Antitrust & Competition Policy Blog

Competition Law and Europe's Open Borders: The Case of Motor Vehicle Distribution in Switzerland

Posted by D. Daniel Sokol

Simon Evenett, University of St. Gallen - Economics Department and Michael Meier, University of St. Gallen - Economics Department provide a study of Competition Law and Europe's Open Borders: The Case of Motor Vehicle Distribution in Switzerland.

ABSTRACT: This paper contains an independent empirical analysis of the effect of a Notice, issued by the Swiss Competition Commission in 2002 concerning vertical agreements between manufacturers and distributors of motor vehicles, on the degree to which the subsequent prices of cars in Switzerland exceeded those charged on the same models in neighbouring countries. Evidence presented here implies a non-transitory reduction in the degree of price discrimination against Swiss customers of medium- and large-sized cars in the years after the Notice came into effect. The total gain to Swiss buyers of cars is very conservatively estimated to be six times the total cumulative budget of the Swiss Competition Commission during the years 2003-2006; the best estimate of those gains exceed a quarter of a billion Swiss Francs during the same period. By 2006 the cumulative price reduction of the Swiss Competition Commission's action resulted in average savings per medium- and large-sized car that are estimated to be 929 and 2113 Swiss Francs, respectively. Moreover, the recurring annual gain to Swiss consumers of this measure by the Swiss Competition Commission is conservatively estimated to exceed ten times the latter's current annual budget, providing some indication of the "value for money" that effective competition law can have, even in economies with ostensibly open borders.

First Annual FTC Microeconomics Conference

Posted by D. Daniel Sokol

The FTC will hold its First Annual Microeconomics Conference on November 6-7, 2008.

The press release states:

The Federal Trade Commission's Bureau of Economics will host a two day conference to bring together scholars working in industrial organization, information economics, game theory, quantitative marketing, consumer behavior, and other areas related to the FTC’s antitrust and consumer policy missions. Examples of potentially relevant topics include online advertising, information disclosure, horizontal and vertical mergers, bundling, loyalty and other discounts, dynamic oligopoly, intellectual property, and behavioral and experimental economics.      

The scientific committee for the  conference is:      

• Susan Athey (Harvard)
• Patrick Bajari (Minnesota)
• John List (Chicago)
• Carl Shapiro (Berkeley)
• Scott Stern (Northwestern-Kellogg)      

The conference will be held at the Federal Trade Commission New Jersey Avenue Conference Center, 601 New Jersey Avenue NW, Washington, DC 20001.      

PRE-REGISTRATION

Pre-registration  for this conference is not necessary, but is encouraged so that we may better  plan for the event.
          To pre-register, please email your  name and affiliation to BE-IOC@ftc.gov. 

      

NOTE: When you pre-register, we will collect your name, affiliation, and your email address. This information will be used to estimate how many people will attend. We may use your email address to contact you with information about the conference.

        Additional information  will be posted as it becomes available.    

SPEAKERS SLATED TO APPEAR, AS OF 9/30/2008

• Alan Sorensen “The Welfare Effects of Ticket   Resale”
• Andrew Sweeting “Equilibrium Price Dynamics in Perishable Goods Markets:  The Case of Secondary Markets for Major League Baseball Tickets”
• Steve Puller “Testing Theories of Price Dispersion and   Scarcity Pricing in the Airline Industry”
• Stephen Meier “Charging Myopically Ahead: Evidence on   Present-Biased Preferences and Credit Card   Borrowing”
• James Hilger “Expert Opinion and the Demand for   Experience Goods: An Experimental Approach in the   Retail”
• Cary Deck “Price   Discrimination with Sequential Purchasing: Theory and   Experiments”
• Dean Karlan “Put Your Money Where Your Butt Is:  A   Commitment Savings Account for Smoking Cessation”
• Mike Waldman “Why Tie a Product Consumers Do Not Use?    Explanations – efficiency, price discrimination, and   exclusion”
• Claudio Lucarelli “Sleeping with the Enemy: Inter-firm   Product Combinations”
• Christian Rojas “The Role of Information and Monitoring   on Collusion”
• Matt Weinberg “An Evaluation of Merger   Simulations”
• Jeremy Fox “Improving the Numerical Performance of BLP Static and Dynamic Discrete Choice Random Coefficients Demand Estimation”
• Katja Seim “Beyond Plain Vanilla: Modeling Joint Product   Assortment and Pricing Decisions”
• David Reiley “Retail Advertising Works!...on   Yahoo!”
• Anindya Ghose “Modeling and Estimating the Relationship   Between Organic and Paid Search Advertising”
• Gunter Hitsch “Tipping and Concentration in Markets with   Indirect Network Effects”

GAO Report on FTC Efforts in the Petroleum Industry

Posted by D. Daniel Sokol

Last week the GAO released a report on the FTC's activities in the petroleum industry.  The title of the report gives away the report's conclusions, Analysis of More Past Mergers Could Enhance Federal Trade Commission's Efforts to Maintain Competition in the Petroleum Industry.

Unilateral Effects Under the Guidelines: Models, Merits, and Merger Policy

Posted by D. Daniel Sokol

Malcolm Coate of the FTC's Bureau of Economics has an interesting new paper on Unilateral Effects Under the Guidelines: Models, Merits, and Merger Policy.  One conclusion is noteworthy, "Finally, the Bush administration had no statistically significant effect on FTC enforcement policy."

ABSTRACT: This paper models FTC unilateral effects merger policy using a broad sample of 153 investigations undertaken between 1993 and 2005. Standard unilateral effects analysis proposes a range of models for competitive effects. A review of the files suggests that half of the sample is evaluated with a dominant firm/monopoly model, while the bulk of the other cases use some form of generic spatial analysis. Bertrand and Cournot structures only appear potentially relevant in about a dozen cases each. Statistical modeling shows it is relatively easy to predict the outcomes of the investigations, using models based on either the full sample or a limited sample that excludes the two-to-one mergers. In addition to the standard structural variables (significant rivals, fringe competition, market leadership, and change in the Herfindahl), entry, performance evidence, and vertical variables significantly affect the probability of a merger challenge. Finally, the Bush administration had no statistically significant effect on FTC enforcement policy.

Jersey Competition Regulatory Authority Seeks an Economic Adviser

Posted by D. Daniel Sokol

From the press release:

The Jersey Competition Regulatory Authority (JCRA) is the competition law enforcement authority for Jersey, the largest of the Channel Islands in between Great Britain and France. We are also the regulator for Jersey’s telecommunication and postal industries. Across all areas of work, our primary mission is to promote consumer welfare in Jersey. The JCRA is a member of the International Competition Network and takes a leading role in the development of competition law and policy in small economies.

The JCRA currently is recruiting an in-house Economic Adviser with a view to commencing in April 2009. Reporting directly to the Executive Director, the Economic Adviser leads all aspects of the JCRA’s economic analyses in complex investigations and regulatory matters. The Economic Adviser also assists in providing guidance on competition policy, which includes both internal and external training opportunities and the development of published guidelines and best practices.

The position requires an economist with a strong academic record and a minimum of four years experience in competition law and/or economic regulation. Experience in the telecommunications and/or postal sectors would be useful. The JCRA can offer a unique professional opportunity to work at the cutting edge of competition and regulatory policy, while living on a beautiful island with one of Europe’s highest qualities of life.

More information about the JCRA and a full job description are available at www.jcra.je. The closing date for applications is 31 October 2008. Letters of application, indicating skills and suitability for the job, together with a curriculum vitae, should be addressed to: Paul O’Toole, Finance and Operations Manager, JCRA, 2nd Floor Salisbury House, 1-9 Union Street, St Helier, Jersey JE2 3RF, Channel Islands. Applications can also be sent by e-mail to p.otoole@jcra.je.

Having just returned from Rosh Hashana services (lots of repenting to do this year), I discovered that Jersey has an active synagogue.  Maybe I should convince my wife and daughters that we are in need of an academic Sabbatical.

Recent Developments in EU Anti-Cartel Enforcement

Posted by D. Daniel Sokol

When you want news about developments in government enforcement, sometimes you want to go to the source.   In our case that is  Kirtikumar Mehta (European Commission, DG Competition) who writes on Recent Developments in EU Anti-Cartel Enforcement.

ABSTRACT: Anti-cartel enforcement has been a major priority for some time for all competition agencies. Beyond intensifying investigative actions and prosecutions, however, the primary thrust of policy and indeed the chief yardstick for evaluation of enforcement is the degree to which ongoing cartel activities in the jurisdiction are severely deterred. Fines or other sanctions through which this deterrence may be expected to dissuade cartel conduct thus assume a central role in any policy considerations.

In the EU, fines on undertakings involved in cartel infringements are set according to the 2006 guidelines on fines which succeeded the 1998 guidelines. As recent decisions show, under the new guidelines fines may be hefty and are claimed to be substantially higher than would have been the case under the previous guidelines, particularly where cartel turnover is high, the cartel was durable, and an undertaking concerned (the term 'undertaking' referring to the corporate group in its entirety) is not only a large multiproduct entity but also a repeat offender.

Rosh Hashana and Antitrust

Posted by D. Daniel Sokol

As Walter Sobchak (John Goodman) says in the new classic The Big Lebowski, "Three thousand years of beautiful tradition, from Moses to Sandy Koufax."  Sandy Koufax (pictured left) did not play baseball for the Dodgers on Rosh Hashana or Yom Kippur.  Out of respect for this beautiful tradition, I will not post messages from sundown tonight till sundown on Wednesday night as I will be at services welcoming in the Jewish New Year.*  For all of our Jewish and non-Jewish readers, let me wish you a  new year filled with peace, prosperity and good health.  L'Shana Tova!

* For those of you unfamiliar with Judaism, Rosh Hashana is not like secular new year with champagne and confetti.  Rather, Wikipedia describes it as:

Rosh Hashanah is the first of the High Holidays or Yamim Noraim ("Days of Awe"), or Asseret Yemei Teshuva (The Ten Days of Repentance) which are days specifically set aside to focus on repentance that conclude with the holiday of Yom Kippur.

We Jews reflect on what we have done in the previous year and ask repentance for our sins. 

Against Antitrust Functionalism: Reconsidering China's Antimonopoly Law

Posted by D. Daniel Sokol

Salil Mehra, Temple University - James E. Beasley School of Law and Yanbei Meng, Renmin University of China have forthcoming Against Antitrust Functionalism: Reconsidering China's Antimonopoly Law.

ABSTRACT: China's new Antimonopoly Law (AML) has been predominantly greeted with doubt about its practical enforceability. In particular, numerous commentators have questioned how the AML can effect change in the government-backed anticompetitive restraints that it targets. However, these doubts are in part the product of a kind of "antitrust functionalism," in which it is assumed that antitrust goals are uniform across nations and that mechanisms for enforcement must also be universal. We argue that China's plan for dealing with so-called "administrative monopolies," especially local and regional trade barriers, may have surprise successes. In part, the AML provides the possibility of an internal free trade agreement - albeit one with exit options closed. By creating a regulatory space for discussion on internal barriers, the AML could help foster a cooperative solution to the "prisoner's dilemma" of beggar-thy-neighbor local and regional government action. The potential dynamic could resemble the self-enforcing nature of international trade liberalization. Additionally, the AML can help spark a "competition culture" that may lead to greater consideration of the anticompetitive effects of government action at all levels, including the central government. That is not to say that the AML will be perfect; however, it could well be a significant step in the right direction.

Waiting to Merge

Posted by D. Daniel Sokol

Eileen Fumagalli, IEFE, Bocconi University and Tore Nilssen, University of Oslo - Department of Economicshave a new paper titled Waiting to Merge.

ABSTRACT: We set up a sequential merger game to study a firm's incentives to pass up on an opportunity to merge with another firm. We find that such incentives may exist when there are efficiency gains from a merger, firms are of different sizes, there is an antitrust authority present to approve mergers, and there is a sufficient alignment of interests between the antitrust authority and the firms. We point out three distinct motives for not merging: the external-effect motive, the bargaining-power motive, and the pill-sweetening motive.

'Consumer Welfar' and Article 82 EC: Practice and Rhetoric

Posted by D. Daniel Sokol

Pinar Akman, ESRC Centre for Competition Policy and Norwich Law School, University of East Anglia has written on ‘Consumer Welfare’ and Article 82 EC: Practice and Rhetoric.

ABSTRACT: This paper questions whether the objective of Article 82EC is indeed enhancing ‘consumer welfare’ as suggested by the EC Commission when one examines the application of the provision thus far. It critically analyses the case law of the EC Commission and Courts to show that there is great dissonance between the practice and the policy declarations on the provision. When one considers the practice alongside the rhetoric, Article 82EC appears as a provision enforced without a clear standard of harm leading to doubts about the legitimacy of enforcement. The article suggests that without a properly defined standard applied in actual decisions by the EC Commission and upheld by the EC Courts, the modernisation of Article 82EC cannot succeed.