Antitrust & Competition Policy Blog

Through the Looking Glass: Ruminations on Improving the Current U.S. Merger Enforcement Guidelines

Posted by D. Daniel Sokol

Ilene Gotts (Wachtell) and Étienne Renaudeau (Darrois Villey Maillot Brochier) provide their thoughts on merger guidelines in Through the Looking Glass: Ruminations on Improving the Current U.S. Merger Enforcement Guidelines.

ABSTRACT: The time has arrived for the U.S. agencies to re-examine their merger enforcement guidelines to ensure that they are not misleading and remain the gold standard model for other jurisdictions. This article discusses numerous areas in which the current U.S. merger enforcement guidelines (MEGs) might be revised. In addition, the article considers the advantages and disadvantages of revising the MEGs, alternatives to issuing new MEGs, and some procedural considerations for developing new MEGs.

An Institutional Assessment of Antitrust Policy: The Latin American Experience

Posted by D. Daniel Sokol

Ignacio de Leon (Econlex) has published An Institutional Assessment of Antitrust Policy: The Latin American Experience.

BOOK ABSTRACT: Antitrust policy nominally plays an instrumental public interest role. The generally accepted notion is that it is a government instrument designed to intervene in relatively unregulated markets in order to preserve rivalry among independent buyers and sellers. Competition authorities are supposed to restrain business conduct that exercises monopoly power aimed at excluding competitors or exploiting consumers and clients. Thus it can be said – although few pro-market theorists make the insight explicit – that antitrust provisions reveal mistrust of the capacity of markets to promote social welfare. The inner logic, enforcement mechanisms, and practical outcomes of antitrust provisions are all intrinsically contradictory to the natural dynamic course of market functioning.

In Dr. De Leon’s challenging thesis, this mistrust of the market lies at the root of antitrust policy, giving rise always to a preference towards ‘predicting’ the result of impersonal market forces rather than interpreting the entrepreneurial behaviour which creates those forces. And it is in Latin America that he finds the powerful evidence he needs to support his case. From the formative years of Latin American economic institutions, during the Spanish Empire, economic regulations – far from being driven by the pursuit of promoting free trade and economic freedom – have been conceived, enacted and implemented in the context of deeply anti-market public policies, trade mercantilism and government dirigisme. The so-called “neoliberal” revolution of the 1990s triggered by the Washington Consensus did not really change the interventionist innuendo of these policies, but merely restated the social welfare goal to be achieved: the pursuit of economic efficiency. Dr. De Leon presents his case against the assumption that consumer welfare orientated policies such as antitrust do really promote entrepreneurship and market goals. Paradoxically, antitrust enforcement has undermined the transparency of market institutions, in the name of promoting market competition.

The author’s provocative analysis marshals several sets of facts in support of his thesis, including the actual functioning of antitrust policy as reflected in case law in various Latin American countries, the preference of merger control over other less intrusive forms of market surveillance, the constrained role of competition advocacy against government acts, and the ineffective institutional structure created to apply the policy. Among the many specific topics treated are the following:

• government immunity;
• strategic industries;
• state-owned enterprises;
• politically influential groups;
• measurement of market concentration;
• the burden of proof of social welfare benefits;
• the role of joint trade associations and professional guilds;
• institutional arrangements that favour collusion;
• selective distribution;
• sector regulation;
• erosion of property rights;
• marginal role of courts in the antitrust system;
• leniency programs; and
• privatized public utilities.

The growing significance of Latin America in the context of economic globalization endows this book with huge international interest. Written by a leading authority on the topic, this is the first book that presents a detailed description of Latin American antitrust law and policy as it has been developed through numerous judicial opinions. A wide variety of audiences around the world will find it of extraordinary value: competition law specialists, scholars and students of the subject, policymakers and politicians in Latin America, as well as all interested lawyers, jurists, and economists.

Remarks by Assistant Attorney General for Antitrust Christine Varney

Posted by D. Daniel

The US Chamber's Antitrust Council and the International Competition Policy Working Group is pleased to welcome 

 

Christine A. Varney
Assistant Attorney General for Antitrust, Department of Justice

Tuesday, May 12, 2009 1:45 pm - 3:00 pm (Eastern Time)

U.S. Chamber of Commerce
1615 H Street NW
Washington , DC 20062

Registration is available here.

 

Patent Pools and Cross-Licensing in the Shadow of Patent Litigation

Posted by D. Daniel Sokol

Jay Pil Choi (MSU - Economics) has a new paper on Patent Pools and Cross-Licensing in the Shadow of Patent Litigation.

ABSTRACT: This paper develops a framework to analyze the incentives to form a patent pool or engage in cross-licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable. It analyzes the private incentives to litigate and compares them with the social incentives. It shows that pooling arrangements can have the effect of sheltering invalid patents from challenges. This result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each otherfs patents if litigation costs are not too large.

A Hard Landing in the Soft Drink Market —MOFCOM’s Veto of the Coca-Cola & Huiyuan Deal

Posted by D. Daniel Sokol

Fei Deng (NERA), Adrian Emch (Sidley Austin) & Gregory Leonard (NERA) explain A Hard Landing in the Soft Drink Market —MOFCOM’s Veto of the Coca-Cola & Huiyuan Deal.

ABSTRACT: On March 18, 2009, China’s Ministry of Commerce (“MOFCOM”) issued its decision to block the proposed takeover by The Coca-Cola Company (“Coca-Cola”) of China Huiyuan Juice Group Limited (“Huiyuan”). This is the first time that MOFCOM has prohibited a transaction under the Anti-Monopoly Law (“AML”), in effect since August 1, 2008.

We will examine several interesting aspects of MOFCOM’s decision. In Section 2, we will discuss the insufficient degree of transparency which characterizes the Coca-Cola/Huiyuan and other cases. Section 3 will examine MOFCOM’s substantive reasoning in the prohibition decision, to the extent that the agency’s findings can be discerned. In Section 4, our focus will lie on the influx of policy objectives other than antitrust.　　　　　　

Product Innovation Incentives: Monopoly vs. Competition

Posted by D. Daniel Sokol

Marius Schwartz (Georgetown - Economics) focuses his inquiry into Product Innovation Incentives: Monopoly vs. Competition.

ABSTRACT: Arrow (1962) showed that a secure monopolist (unconcerned with preemption) has a weaker incentive than would a competitive firm to invest in a patentable process innovation. This paper shows that the ranking can be reversed for product innovations. Only the innovator sells the new product, a differentiated substitute for the old. Under alternative market structures considered, the old product is sold only by that same firm (two-product monopoly), only by a different firm (post-innovation duopoly), or in perfect competition. In an asymmetric Hotelling model, the innovation incentive under monopoly is greater than under duopoly if and only if the new product has the higher quality, and is always greater than under perfect competition.

Bundling and Competition for Slots: On the Portfolio Effects of Bundling

Posted by D. Daniel Sokol

Doh-Shin Jeon (Universitat Pompeu Fabra - Economics) and Domenico Menicucci (Università degli Studi di Firenze) focus their newest paper on Bundling and Competition for Slots: On the Portfolio Effects of Bundling.

ABSTRACT: We consider competition among n sellers when each of them sells a portfolio of distinct products to a buyer having limited slots (or shelf space). We study how bundling affects competition for slots. When the buyer has k number of slots, efficiency requires the slots to be allocated to the best k products among all products. We first find that without bundling, equilibrium often does not exist and hence the outcome is often inefficient. Bundling changes competition between individual products into competition between portfolios and reduces competition from rival products. Therefore, each seller has an incentive to bundle his products. Furthermore, under bundling, an efficient equilibrium always exists. In particular, in the case of Digital goods, all equilibria are efficient if firms do not use slotting contracts. However, inefficient equilibria can exist if firms use slotting contracts. In the case of physical goods, pure bundling also can generate inefficient equilibria. Finally, we identify portfolio effects of bundling and analyze the consequences on horizontal merger.

Antitrust Professors on the Move - 2009 Edition

Posted by D. Daniel Sokol

Below is a list of antitrust professors on the move to new schools:

Dan Crane - University of Michigan (from Cardozo)
Abe Wickelgren - University of Texas (from Northwestern)
Christopher Leslie - UC Irvine (from Chicago Kent)
Howard Shelanski - Georgetown (from Berkeley)

FTC v. CCC Holdings: Message Received

Posted by D. Daniel Sokol

Peter Love (Jones Day) and Ryan Thomas (Jones Day) write on the topic of FTC v. CCC Holdings: Message Received.

ABSTRACT: Cirroc, the Unfrozen Caveman Lawyer from Saturday Night Live, consistently employed the same successful litigation tactic. While confessing confusion about many aspects of modern life, he could still say, “there is one thing I DO know . . .” as a lead‐in to his argument that his client was entitled to a favorable judgment. There was some question following the D.C. Circuit’s splintered decision in FTC v. WholeFoods about how much value the case might have as precedent and whether it would affect how district court judges decide FTC preliminary injunction cases. Like Cirroc, we still are not sure how to reconcile the statutory language and case law, but after the recent district court decision in FTC v. CCC Holdings, “there is one thing we DO know . ..”—at least in the D.C. Circuit, the FTC probably can get a preliminary injunction if it can make out a prima facie structural case, almost whatever the facts.

The court in CCC Holdings (1) unambiguously followed Whole Foods (despite there being no majority opinion), (2) received the message that lower courts really should apply “serious questions” as the standard for FTC requests for a preliminary injunction, and (3) concluded that this standard sets a relatively low bar for the FTC to obtain a preliminary injunction.

China's Anti-Monopoly Law: An Early Report Card

Posted by D. Daniel Sokol

Lester Ross (WilmerHale) provides his thoughts on China's Anti-Monopoly Law: An Early Report Card.

ABSTRACT: China's AML has been in effect for less than a year. The enforcement authorities are progressing with respect to structure and regulations. The Coca-Cola-Huiyuan decision has aroused concern that the competition provisions are being applied in a manner that is biased against foreign acquirers of Chinese companies.

This should not be construed as a more general trend to disfavor foreign investment, however, as MOFCOM in particular has recently promulgated measures to simplify some foreign investment approval procedures and the Chinese government has spoken out strongly against protectionism. The AML moreover appears to be having a pro-competitive impact in some respects as shown with regard to the insurance industry.