Antitrust & Competition Policy Blog

Antitrust: Commission consults on review of rules for assessing horizontal cooperation agreements

Posted by D. Daniel Sokol

In a press release, the Commission announced, "The European Commission has launched a public consultation on the functioning of the current regime for the assessment of horizontal cooperation agreements under EU antitrust rules, in particular the Specialisation and Research & Development Block Exemption Regulations and the Horizontal Guidelines. The purpose of the review is to evaluate how these rules have worked in practice. The Commission welcomes comments up to 30th January 2009."

We Almost Had the Biggest DOJ Antitrust Litigation of the Bush Administration

Posted by D. Daniel Sokol

The American Lawyer has a great interview with Sandy Litvak, who discussed just how close (3 hours) DOJ Antitrust came to taking Google to trial.

HT: The Tech Chronicles

Economic Aspects of the Microsoft Case: Networks, Interoperability and Competition

Posted by D. Daniel Sokol

Maria J. Gil-Moltó of University of Leicester Department of Economics discusses Economic Aspects of the Microsoft Case: Networks, Interoperability and Competition.

ABSTRACT: In this paper, we discuss the main economic aspects of the European Microsoft case; in particular, Microsoft’s refusal to supply the necessary information to make the competitors’ work group server systems interoperable with Windows Operating System. The case can be seen as an example of competition between networks. We review the relevant economics literature with the objective of understanding the motivations behind Microsoft’s strategies.

Uncertainty Quality, Product Variety and Price Competition

Posted by D. Daniel Sokol

Jean J. Gabszewicz (Université catholique de Louvain - Economics) and Joana Resende (Université catholique de Louvain - Economics) have a new paper out on Uncertainty Quality, Product Variety and Price Competition.

ABSTRACT: This paper analyses price competition under product differentiation when goods are defined in a two dimensional characteristic space, and consumers do not know which firm sells which quality. Equilibrium prices consist of two additive terms, which balance consumers' relative valuation of goods' expected quality and consumers' preferences for variety. However the relative importance of these terms differ under vertical and horizontal dominance.

Semi-Collusive Advertising and Pricing in Experimental Duopolies

Posted by D. Daniel Sokol

Andreas Nicklisch, Max Planck Institute of Research on Collective Goods has a new piece on Semi-Collusive Advertising and Pricing in Experimental Duopolies.

ABSTRACT: This article tests experimentally whether a high degree of collusion on advertisement expenditures facilitate tacit price collusion in duopoly markets. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results show that the competitiveness of advertising and prices are significantly higher when the advertising spillover is higher than the price spillover than when advertising spillover is lower than the price spillover. In the second environment, a higher degree of advertising collusion leads for experienced players to a higher degree of price collusion. In the first environment, players behave at most semi-collusively, that is, if at all, they collude on advertising, but compete over prices.

General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America

Posted by D. Daniel Sokol

General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America by Mariam Dayoub, World Bank and Esperanza Lasagabaster, World Bank provides some interesting insights into the world of pension reform and competition policy.

ABSTRACT: Following Chile's pension reform in 1981, a wave of multi-pillar pension reforms took place in Latin America (LAC). Their implementation has revealed new policy challenges. To shed light on these issues, this paper reviews the structure and performance of mandatory DC pillars in LAC. The review highlights three important points. First, it suggests overall positive outcomes from reforms in the LAC countries that implemented multi-pillar pension systems. There is, however, scope for increasing efficiency. Second, management fees have declined but remain relatively high whereas decreases in operational costs have only been partially passed through to consumers reflecting inadequate competition. Limits on transfers and related measures have been ineffective in curtailing management fees but created new barriers to entry. In recent years, a few countries in LAC introduced or are in the process of introducing a combination of new measures that focus more directly on the two root causes of inadequate competition - the inelasticity of demand to fees and selective elimination of barriers to entry by facilitating unbundling of services. These new measures show some promise. Third, the paper's review indicates that a greater diversification of pension fund portfolios in LAC appears to be necessary. Portfolio concentration owes to the adoption of strict quantitative investment regulations, underdeveloped capital markets and volatile macroeconomic environments. A gradual relaxation of these restrictions is now in progress in several countries. Regulators have become more conscious of the costs imposed by such regulations and macroeconomic conditions have improved. Greater overseas diversification seems inevitable given the development stage of local capital markets.

Breaking News: Italianer to Replace Lowe at DG Comp

Posted by D. Daniel Sokol

The Global Competition Review has just broken the story that "Alexander Italianer, the deputy secretary general of the European Commission, will replace Philip Lowe as the director general of DG Comp by the end of the current commission's mandate - signalling what could be the end of Neelie Kroes' term as commissioner of competition."

The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction

Posted by D. Daniel Sokol

Steven Tenn of the FTC's Bureau of Economics has written a merger retrospective working paper on The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction.

ABSTRACT: We conduct a retrospective study of the Sutter-Summit hospital merger to assess whether antitrust enforcement in this matter was appropriate. This consummated merger combined two hospitals located close together in the Oakland-Berkeley region of the San Francisco Bay Area. The greater metropolitan area contained many other hospitals that offered a similar range of services, but which were located farther away. A central issue raised by the Sutter-Summit transaction was whether travel costs were low enough such that these hospitals were a sufficient constraint on the merging parties to prevent an anticompetitive price increase. We use detailed claims data from three large health insurers to compare the post-merger price change for the merging parties to the price change for a set of control group hospitals. Our results show that Summit’s price increase was among the largest of any comparable hospital in California, indicating this transaction may have been anticompetitive.

Guidance on the Commission's Enforcement Priorities in Applying Article 82 EC Treaty

Posted by D. Daniel Sokol

In an important development, "The Commission has published on 3 December 2008 guidance on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings. The Commission also issued a press release  and a question and answers memo."

The Effects of Competition on Investment - Towards a Taxonomy

Posted by D. Daniel Sokol

Armin Schmutzler, University of Zurich - Socioeconomic Institute (SOI) writes on The Effects of Competition on Investment - Towards a Taxonomy.

ABSTRACT: Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow concepts of increasing competition. The paper also shows that competition is more likely to increase the investments of leaders than those of laggards. When R&D-spillovers are strong, competition is less likely to increase investments. The paper also identifies conditions under which low initial levels of competition make a positive effects of competition on investment more likely.