Antitrust & Competition Policy Blog

Harvard, Not Chicago: Which Antitrust School Drives Recent Supreme Court Decisions?

Posted by D. Daniel Sokol

Einer Elhauge of Harvard Law School provacatively asks (and answers) Harvard, Not Chicago: Which Antitrust School Drives Recent Supreme Court Decisions?

ABSTRACT: The U.S. Supreme Court has now decided 14 antitrust cases in a row in favor of the defendant. But this does not indicate an embrace of the conservative Chicago School over the moderate Harvard School. To the contrary, on every issue the Court has addressed where those two schools are in conflict, the Supreme Court has sided with the Harvard School. It has also sided with sound antitrust economics rather than with formalisms favoring plaintiffs or defendants.

Competition Policy Economics Professor Needed

Posted by D. Daniel Sokol

The Faculty of Business Economics, University of Addis Ababa urgently needs a well qualified expert to teach its competition policy economics module. The module has to be delivered and completed by mid-November, class size of about 25.  The class will inclide primarily government officials (among others).  The estimated time would be 20 hours per week for four weeks (including office hours to meet/guide students), plus time to mark exams.  Payment is up to $1,300 per day depending on the qualifications of the expert, plus return business class airfare, hotel accommodation and per diems to cover meals and incidentals. Interested individuals should contact, as soon as possible:

Ato Milikias T. Giorgis - Project Coordinator for the PSD CB credit, (E-mail: milktg@ethionet.et; cell phone 251-911-124605), and Ato Tsegabirhan  Wolde Giorgis, Head of Dept of Economics of AAU (E-mail: ch_econ@econ.aau.edu.et; cell phone 251-911-249071)

The Next Step in Chinese Competition Law - A Lesson from the EU?

Posted by D. Daniel Sokol

With the Chinese Anti-Monopoly Law slated for intrduction in 2008, today's BNA Antitrust and Trade Regulation Daily (subscription required) reports that Neelie Kroes is off to China for meetings to discuss competition policy between September 3-5.  As BNA reports, the meetings "...will include discussions of the Chinese and European economies as well as 'the role of competition policy in enhancing their competitiveness.'"  It further states that meetings will take place with both state actors (the Chinese Ministry of Commerce and the State Administration of Industry and Commerce) and non-state actors (Chinese academics and members of the business community).

Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers

Posted by D. Daniel Sokol

I have found yet another interesting antitrust payment systems article.  This one is by Mats Bergman of Södertörn University College in Sweden and the Swedish Competition Authority and is titled Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers.

ABSTRACT: Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter's case of non-strategic and heterogenous merchants. A partial ranking of market structures according to their welfare effects is provided. Some support is found for the policy adopted by the EU Commission in the competition law case concerning Visa's interchange fees.

Network Effects and Two-Sided Markets

Posted by D. Daniel Sokol

As I think about how I am going to teach payment systems in the spring, I am particularly interested in how to think about the antitrust implications of two sided markets.  Adding to the literature is Cento Veljanovski of Case Associates.  Veljanovski prepared his paper Network Effects and Two-Sided Markets as part of his teaching in the Kings College, University of London Postgraduate Diploma/Masters in Economics in Competition Law.

ABSTRACT: This paper sets out the basic economics of network effects and two-sided or multi-sided markets as relevant to antitrust and regulation. Network effects, and the related concept of two- (or multi-) sided markets, are playing an increasing role in antitrust/competition law in the communications sector, computer hardware and software, Computer Ticketing Services (CRS), Automated Teller Machines (ATMs) and credit card schemes sectors to name a few; and also in the evaluation of mergers, industry standards, market structure and competitive behaviour. The discussion begins by defining network effects and the way they alter the economics of market structure, competitive behaviour and pricing. The theory is then applied to concerns over the adoption of industry and product standards, mergers in the communications sector, and the pricing of mobile services. This is followed by an introduction to the theory of two-sided markets. This covers situations where network effects affect consumers in different groups or sides of the market brought together by a third party, such as credit card schemes. The theory of two-sided markets is developed and then applied to some features of credit card schemes. This paper is a module for the Kings College, University of London Postgraduate Diploma/Masters in Economics in Competition Law, 2006/2007.

Reference Points and Self-Enforcing Collusion in Oligopoly

Posted by D. Daniel Sokol

Keeping on the theme of collusion from previous posts, an interesting new working paper Reference Points and Self-Enforcing Collusion in Oligopoly is available from Felix Monuz-Garcia of the University of Pittsburgh Department of Economics.

ABSTRACT: This paper examines incentives for total and partial collusion in one-shot oligopoly games. Specifically, firm managers are considered to assign a positive importance to the difference between other firms' actual production choices and a particular reference level of output that, in any collusive agreement, would have restricted the market's total product. These considerations might be important, for instance, when the firm manager operates under weak pressures for short-run profits from the shareholders, whereas when this pressure is relatively high the above considerations are negligible. First, I show that by considering the importance that firm managers assign to this difference - reflecting the firm manager's preference for collusive partners - higher levels of collusion can be supported than in standard oligopoly games. In addition, if firm mangers' preference for collusive partners is high enough, the collusive agreement (e.g. cartel) becomes self-enforced in the Nash equilibrium of the static game. Furthermore, for moderate firms' preferences, this paper shows that the fully cooperative agreement can be sustained as the Nash equilibrium of the infinitely repeated game for less restrictive discount factors than in standard game-theoretic models of oligopoly.

If a Tree Falls and People Hear It, Does This Mean That There is an Antitrust Conspiracy?

Posted by D. Daniel Sokol

A new working paper by Jean-Daniel M. Saphores, Jeffrey R. Vincent, Valy Marochko, Ioan Vasile Abrudan, Laura Bouriaud, and Clifford Zinnes explores collusion in timber auctions.  The World Bank Policy Research Working Paper is titled Detecting Collusion in Timber Auctions: An Application to Romania.

ABSTRACT:  Romania was one of the first transition countries in Europe to introduce auctions for allocating standing timber (stumpage) in public forests. In comparison with the former system in the country - administrative allocation at set prices - timber auctions offer several potential advantages: greater revenue generation for the government, a higher probability that tracts will be allocated to the firms that value them most highly, and stronger incentives for technological change within industry and efficiency gains in the public sector. Competition is the key to realizing these advantages. Unfortunately, collusion among bidders often limits competition in timber auctions, including in well-established market economies such as the United States. The result is that tracts sell below their fair market value, which undermines the advantages of auctions. This paper examines the Romanian auction system, with a focus on the use of econometric methods to detect collusion. It begins by describing the historical development of the system and the principal steps in the auction process. It then discusses the qualitative impacts of various economic and institutional factors, including collusion, on winning bids in different regions of the country. This discussion draws on information from a combination of sources, including unstructured interviews conducted with government officials and company representatives during 2003. Next, the paper summarizes key findings from the broader research literature on auctions, with an emphasis on empirical studies that have developed econometric methods for detecting collusion. It then presents an application of such methods to timber auction data from two forest directorates in Romania, Neamt and Suceava. This application confirms that data from Romanian timber auctions can be used to determine the likelihood of collusion, and it suggests that collusion reduced winning bids in Suceava in 2002 and perhaps also in Neamt. The paper concludes with a discussion of actions that the government can take to reduce the incidence of collusion and minimize its impact on auction outcomes.

There is No Antitrust Conspiracy to Blame For Your High Gas Prices

Posted by D. Daniel Sokol

Yesterday the FTC and DOJ released the their Report On Spring/Summer 2006 Nationwide Gasoline Price Increases.  In what is perhaps a shock to nobody (except those in Congress), it turns out that prices are a function of supply and demand.  In particular the report lists six factors for the price increases:

(1) seasonal effects of the summer driving season; (2) increases in the price of crude oil; (3) increases in the price of ethanol; (4) capacity reductions stemming from refiners’ transition from the fuel additive methyl tertiary-butyl ether to ethanol; (5) refinery outages resulting from hurricane damage, other unexpected problems or external events, and required maintenance; and (6) increased consumer demand for gasoline beyond the seasonal effects of the summer driving season.  

European Commission Decisions on Competition: Landmark Antitrust and Merger Cases from an Economic Point of View

Posted by D. Daniel Sokol

A new book on EC Competition Law, European Commission Decisions on Competition: Landmark Antitrust and Merger Cases from an Economic Point of View, provides a comprehensive description and analysis of Commission decisions adopted pursuant to Articles 81, 82 and 86 EC Treaty, as well as landmark European merger cases.  Its authors are Maarten Pieter Schinkel (Amsterdam Center for Law and Economics), Martin Carree (Universiteit Maastricht), Francesco Russo (Amsterdam Center for Law and Economics), and Andrea Günster (Amsterdam Center for Law and Economics).

ABSTRACT: This book provides a comprehensive economic classification and analysis of all European Commission decisions adopted pursuant to Articles 81, 82 and 86 EC Treaty, as well as landmark European merger cases. The decisions are organized according to the principal economic theory applied in the case. For each theory, the first decision in which that theory was relied upon by the Commission - provided, if appealed, it was upheld by the European Courts - is described according to a fixed template that is applied throughout the book. All related decisions, in which the same economic issue was central, are listed chronologically. The book is offered as a compendium to the leading IO textbooks and practitioner guides, to which detailed references are made. All cases are structured to be easily accessible for scholars of IO and the economics of competition policy, as well as practicing competition lawyers and officials. Of each landmark decision discussed in the book, a PDF file of the full text of the publication as it appeared in the Official Journal of the European Communities is included on a complementary CD-ROM. This book provides a unique analysis of the Commission's application and understanding of results from antitrust economics that have influenced European competition law enforcement. The introduction to the book, together with the breadth of the materials selected, present a complete historical overview of European competition policy.

August 24 Draft of Chinese Anti-Monopoly Law

Posted by D. Daniel Sokol

Over at our sister blog within the Law Blog network, China Law Prof Blog, there is a posting of the August 24 Draft of Chinese Anti-Monopoly Law.  You can download the Chinese and English law below.

Download 070824_draft_aml_third_draft.pdf