Antitrust & Competition Policy Blog

Did the Canadian Newspaper Acquisitions Raise Prices for Consumers

Posted by D. Daniel Sokol

Oftentimes with merger control, we may question how accurately antitrust can be when it is forward looking.  A new working paper by Ambarish Chandra of the Sauder School of Business of the University of British Columbia and Allan Collard-Wexler of the Stern School of Business of New York University examines the effects of a series of mergers in the Canadian newspaper industry to determine potential anti-competitive effects of consolidation.  It is titled Did the Canadian Newspaper Acquisitions Raise Prices for Consumers.

ABSTRACT: In the late 1990s, the Canadian newspaper industry underwent rapid consolidation with a few conglomerates controlling the vast majority of daily papers. Over a 4 year period, about three-fourths of Canada's daily newspapers changed ownership. While the issue received considerable attention and criticism at the time, the concerns were mostly about diversity of opinion. We have not found any study examining the straightforward economic implications of such a large scale realignment in this important industry.

We examine the effect of this consolidation on observable variables relating to consumer welfare. Specifically, we analyze prices for both circulation and advertising, as well as study the extent to which concentration increased using county level circulation data. Our results do not support the notion that greater concentration led to the abuse of market power in the form of higher prices. In fact, our results suggest that newspapers with changed ownership and those in the dominant chains had either lower price increases or greater price declines after the merger, compared with the other papers

Supermarkets and Competition

Posted by D. Daniel Sokol

Today's Wall Street Journal has an interesting article on how traditional supermarkets have responded to the competitive pressures of low cost retailers (Wal-Mart).  It is an interesting read.  Wal-Mart has not been the only threat to traditional supermarkets.  There are also high end threats from the likes of Whole Foods and Wild Oats.  On this issue, the FTC has decided to try to block the merger of Whole Foods and Wild Oats.  I had assumed that this deal would not have been challenged and that the merged firm would have had to make some divestitures where there was an overlap in certain markets.  Econometric data will be key in determining the case-- think back to Staples/Office Depot, although I think that this case is a bit different.  Nevertheless, the new case should be an interesting one.  The big question here is in the market definition-- is it based on supermarkets overall (and what does "supermarkets" include) versus a more specialized market for yuppie organic foods of which we are moving from two players to only one.  This is not your traditional supermarket case (unlike the A&P and Pathmark merger).  I am a bit skeptical on anti-competitive effects on this merger because I tend to think that there may not be a separate organic market.  The econometric data will help us to determine if the FTC story is the correct one.  This FTC challenge comes in the wake of a recent FTC conference on supermarkets on May 24.

Statistics on Modern Private International Cartels, 1990-2005

Posted by D. Daniel Sokol

After receiving a number of inquiries about a post earlier this week, I am following up with posting on a new working by John Connor on cartels.  Connor has increased our understanding of international cartels probably more than any other scholar.  His latest working paper is Statistics on Modern Private International Cartels, 1990-2005 with colleague Gustav Helmers, which has important implications for both scholars and enforcers.

ABSTRACT: This report explains the principal economic and legal features of a unique set of data on 283 modern private international cartels discovered anywhere in the world from January 1990 to the end of 2005. Measured in real 2005 money, aggregate cartel sales and overcharges totaled about $1.2 trillion and $500 billion, respectively. In the early 2000s, about 35 such cartels were discovered each year. We find that global cartels comprise more than half of the sample's affected sales and are larger, longer lasting, and more injurious than other types. In the early 2000s world-wide corporate penalties stabilized at or above $2 billion per year, one-thousand times penalties in the early 1990s. More than 40% of those penalties were from settlements in private suits, and most of the rest are fines imposed by U.S. and EU antitrust authorities.

Median penalties are low: from 1.4% to 4.9% of affected sales, depending on the type of prosecution. As a proportion of damages, median fines ranged from less than 1% for EU-wide cartels to 17.6% for Canada. Private plaintiffs obtained 38% of damages from international cartelists. World wide, median real cartel penalties of all types amounted to about 20% of overcharges.

The European Commission's 2006 Guidelines on Antitrust Fines

Posted by D. Daniel Sokol

Wouter Wils has a new article in the World Competition: Law and Economics Review on antitrust fines titled The European Commission's 2006 Guidelines on Antitrust Fines: A Legal and Economic Analysis.

ABSTRACT: On 1 September 2006, the European Commission published new Guidelines on the method it will use when setting fines for undertakings that have infringed the competition rules laid down in Articles 81 and 82 of the EC Treaty. This paper discusses the questions what the purpose is of guidelines, and how foreseeable the amount of fines should be, and analyses the method set out in the new Guidelines in the light of the Commission's past practice, the case-law of the Community Courts and the theory on optimal fines.

Call for Papers: Latin American Competition Policy Conference in Sao Paolo

Posted by D. Daniel Sokol

CALL FOR PAPERS
  Latin American Competition Policy Conference
  Fundação Getulio Vargas
  São Paolo Brazil
  March 21, 2008

We invite the submission of theoretical, empirical, and policy-oriented papers from academics in law and economics on topics related to one of the two conference themes: (i) cartels, and (ii) competition advocacy in Latin America. The primary focus of the conference is on academic research that is country specific or region-wide. Additionally, we intend to organize a reaction session of competition agency officials on these issues.

Authors of accepted papers will receive reimbursement for travel related expenses (hotel, airfare, incidentals). Proceedings of the conference will be published in a book with a major academic publisher. To be eligible for submission, a paper cannot be previously published or accepted for publication. Papers may be submitted in any of the three conference languages: English, Portuguese or Spanish. Final publication of papers will be in English.

The initial deadline for abstracts and papers is September 5, 2007. At this initial date, authors may submit either an abstract or a paper and an abstract. Abstracts should be no more than 1,500 words. An author may submit more than one paper. However, any one person may present only one paper. All submissions will be refereed. Authors of accepted abstracts must submit a paper by February 1, 2008.

We expect to notify authors about acceptances by October 15, 2007.   

The number of accepted papers and the panel subjects will depend on the number, quality, and subject areas of the submitted papers.

Paper and abstract submissions should be sent to UMCLawAntitrust@missouri.edu.  The conference website is available at http://law.missouri.edu/latin-am-antitrust/.

Cartel Overcharges: An Empirical Analysis

Posted by D. Daniel Sokol

A sometime collaborator and former student of John Connor, Yuliya Bolotova of the University of Idaho Agricultural Economics and Rural Sociology Department, has posted Cartel Overcharges: An Empirical Analysis, which builds upon Connor's vast and impressive work on cartels.  A key finding is that the more effective antitrust regimes tend to have lower overcharges from cartels.

ABSTRACT: Using the overcharge estimates for 406 cartel episodes, I evaluate the impact of cartel characteristics and market environment on the size of the overcharges imposed by cartels in different geographic markets and during six antitrust law regimes starting from the 18th century. I find that the average overcharge imposed by cartels in the sample is 21.88 percent with a median of 20 percent. International cartels imposed higher overcharges than domestic cartels. Overcharges imposed in the US and European markets were lower than overcharges imposed in the Asian markets and the rest of the world. Overcharges tend to decline as antitrust enforcement regimes had become stricter. As predicted by cartel theory, market structure is an important factor influencing the overcharge level. Markets where cartels have a high market share tend to have higher overcharges. If a leading firm has a high market share, the overcharges tend to decrease. As the number of cartel participants increases, the overcharges tend to fall. As cartels grow older, they manage to manipulate the market price more effectively.

Economics of Antitrust: Complex Issues In a Dynamic Economy

Posted by D. Daniel Sokol

The antitrust economics team at NERA has just released a new edited book on various antitrust economics issues entitled Economics of Antitrust: Complex Issues In a Dynamic Economy.  The sixteen chapters cover a wide variety of topics including bundled discounts, refusals to deal, price squeezes, patent settlement agreements, early termination fees, auction theory, non-price competition, ownership and control, the design of surveys for relevant market definition, after-markets, multiple dimensions of market power, misidentified costs, cartels, not for profit firms, overcharges, and proving causation in damages.

Sullivan and Grimes Win Award for Best Antitrust Scholarship

Posted by D. Daniel Sokol

The American Antitrust Institute has announced that Southwestern Law School professors Lawrence A. Sullivan and Warren S. Grimes have won the 2007 Jerry S. Cohen Award for Antitrust Scholarship for their treatise Antitrust Law: An Integrated Handbook (2d edition, 2006).   Runners up were Robert Lande and John Conner for their article How High Do Cartels Raise Prices: Implications for Optimal Cartel Fines, Tulane L. Rev. (2006) and C. Scott Hemphill for Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 N.Y.U.L. Rev. 1553 (2006).

Recent Evolutions in Antitrust Enforcement: A Comparative Perspective

Posted by D. Daniel Sokol

With the ICN annual meeting this week, I have been thinking quite a bit about comparative antitrust.  Alberto Heimler of the Italian Competition Authority has a well thought out analysis of various trends in EU enforcement (and he should given his active involvement in European, OECD and ICN efforts) in a new article entitled Recent Evolutions in Antitrust Enforcement: A Comparative Perspective.

ABSTRACT: There are many philosophies of antitrust enforcement in the world, but in recent years we are witnessing greater and greater convergence. At the first ICN conference in Naples in 2002, Giuseppe Tesauro, then Chairman of the Italian Competition Authority, discussing the then ongoing debate on the test to apply in merger control, whether dominance or substantial lessening of competition, said “the Atlantic Ocean is not a one way street.” What he meant was that the Sherman Act of 1890, the EC merger regulation of 1989, the Italian law of 1990, and the Romanian law of 1997, all have something to say to the world and a message to deliver.

There have been important developments in European antitrust enforcement since the 1960s. The original philosophy of EC antitrust originates from the ordoliberal German tradition which already in the 1920s had distinguished “impediment competition” (to be prohibited), such as predatory pricing, loyalty rebates and boycotts, from “performance competition” which included all conduct that made a firm’s product more attractive to consumers (to be favored). The ordoliberal tradition was mostly based on form. Indeed for many years antitrust enforcement in the EC meant applying article 81, paragraph 3, on notified agreements and on developing form-based block exemption regulations. The introduction of the merger regulation in 1989, and the emphasis on economic analysis that it brought with it, started to move the Commission away from form-based to effects-based enforcement. The communication on the relevant market was issued in 1997; the new block exemption on vertical restraints in 1999. Economic analysis is now playing an increasing role in interpreting the substantive antitrust provisions.

The Empirics of Antitrust in Two-Sided Markets

Posted by D. Daniel Sokol

Marc Rysman of Boston University - Department of Economics has a new article that appears in Competition Policy International on two sided markets, an issue that has received an increasing amunt of attention, such as with payments systems (which I am teaching for the first time this coming spring) or computer software.  His article is entitled The Empirics of Antitrust in Two-Sided Markets.

ABSTRACT: Recent theoretical research on the implications of two-sided markets is gaining recognition for its implications inantitrust. However, the role of empirical analysis in antitrust cases for two-sided markets has been unexplored thus far. Empirical tools of economics are playing an increasingly large role in antitrust litigation. At the same time, there have been several recent attempts to bring empirical analysis to two-sided markets. To the extent that this empirical work on two-sided markets bares similarities to common empirical tools of antitrust, it can provide a template for how the empirics of antitrust cases will proceed in two-sided markets.

This paper studies several issues in which empirical contributions can impact antitrust in the context of two-sided markets. For each issue, I discuss recent empirical research that exemplifies my point. The first issue I discuss is the implementation of market simulations. Market simulations have an important role in determining relevant markets and the price effects of horizontal coordination.