attorney General of the Department of Justice’s Antitrust Division.

J. Gregory Sidak is a Visiting Professor of Law at Georgetown University Law Center and Founder of Criterion Economics, L.L.C.

Antitrust Analysis of Category Management: Conwood v. U.S. Tobacco

Posted by D. Daniel Sokol

Josh Wright of George Mason Law School has expanded our knowledge on category management in a number of recent working papers.  His most recent paper on the topic, Antitrust Analysis of Category Management: Conwood v. U.S. Tobacco, examines the Conwood case.

ABSTRACT: Category management is a business practice whereby a retailer designates a manufacturer as a category manager or captain and gives the designated manufacturer authority concerning retail shelf space allocation within a product category. In return for shifting brand stocking decisions as well as promotion, product assortment, and inventory decisions to the designated manufacturer, the retailer receives a lower wholesale price or a per unit time payment from the manufacturer. This paper analyzes the antitrust law and economics of category management contracts, demonstrating that they are an element of the normal competitive process that benefits consumers and challenging the increased antitrust scrutiny that has been applied to such arrangements as exemplified by the Sixth Circuit's recent decision in Conwood Co. v. United States Tobacco Co. We show that the economics of category management contracts is not fundamentally different from exclusive shelf space contracts - control over the shelf space allocation decision is merely shifted from the retailer to a manufacturer with the manufacturer becoming the transactor that can violate the implicit contract and the retailer becoming the policer of the contract. Mistaken reasoning regarding fiduciary obligations and horizontal versus vertical contracts has led to the placement of greater antitrust scrutiny on category managers than on firms that have negotiated more restrictive fully exclusive distribution contracts.

Hovenkamp named to American Academy of Arts & Sciences

Posted by D. Daniel Sokol

Herb Hovenkamp, the Ben V. & Dorothy Willie Professor of Law and History at the University of Iowa Law School has been named a Fellow to the prestigious American Academy of Arts & Sciences.  Hovemkamp is one on the luminaries in antitrust scholarship and this is an award well deserved.

FTC Seeks Comments on Study on Authorized Generic Drugs

Posted by D. Daniel Sokol

According to the FTC website posting:

The FTC is considering conducting a study to analyze the use and likely short- and long-run competitive effects of authorized generic drugs in the prescription drug marketplace. Before investigating these issues, the FTC is seeking public comments on its proposed information requests to firms in the prescription drug industry. The information collection requirements described below will be submitted to the Office of Management and Budget (“OMB”) for review, as required by the Paperwork Reduction Act (“PRA”) (44 U.S.C. 3501-3520).
...
In recent years and with increasing frequency, brand-name drug manufacturers have begun to market authorized generic drugs at precisely the same time that a paragraph IV generic is beginning its period of 180-day marketing exclusivity. The likely effects of this practice on generic competition have been subject to some debate. In the short run, the entry of an authorized generic drug may benefit consumers by creating additional competition that lowers generic prices further than if only the paragraph IV generic were marketed. Many generic manufacturers assert, however, that in the long run, consumers will be harmed because an expectation of competition from authorized generics will significantly decrease the incentives of generic manufacturers to pursue entry prior to patent expiration. For a generic manufacturer, the additional competition from an authorized generic may result in significantly less profit during the period of 180-day exclusivity than if the generic manufacturer had no authorized-generic competition during that time.
...
[The paper discusses five issues based on the initial comments that the FTC received]: (A) the practical utility of the proposed study and why it is necessary for the proper performance of the FTC’s functions; (B) suggestions to narrow the scope of the study; (C) suggestions to use alternative sources of information; (D) comments requesting limitations on the use of the information submitted; and (E) suggestions to broaden the scope of the study.

Ice Cream and Antitrust

Posted by D. Daniel Sokol

A new paper, Mergers when Firms Compete by Choosing both Price and Promotion, by Luke Froeb of Owen Graduate School of Management of Vanderbilt University, Steven Tenn of the Federal Trade Commission and Steven Tschantz of the Department of Mathematics of Vanderbilt University analyzes the merger effects in the 2003 merger between Häagen-Dazs and Dreyer that the FTC challenged.

ABSTRACT: Enforcement agencies have a relatively good understanding of how to measure the loss of price competition caused by merger. However, when firms compete in multiple dimensions, merger effects are not well understood. In this paper, we study mergers in industries where firms compete by setting both price and promotion, and ask what happens if we mistakenly assume that price is the only dimension of competition. To answer the question, we build a structural model of the super-premium ice cream industry, where a 2003 merger between Häagen-Dazs and Dreyer's was challenged by the Federal Trade Commission. A structural merger model that ignores promotional competition under-predicts the price effects of a merger in this industry (5% instead of 12%). About three-fourths of the difference can be attributed to estimation bias (estimated demand is too elastic), with the remainder due to extrapolation bias from assuming post-merger promotional activity stays constant (instead it declines by 31%).

Rebuilding Illinois Brick: A Functionalist Approach to the Indirect Purchaser Rule

Posted by D. Daniel Sokol

Barak Richman and Christopher Murray of Duke Law School tackle indirect purchaser issues in Rebuilding Illinois Brick: A Functionalist Approach to the Indirect Purchaser Rule.

ABSTRACT: The indirect purchaser rule, established three decades ago in Illinois Brick v. Illinois, has generated sufficiently steady and widespread criticism that Congress's Antitrust Modernization Commission is now considering possible reforms. The debate over reforms, however, has been constrained by an undue emphasis on legal formalism and has failed to generate innovative alternatives. We review the development of the doctrine, identify its significant shortcomings, and articulate the functional objectives that antitrust rules of standing should pursue. Building off these objectives, which constitute the foundations of antitrust law, and incorporating some lessons from securities law, we propose a mechanism that opens antitrust suits to indirect purchasers, consolidates the multiple claims, and designates a presumptive lead plaintiff.

Trends and Developments in Global Competition Law

Posted by D. Daniel Sokol

The University of London Interdisciplinary Centre for Competition Law and Policy (ICC) and US law firm Crowell & Moring are hosting a conference entitled Trends and Developments in Global Competition Law.  Ththe conference will focus on: international merger control; international cartel procedures; private enforcement, damages claims and recovery; and abuse of dominance.  Conference registration is available here.

FTC Commissioner Rosch on Antitrust-IP in the Pharmaceutical Industry

Posted by D. Daniel Sokol

David Balto has brought to my attention a speech that FTC Commissioner Tom Rosch made yesterday on IP-Antitrust issues specific to the pharmaceutical sector.  According to David, the speech highlights include:

• Rosch believes that both Tamoxifen and Schering were wrongly decided.
• Rosch hopes that the Supreme Court will accept cert in Tamoxifen
• The FTC supports the objectives of the proposed patent settlement legislation   
• Rosch believes that the FTC can successfully challenge patent settlements under the standards in the Tamoxifen and Schering decisions and the Commission should do so
• The speech addresses how competition should be analyzed in a merger where the parties suggest that there is no lost competition because the overlapping product of one of the merging parties violates the patent of the other merging party
• the speech addresses issues surrounding building a patent thicket 
• Finally, the speech suggests that FTC Section 5 can be used to attack the conduct of a patent troll

You can download the speech here.

ABA Sections of Antitrust and Intellectual Property Law: Strategic Choices, Evolving Standards, and Practical Solutions

Posted by D. Daniel Sokol

I just reviewed the brochure for the annual ABA Antitrust-Intellectual Property conference.  Like the previous ABA Antitrust-IP conferences, this one looks very interesting with a nice mix of academics, government officials and lawyers from both in-house and law firm perspectives.  The agenda is available here and registration here.