The Antitrust Hotch Potch

Blogging Break

I am off for vacations. Leaving for a country which does not have a competition law, and where the economy is certainly subject to accross the board price controls...

Back on 7 September.

Nicolas

Conference Announcement - European State Aid Control and Competition Policy

Interesting forthcoming conference, in Berlin, dedicated to State aid law. Hereafter, the conference programme. For more info, see here.

"European State Aid Control and Competition Policy is a high-profile event, taking place for the first time this October in Berlin. It consists of a workshop on the Law and Economics of R&D&I State Aid and a two-days conference on the Law and Economics of European State Aid Control. The conference stands in the tradition of the well-established EstALi Experts' Forum, which takes place in Brussels during spring time and which is the leading annual conference in the field of European State Aid Law.

This event consists of the following modules:

8 Oct 2007 The Law and Economics of R&D&I State Aid – Workshop

One-day practice oriented high-level programme discussing the legal and economic concepts behind the new R&D&I Guidelines.  Maximum number of participants limited to 30. Joint event organized by The European State Aid Law Institute (EStALI)/ European School of Management and Technology (ESMT).

9 Oct 2007 The Law and Economics of European State Aid Control – Conference

High-level conference discussing recent trends in the field of State aid control.  Key contributors include: Judge Arjen W. H. Meij, Luxembourg; Damien Neven, CE DG COMP  and L.-H. Röller, President ESMT and former CE DG COMP.  Joint event organized by EStALI/ESMT."

On the Efficiency of AC/DC: Bon Scott versus Brian Johnson

I had a blast when discovering the following paper by R. Oxoby (an Economics Professor at the university of Calgary): "On the Efficiency of AC/DC: Bon Scott versus Brian Johnson"

I cannot resist to reproducing in full its introduction:

The band AC/DC is considered one of the seminal hard rock bands, often compared to Led Zeppelin and Black Sabbath in influencing many subsequent hard rock and heavy metal bands. The band was formed in 1973 by Angus and Malcolm Young who took the band’s moniker from the back of their sister’s sewing machine. In its 35 year history, the band has sold more than 150 million albums, including 42 million copies of the 1980 album Back in Black, making Back in Black the highest selling album by any rock band. In 2003 the band was inducted into the Rock and Roll Hall of Fame. Given all this, it is no wonder that AC/DC has such a rabid fan base and, as discussed below, faces an epic debate regarding its line-up. Among musicologists, researchers of popular culture, and rock and roll lovers of all ages there exists a common debate. That is, with respect to the rock band AC/DC, who is the better vocalist: Bon Scott or Brian Johnson? The band’s original vocalist, Scott, performed on seven of the band’s albums (excluding live albums and compilations), passing away in 1980. Brian Johnson joined the band in 1980, serving as vocalist on nine albums (excluding live albums and compilations). Since 1980, there has been near constant contention regarding who was the better singer. In this paper, we explore this issue. Since it is difficult to ascertain which vocalist was better given the heterogeneity of musical tastes, our analysis does not focus on the aural or sonic quality of the vocalists’ performances. Rather, using tools from the field of experimental economics, and we consider which vocalist results in individuals arriving at more efficient outcomes in a simple bargaining game. Our results suggest that having participants listen to songs by AC/DC in which Brian Johnson served as vocalist results in participants realizing more efficient outcomes. Thus, in terms of a singer’s ability to implement efficient behavioral outcomes among listeners, our results suggest that Brian Johnson was a better vocalist than Bon Scott.

The paper has sparked debate lately, with S. Levitt (the well-known Freakonomics author) popularizing it, but also criticizing Oxoby's findings in a LA Times Op-Ed. What S. Levitt ignored is that the paper was an entire joke.

Bottom-line: confronted with what appears to be sophisticated analysis, even the most distinguished economists do not manage to draw the line between a completely fictitious study and a real expert paper. To lawyers, judges, and civil servants: beware economic analysis.

Personal note: indeed, I am a long-time AC/DC fan...

Arbitration and Antitrust - Book available for Download

Very useful document, entirely free of charge, available for download here:

"Arbitrating Antitrust and Merger Control Issues", by Dr. M. Blessing, from the Swiss law firm Bar&Baker.

Frankly, I have not had time to read the whole document (216 p.), but - with the hindsight of personal experience - the table of contents is quite appealing.

Nicolas

Regionalizing Competition Policy?

A wind of separatism blows on Belgium lately. The big issue: regionalizing many matters that are currently dealt with at the federal level. Belgium is indeed a "federal" state, composed basically of three communities/regions, i.e. Flanders (Dutch speaking), Wallonia (French speaking) and Brussels (officially bilingual but in fact mostly French speaking).

In the dawn of a rather populist campaign, the future dutch speaking prime minister, Y. Leterme, must now honour his commitment to regionalize many federal matters. The funny thing is that Leterme and his fellows, blinded by their regionalization mantra, had apparently planned on regionalizing something that is - no offense to the newly appointed officials and their promising plans for improvements - almost inexistent in Belgium: competition policy.

Check here at p.4.

Commission to appeal CFI Ruling in Schneider v. Commission

The Commission announced yesterday that it will appeal the CFI's judgment in Schneider v. Commission, which found it liable for damages pursuant to Article 288 EC . Note that, while awaiting the ECJ ruling, the CFI will have adopted its judgment in MyTravel vs. Commission, thereby setting the ground for an interesting legal debate.

The Real Added Value of the Future EC Treaty in the field of Competition Law

As far as the main competition provisions (i.e. Article 81 and 82) are concerned, the draft new Treaty adopted in June 2007 by the IGC provides only for cosmetic modifications, one of which is..... to replace the terms "common market" by "internal market"! Currently Article 81 and 82 are redacted as follows:

The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market...

Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market

Since the European Single Act of 1986, the notion of "common market" has been replaced by the concept of "internal market". The proposed future Treaty will eliminate from European phraseology the concept of common market, thereby correcting an enduring lexical anomaly.

M. Dony, from the University of Brussels, makes it very clear in that document (see words and sentences in red).

In fact, as said in previous posts, the real hot issue with the new Treaty relates to the deletion of the EC commitment to free and undistorted competition, currently set out at Article 3g. Read, on this issue, the diverging opinions of A. Riley ("Dropping Out of Competition" , WSJe, 02/08/2007) and M. Petite ("EU Commitment to competition policy is unchanged", FTE, 27/06/2007).

Nicolas

Scholarship - Sidak's Reply to Lemley and Shapiro

Greg Sidak, from Georgetown University Law Center has posted on ssrn a paper which disputes the policy orientations advocated by Lemley and Shapiro regarding patent holdups and injuctive relief:

Holdup, Royalty Stacking, and the Presumption of Injunctive Relief for Patent Infringement: A Reply to Lemley and Shapiro

Professors Mark Lemley and Carl Shapiro have presented a theoretical argument for weakening the presumption of injunctive relief in patent infringement cases. In this article, I evaluate the Lemley-Shapiro theoretical model of “patent holdup.” I dispute its main finding that the threat of an injunction inflates royalty payments in many cases relative to a hypothetical benchmark royalty rate. I also dispute the Lemley-Shapiro policy prescriptions for patent law reform, which would remove the presumption of injunctive relief in cases where the patented product is a component of a larger product or the patentee is a non-practicing entity. I conclude that the Lemley-Shapiro theoretical model is not correctly specified, and, even if it were, the hypothetical benchmark royalty rate against which the voluntarily negotiated royalty rate is compared is downwardly biased. I also find that their own model does not support their policy prescriptions. A high priority for any revision of  patent policy should be to create a more efficient market for the rights to inventions. Much of the debate over patent holdup and royalty stacking would subside if an “information market” were created to objectively value a disputed patent for purposes of calculating damages or reasonable royalties.

Funny stuff

Found on That's News to Me:

Imagine if the real world was like Antitrust law:

You there, what are you doing with those kids of yours? You impart your life's wisdom on them while living together? Sounds like a cartel! Shame! You work while they go to school? Why, that's market allocation! Double shame! You don't let them see R-rated movies? You're a bunch of group boycotters too! Let me guess, let me guess: You married their mother (tying), had children (facilitating practices), and then her refusal to have sex with you (denial of essential facility) caused you to divorce her (refusal to deal)? I've heard enough.

Anticompetitive Barriers to Trade - A Quantitative Example

In early 2005 the EU was compelled to  eliminate trade barriers to textiles imports from China (and other countries). The measure triggered considerable political resistance in France, and a number of politicians threatened to reestablish quotas on Chinese textiles. According to the French government, the competitive pressure exerted by cheap Chinese textiles would have forced domestic industries to cut approximately 7000 jobs.

David Spector, a distinguished economist active in the antitrust field, made a small calculation which illustrates the total welfare gains stemming from trade liberalization.

Assuming that imports competition would have led to a price depression of 5% (a low estimate) on the market for textiles, the increase in purchasing power for the French consumer would have been equal to 1.5 billion € a year. And assuming that the Government would have had to pay the wages of the 7000 unemployed persons until pension, it would have incurred a budgetary cost of (only) 200 million € a year. Under a total welfare benchmark, the elimination of quotas was therefore the efficient public policy choice.

Economists would probably find qualifications or even flaws into the reasoning. But I can only concurr with the authors of this nice paper on "Competition and Employment", that government policies of this kind can be anticompetitive, and detrimental to social welfare.