Daniel Sokol has the list with links. Here’s the short version.

1. Expert Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc., J. Gregory Sidak
2. Behavioral Economists at the Gate: Antitrust in the 21st Century, Maurice E. Stucke
3. Mandating Access to Telecom and the Internet: The Hidden Side of Trinko, Daniel F. Spulber, Christopher S. Yoo
4. Competition Law and Copyright Misuse, John T. Cross, Peter K. Yu
5. Authorized Generics: A Prescription for Hatch-Waxman Reform, Tom Chen,
6. Two Puzzles Resolved: Of the Schumpeter - Arrow Stalemate and Pharmaceutical Innovation Markets, Michael A. Carrier
7. Mergers when Firms Compete by Choosing both Price and Promotion, Luke Froeb, Steven Tenn, Steven Tschantz
8. The Empirics of Antitrust in Two-Sided Markets, Marc Rysman
9. Hanging Up on Carterfone: The Economic Case Against Access Regulation in Mobile Wireless, Marius Schwartz, Federico Mini
10. Property, Liability and Market Power: The Antitrust Side of Copyright, Antonio Nicita, G.B. Ramello

Note the two articles on antitrust and copyright, which is quickly becoming a new frontier on both sides of the Atlantic.

Technorati Tags: antitrust, IP

Bill Henderson is applying social network analysis to graph the degree of interconnectedness between cities (NY, DC, SF, etc.) and major law firms. The results are unsurprising (big law firms like big cities, etc.) but the chart looks cool.

Technorati Tags: law firms

In What Can Antitrust Contribute to the Network Neutrality Debate Christopher Yoo cautions against net-neutrality regulation on the basis of economic learning developed and applied in the antitrust context.

A review of both the theory and the practice of antitrust suggests that it does have something to contribute. As an initial matter, antitrust underscores that standardization and interoperability are not always beneficial and provides a framework for determining the optimal level of standardization. In addition, the economic literature and legal doctrine on vertical exclusion reveal how compelling network neutrality could reduce static efficiency and show how mandating network neutrality could impair dynamic efficiency by deterring investment in alternative last-mile technologies. As such, network neutrality is better suited to the ex post, case-by-case approach associated with the rule of reason than the ex ante, categorical approach associated with per se illegality and regulation.

Yoo compares net neutrality to a rule of per se illegality for alternative network architectures. Yoo chronicles the history of the net neutrality debate as a succession one defeats for the net neutrality proponents.

In its initial iteration, the debate focused on structural remedies that would guarantee Internet service providers (ISPs) “open access” to cable modem systems. The next generation of network neutrality scholarship abandoned structural remedies as unworkable. Instead, network neutrality proponents embraced a system of nondiscrimination, regardless of whether that was directed at the client side (i.e., consumers) and the server side (i.e., content and applications providers), in order to ensure that access to the benefits of the faster Internet depend on the ability to pay. In 2006, network neutrality proponents staged another tactical retreat, conceding the validity of consumer tiering and limiting their opposition to access tiering. Most recently, network neutrality proponents have conceded the validity of access tiering and have simply argued for nondiscrimination within each tier. The shift in focus away from content and applications providers and toward other network providers is simply the most recent in a long line of concessions.

The proponents of net neutrality lose battle after battle because a neutral net is not necessarily more efficient than discriminatory network structures. In fact, when it comes to network congestion, for example, discriminating at the protocol level is likely to be more efficient and welfare enhancing. But who says that the debate about net neutrality is primarily an economic one?

1. Net neutrality is first and foremost a question about the background institutions of a just society. The end-to-end Internet architecture is about to put an end to one-way sender-recipient communication that has all but destroyed the discursive nature of the political process. Net neutrality is about a basic infrastructure of equality built into the protocols of our communication, providing equal freedoms for all. The Bill of Rights was not about maximizing total welfare. It was — and is — about guaranteeing a fully adequate set of equal political and civil liberties to everyone. Architecture mirrors legal code. We insist on equal access to public spaces, and — despite congestion — we insist on equal access to public roads. (And where we do think about congestion pricing, we engage in a full-blown policy debate, in which economics is one but not the only concern.)
2. Yoo treats the net as if it was just the next iteration in sender-recipient communication after newspapers, radio, and TV: one sender in the middle, millions of recipients at the periphery. But that’s missing the point. The net put the means of production into the hands of millions, the “content and applications providers,” who according to Yoo deal in a “national if not international” market. But what about the millions of ordinary people who blog, podcast, maintain websites, mailing lists, etc.? In what way do they, “content producers” without a doubt, also deal on a “national if not international market?” (Maybe they do, in some sense, via syndication?)
3. Finally, I am getting tired of the rhetoric of humility. Here’s an example:

   Permitting experimentation with practices until concrete harm can be demonstrated also appears to be an appropriate way to show humility about anyone’s ability to predict which approaches will ultimately prove to be best for consumers.

   In other words, acting in the face of uncertainty is per definition hubris, whereas letting things run unchecked is the way of the ostrich humble sage. In the context of law & economics, and antitrust for that matter, humility is code for inequality. Or at least it is code for policies that are usually indifferent to even vastly unequal outcomes. Humility is a cardinal virtue. False humility, however, is just annoying. There are good arguments on both sides here, but no one should claim the mantle of the virtuous for his or her side.

In any case, Yoo’s article is well written and — within the “net neutrality is primarily an economic problem” paradigm — well argued. I just happen to question the adequacy of that paradigm.

Technorati Tags: antitrust, net neutrality

Antitrust, it is said, is good at increasing allocative efficiency and bringing prices down to cost. In the process, however, antitrust reduces incentives to creators who would like to sell at a higher price. Enter IP, which in the words of the underrated IP commentator Abraham Lincoln “adds the fuel of interest to the fire of genius, in the discovery and production of new and useful things.” The result is the current model, where antitrust is pretty much relegated to policing the walls of the IP kingdoms (or prisons, depending on your point of view) from the outside, with no say as to what happens on the inside or where the boundaries should be drawn.

In Beyond Schumpeter vs. Arrow, Jon Baker takes a hard look at both the Schumpeter conjecture, according to which large firms and monopolists are likely to be more innovative than firms in competitive markets and Arrow’s claim that competition rather than monopoly promotes innovation. The current stalemate position is emblematically expressed in the “inverted U” distribution of innovation: least in competitive markets, most under oligopoly conditions, and somewhat less under monopoly. Baker surveys and ultimately dismisses the various studies that tried to link the rate of innovation to concentration, because “the most grave difficulty was in isolating the effect of competition.”

One industry might be particularly innovative for a number of reasons other than the extent of pre-innovation competition. Technological opportunities may be great: scientists and engineers may see ways to improve computer chips but not ways to improve potato chips. Or firms may have greater guarantees they will be free from post-innovation competition, for example because they expect broad intellectual property protections or because their prior success gives them an advantage in keeping customers. It turned out to be virtually impossible to separate out possibilities like these from differences in the extent of competition when comparing one industry with another, so researchers could not practically exploit cross-industry comparisons to tell whether and how competition mattered. Recently, several economists motivated by concerns among researchers working in the field of endogenous growth theory have made an heroic effort to address many of the problems with the earlier cross-industry studies, and in doing so appear to have resurrected the “inverted U” result. But the modern studies still do not control satisfactorily for differences across industries in the extent and rate of growth of technological opportunity and in the conditions of appropriability.

Some of the studies were only able to control for industry effects in two-digt SIC industries, “which are so broad as to be little better than no controls at all.” Baker concludes:

As a general rule competition does not just lead firms to produce more and charge less; it encourages them to innovate as well. Competition supplies a powerful motive for innovation.

On that “pro-competition” note, Baker’s paper concludes with suggestions for antitrust enforcement policy:

[A]n antitrust enforcement program crafted to promote innovation would seek to protect product market competition in “winner-take-most” or “winner-take-all” markets; protect product market competition in markets in which probable technological or regulatory developments or rapid growth in demand largely determine the extent of future product market competition; attack direct reductions in innovation competition; challenge “naked” horizontal agreements to fix prices or allocate customers; prevent agreements among rivals to engage in conduct facilitating coordination with no plausible business justification; and challenge horizontal mergers likely to reduce product market competition.

Mark Lemley, in A New Balance Between IP and Antitrust, also argues for competition as the primary engine of innovation.

[W]e must treat IP and antitrust law as equals. The current approach treats IP rights as having primacy within their established boundaries, and relegates antitrust to the role of policing departures from those boundaries. This is evident in a variety of Federal Circuit opinions, not only in the misuse context (where it is perhaps understandable) but in assessing fundamental questions such as the legality of conditional refusals to deal involving patents. While there is clearly logic to this framework– the grant of a patent must confer some rights on its owner that it would not have had in the absence of that grant, and antitrust should not interfere with those core rights–it is directly responsible for the cycles of over- and under-protection that have characterized the IP-antitrust interface. When patent rights get stronger, we want antitrust to get stronger to prevent abuses of the right; instead, it recedes, as it must in any system where its powers are determined by the bounds of the patent right. Similarly, when the patent owner’s rights are narrowed, the antitrust “sea” floods in to fill the gap, even though the risk of monopolistic abuse has been reduced.

Both papers are short and to the point, perfect for a flight from NY to DC.

Technorati Tags: antitrust, IP

In a new paper, Jon Baker and Carl Shapiro argue that the pendulum of horizontal merger enforcement has swung too far in the direction of non-enforcement. Using historic merger challenge data and survey evidence, they conclude that:

The recent figures for both agencies are low relative to the average of those reported by Commissioner Leary, particularly at DOJ. Indeed, they are for both agencies identical to those observed during the second term of the Reagan administration. The DOJ merger enforcement number in particular matches the lowest in modern history. We interpret these figures as indicating that merger enforcement during the first term of the current administration was surprisingly low, particularly at the Antitrust Division, even after accounting for any expectations that a new Republican administration might resolve close cases more in favor of permitting mergers than would the Democratic administration that preceded it.

Baker and Shapiro call for re-calibrating the significance of the structural presumption, which “identifies the minimum quantum of evidence the government must present in order to satisfy its burden of production, and hence shift a burden of production to the merging firms.” In practice, this leads to different approaches for establishing a structural presumption, depending on whether the theory of harm is one of coordinated or unilateral effects.

1. Unilateral effects As predicted unilateral effects do ultimately not depend on market shares but upon the diversion ratios between products sold by the merging firms, “it is important to allow the government also to establish its prima facie case with evidence that the diversion ratios between the products offered by the merging parties are substantial.” Using market shares (and the implicit assumption that diversion ratios are proportional to those shares) remains an alternative, but is usually a second best solution.

2. Coordinated effects The crux of a coordinated effects case lies in demonstrating changed incentives of the market participants in the post-merger world. Thus, traditional market definition, which essentially equates a market with the minimum viable scale for a cartel, is the correct starting point. In a second step, the agencies would have to establish that combining the merging parties is a difference that makes a difference in the post-merger world, either by eliminating a maverick or by reducing the ability of a maverick to disturb coordination. Baker and Shapiro propose that a 4-3 merger or a showing of post-merger HHIs in excess of 2,800 is sufficient to make a prima facie case for coordinated effects.

As to rebuttal arguments, Baker and Shapiro are critical of the uncritical acceptance of the three “E”s, expansion, entry, and efficiencies by the agencies and the courts.

In summary:

We certainly do not propose a return to the horizontal merger control policies and precedents of the 1960s. The presumptions we have described here would not be irrebuttable, though they would be influential. They would be based on aspects of market structure, but not solely on market concentration, and in some cases, not on market concentration at all.

Any article by Baker and Shapiro is worth reading, and this one is no exception. Most of their proposals are sensible as a matter of economic theory and legal practice. Few, I suppose, would object to more predictable antitrust enforcement, and rebuttable presumptions have always been a powerful tool to increase predictability without the collateral damage from the heavy artillery of per se rules.

That said, Baker’s and Shapiro’s proposals should include additional procedural transparency requirements for the agencies in the merger review process, not just in the few cases that actually go to trial. The agencies should only get to enjoy a presumption after sharing the evidence on which the presumption rests with the parties to the merger (with some limitations, of course, if third parties are involved).

Technorati Tags: antitrust, horizontal mergers

Daniel Sokol at the Antitrust & Competition Blog highlighted an interesting paper recently posted on SSRN.  Maurice Stucke of U.S. Department of Justice’s Antitrust Division has authored an article entitled Behavioral Economists at the Gate: Antitrust in the 21st Century.  Stucke notes that antitrust economics accepts, largely unquestioned, rational choice theory (i.e., that ”actors are rational, have willpower, and will act in their own self-interest”).  (Note: all quotes in this post are from the article; footnotes and citations omitted).  As a result:

One uniformly accepted tenet, according to Posner, is that business firms are profit-maximizers, so that “the issue in evaluating the antitrust significance of a particular business practice should be whether it is a means by which a rational profit maximizer can increase its profits at the expense of efficiency.”

In recent years, however, behavioral economists have found

that individuals do not always act in ways the rational choice theories predict. Drawing from the findings of other disciplines, such as psychology, neuroscience, and sociology, behavioral economists note that a sizeable percentage of their test subjects systemically deviate from these rational choice theories’ predicted outcome in several important ways …

The article, “identifies some possible paradoxes and anomalies with respect to antitrust’s merger theories. It appears anecdotally that some corporate behavior is (or is not) occurring that is not readily explainable under antitrust’s rational choice theories.”  As a result, there ”is an empirical question as to the degree the federal antitrust agencies, relying upon their Merger Guidelines, are indeed accurately forecasting the likely competitive effects of mergers today.”

Stucke also recommends five legislative changes “[t]o encourage such post-merger review and to empirically test the Merger Guidelines’ predictive qualities”:

• First, Congress should expressly provide the federal antitrust agencies with subpoena authority for non-public information to conduct such post-merger review.
• Second, Congress should require the federal antitrust agencies to publish their summary findings of any merger subject to a Second Request in which the agency: (i) took no enforcement action; (ii) permitted the merger in part to be consummated pursuant to a consent decree; or (iii) challenged the merger in court, but lost.
• Third, for any successful cartel or monopolization prosecution, Congress should require the agency to report two to five years after the completion of the prosecution the state of competition in that industry, as described above.
• Fourth, Congress should require the federal antitrust agencies to make publicly available a computerized database identifying all civil and criminal antitrust consent decrees, pleas, or litigated actions under section 1 of the Sherman Act.
• Fifth, any publicly held company that seeks to rely on an efficiency defense before the agencies and/or the courts should be required to publicly report its claimed efficiencies in its SEC filings.

The paper is more interesting - and deserving of comment - that this brief summary.  It is worth reading.  Download it while it is hot.

It has been some time since the real estate market has been mentioned on Antitrust Review.  Yesterday, the FTC and DOJ rectified this with the release of a joint report: “Competition in the Real Estate Brokerage Industry.” The 78 page report appears to be very through and provides a wealth of background material.  The report makes the following recommendations:

• The Agencies should continue to monitor the cooperative conduct of private associations of real estate brokers, and bring enforcement actions in appropriate circumstances. While cooperation among brokers through a multiple listing service can provide consumers with important efficiencies, cooperation used to adopt rules that hinder rivals can be anticompetitive and, as recent Agency actions indicate, may violate the antitrust laws.

• The Agencies should continue to provide state legislators and industry regulators with information concerning the competitive consequences of state legislation and regulations that threaten to or already do restrict competition and consumer choice in the real estate brokerage industry, and take enforcement action in appropriate circumstances.

• State legislators and industry regulators should consider repealing existing laws, rules and regulations, such as minimum-service and anti-rebate provisions, that limit choice and reduce the ability of new brokerage models (e.g., fee-for-service brokers, discount full-service brokers, virtual office website brokers, and broker referral networks) to compete and that do not appear to provide any consumer benefits that would justify such restrictions. They should also avoid enacting such laws, rules, and regulations in the future.

• The Agencies and industry regulators should promote consumer understanding of marketplace options. Some consumers may not be aware of the range of alternatives available to them when hiring a real estate broker, including the types of business models available and the negotiability of fees, for both home buyers and sellers, and/or may not understand the duties owed by their broker. Competition in the real estate brokerage industry would likely be enhanced if consumers had better access to such information.

• The Agencies and industry regulators should assess the feasibility of an empirical study of the real estate brokerage industry. Transaction-level data on commission rates and fees are not publicly available, but broad national aggregate data suggest that commission rates and fees move in tandem with housing prices. Just as the 1983 FTC study provided valuable information about how real estate brokers competed in the late 1970s and early 1980s, a new study examining how transaction-level commission rates and fees vary based on such factors as market conditions, housing prices, and regulation would provide a better understanding of the current state of competition in the real estate brokerage industry.

The AP (via Business Week) reports that:

State laws and real estate agents’ business practices are preventing consumers from getting the full benefit of the competition that the Internet was expected to bring to the real estate industry, federal regulators said Tuesday. In a new report from the Federal Trade Commission and the Department of Justice, regulators said that discount brokers and other rivals to traditional agents have been constrained in their ability to use the Internet to reduce fees and improve service. The Internet is now more important tool than yard signs for advertising homes for sale, the report said. In 2006, 80 percent of home buyers used the Internet while looking for a house versus 63 percent who said they looked for yard signs, according to a study cited in the report. … In an e-mailed response, Pat Combs, president of the National Association of Realtors, said the real estate industry is “dynamic, entrepreneurial and fiercely competitive.” The Justice Department sued state real estate commissions in Kentucky, South Dakota, West Virginia and Tennessee, charging that rebate bans limited competition. The states agreed to lift the bans. And the FTC last October ordered real estate groups in five states to allow fee-for-service and other discount brokers full access to their online multiple listing services, warning that refusal to do was a violation of antitrust law. “For the past 25 years, the association has conducted membership education and training programs to ensure compliance with antitrust law,” the NAR’s Combs said. “The report released today is based on a government workshop on competition in the real estate industry that was held nearly two years ago.”

The FTC’s press release is available here.

Jon Baker’s excellent article discusses the conceptual framework for market definition — both, the why and how — with admirable clarity. Required reading!

Technorati Tags: antitrust, market definition

The April 2007 edition of The Antitrust Source is now available.  The editions includes an interview with Antitrust Modernization Commission Chair Deborah Garza, an analysis of recent Supreme Court decisions to determine if there is a bias towards defendants, and an analysis of post-Trinko refusal to deal cases.

A new paper analyzes US and and EU merger enforcement. Of particular note is that two of the co-authors are Malcolm Coate and Shawn Ulrick of the Federal Trade Commission. According to the abstract:

Merger regulation affects large transactions in the market for corporate control in both the European Union (EU) and the United States (US). This paper compares the merger enforcement policies of the two regions using descriptions of the merger investigations prepared by the staff of the EU and the Federal Trade Commission. The policies are found to share a common foundation with substantial weight being placed on both the market structure characteristics and the likelihood of effective entry. US enforcement was broader-based in that it scrutinized markets that might be characterized as raising oligopoly, unilateral, and dominant firm concerns, while the EU policy focused largely on market dominance. Neither regime is found to be stricter in all circumstances, since the market and firm characteristics impact the enforcement decisions differently. However, we find that the US regime is more predictable (given our measures of the explanatory variables), tougher on strong dominance cases and oligopoly cases, but more permissive on weak dominance cases.

Download it while it is hot.

Earlier today, DOJ and the FTC issued a joint report titled ”Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition.”  According to the press release, the conclusions include:

• Antitrust liability for mere unilateral, unconditional refusals to license patents will not play a meaningful part in the interface between patent rights and antitrust protections. Antitrust liability for refusals to license competitors would compel firms to reach out and affirmatively assist their rivals, a result that is in tension with the antitrust laws;
• Conditional refusals to license that cause competitive harm are subject to antitrust scrutiny; 
• Joint negotiation of licensing terms by standard-setting organization participants before the standard is set can be procompetitive. Such negotiations are unlikely to constitute a per se antitrust violation. The agencies will usually apply a rule of reason analysis when evaluating these joint activities; 
• The agencies evaluate the competitive effects of cross licenses and patent pools under the rule of reason framework articulated in the 1995 Antitrust-IP Guidelines; 
• Combining complementary patents within a pool is generally procompetitive. A combination of complementary intellectual property rights, especially those that block the use of a particular technology or standard, can be an efficient and procompetitive way to disseminate those rights to would-be users of the technology or standard. Including substitute patents in a pool does not make the pool presumptively anticompetitive[-]­competitive effects will be ascertained on a case-by-case basis; 
• The agencies apply a rule of reason analysis to assess intellectual property licensing agreements, including non-assertion clauses, grantbacks, and reach-through royalty agreements; 
• The Antitrust-IP Guidelines will continue to guide the agencies’ analysis of intellectual property tying and bundling. The agencies consider both the anticompetitive effects and the efficiencies attributable to a tie, and would be likely to challenge a tying arrangement if: (1) the seller has market power in the tying product, (2) the arrangement has an adverse effect on competition in the relevant market for the tied product, and (3) efficiency justifications for the arrangement do not outweigh the anticompetitive effects. If a package license constitutes tying, the agencies will evaluate it under the same principles they use to analyze other tying arrangements; 
• The agencies consider both the anticompetitive effects and the efficiencies attributable to a tie or bundle involving intellectual property; 
• The starting point for evaluating practices that extend beyond a patent’s expiration is an analysis of whether the patent in question confers market power. If so, these practices will be evaluated under the agencies’ traditional rule of reason framework, unless the agencies find a particular practice to be a sham cover for naked price fixing or market allocation; and 
• Collecting royalties beyond a patent’s statutory term can be efficient. Although there are limitations on a patent owner’s ability to collect royalties beyond a patent’s statutory term, see Brulotte v. Thys Co., 379 U.S. 29 (1964), that practice may permit licensees to pay lower royalty rates over a longer period of time which can reduce the deadweight loss associated with a patent monopoly and allow the patent holder to recover the full value of the patent, thereby preserving innovation incentives.

A pdf version of the entire report is available as is a html version.

The morality of the market is one of the most significant issues not only in ethics but also, at least since Durkheim and Weber, in sociology. As is often the case, the more pervasive a practice, the harder it is to describe and analyze. Marion Fourcade and Kieran Healy, in their forthcoming paper Moral Views of Market Society do an excellent job surveying and classifying the contemporary sociological literature. The “liberal dream” of the market as a civilizing force (doux commerce) has three major themes:

1. The promotion of individual virtues (integrity, honesty, truthfulness, etc.) and interpersonal cooperation
2. Markets as enabling conditions for personal liberty and political freedom (Hayek, Friedman, etc.)
3. Markets as enabling conditions for cultural production and creative flourishing.

The “liberal dream,” however, in good dialectic fashion, already contains the seeds of a “commodified nightmare,” where each element of the doux commerce thesis is negated.

1. “Instead of virtue, [markets create] envy and wants.” Markets don’t just satisfy, they create wants, feeding the human drive towards pointless, conspicuous consumption (Veblen). Moreover, on an empirical level, the correlation between want-satisfaction and happiness is not at all clear.
2. “Instead of cooperation, [markets create] coercion and exclusion.” Severe inequality makes a mockery of the formally free nature of market exchange, and because of its hegemonic aspirations, the market as one mode of valuing things, is crowding out modes that price cannot capture (a modified commodification argument.)
3. “Instead of creativity, copyright.” I very much like the authors’ reference to Marcuse, Adorno and Horkheimer in this context, whose works provide an often overlooked conceptual background to understanding the battle between the owners of the 20th Century industrial means of producing mass culture (studios, networks, distributors, etc.), designed mostly to provide instant and easy gratification, and the counter-movement aimed at democratizing the means of cultural production (e.g., blogs, iMovie, Reason, etc.) and keeping open the cultural commons from which all cultural production — both industrial and decentralized — draws (e.g., Creative Commons, FSF, etc.)

The article concludes with an overview of reflexive theories of markets and morals, discussing how theories primarily invented to observe and understand markets became entangled with their objects and were thus transformed into code, executed by markets (e.g., financial derivatives). A similar story could be told about the recent translation of antitrust law into the language of antitrust economics. First, economic concepts were used to describe (and criticize) the state of the law. Over time, the external categories of observation were imported into the law and then transformed into executable legal code, now defining the practice of antitrust law.

In summary, for most of its history, intellectuals have variously praised, reviled, or downplayed the moral consequences of market capitalism. These positions are still very well represented in today’s literature. Still, the distinctive quality of contemporary scholarship is that it goes much further in opening the black box of morality and dissecting the cultural and technical work necessary to produce, to sustain or — conversely — to constrain the market. In doing so, it also reveals the role social scientists play in this process. Continuing this task, then, implies a reflexive approach, where economists, political scientists and sociologists critically consider their own participation in the definition of the market’s moral categories, and in the construction of competing moralizing instruments and techniques.

Download it while it’s hot!

Cross-posted at Law & Society Blog.

Technorati Tags: economics, sociology, market, Frankfurter Schule

Wouter P.J. Wils has a new paper out on The European Commission’s 2006 Guidelines on Antitrust Fines: A Legal and Economic Analysis. Here is the abstract:

On 1 September 2006, the European Commission published new Guidelines on the method it will use when setting fines for undertakings that have infringed the competition rules laid down in Articles 81 and 82 of the EC Treaty. This paper discusses the questions what the purpose is of guidelines, and how foreseeable the amount of fines should be, and analyses the method set out in the new Guidelines in the light of the Commission’s past practice, the case-law of the Community Courts and the theory on optimal fines.

And here is a taste:

The 2006 Guidelines appear to differ in three respects from (the practice under) the 1998 Guidelines. First, not only earlier findings by the European Commission of similar infringements of Articles 81 or 81 EC are now taken into account, but also such findings by the competition authorities of the EU Member States. This is a logical evolution, following the establishment by Regulation No 1/2003 of the European Competition Network (ECN), in which the European Commission and the competition authorities of the EU Member States share the task of investigating and prosecuting infringements of Articles 81 and 82 EC. Second, whereas the practice under the 1998 Guidelines was to increase the basic amount by 50 % on account of repeated infringement, the 2006 Guidelines provide for an increase ‘by up to 100 %’. Third, this increase applies ‘for each [earlier] infringement established’.

Papers by Shapiro or Kaplow are by definition high up on my reading list, and one that’s (i) written by both with (ii) a narrow title such as “Antitrust” gets bumped up to the top spot pretty effortlessly. According to the abstract:

This is a survey of the economic principles that underlie antitrust law and how those principles relate to competition policy. We address four core subject areas: market power, collusion, mergers between competitors, and monopolization. In each area, we select the most relevant portions of current economic knowledge and use that knowledge to critically assess central features of antitrust policy. Our objective is to foster the improvement of legal regimes and also to identify topics where further analytical and empirical exploration would be useful.

As one would expect, the treatment is concise, moderately formal, with a great deal of attention paid to differences between legal and economic approaches (Kaplow’s hand, no doubt) and the influence of lock ins, disruptive innovation, etc.

My only issue (as always) is that the article pays little attention to the ideological underpinnings of antitrust and the normative distributive commitments that are part and parcel of economic theory. (I addressed some of those issues here and here.) More specifically, the relationship between the ultimate goal of economic policy (consumer welfare), the primary means of achieving it (free markets, competition), and the mission of the antitrust laws (prohibiting conduct having significant anticompetitive effects) as a policy tool for promoting competition and therefore consumer welfare requires IMHO more explicit treatment. It is only against that backdrop that the function of the two most important proxies for anticompetitive conduct, market power (the ability and the incentive to raise prices) and market concentration (e.g., HHI measures) becomes readily apparent. That said, Kaplow’s and Shapiro’s paper is highly recommended. Download it while it’s hot.

Technorati Tags: antitrust, shapiro, kaplow

Dan Sokol has a new paper out, Technical Assistance for Law & Economics: An Empirical Analysis in Antitrust/Competition Policy, co-authored by Michael Nicholson, Daniel Sokol, and Kyle Stiegert. Here is a taste from the abstract:

Many nations have augmented their development of competition agencies with technical assistance (TA) support. Determining how best to design TA programs to interact with nascent and financially constrained competition agencies is a difficult and complex matter. The objective of this study is to assess the impacts of the TA-agency partnership. This paper focuses specifically on factors that lead to improved effectiveness of TA as it pertains to improved agency effectiveness. In a field that has been lacking for empirical evaluation, we use a unique dataset of responses from 38 competition agencies that have received technical assistance from the period 1996-2003. Our empirical analysis demonstrates that issues of timing and absorptive capacity of particular forms of technical assistance within a larger political economy consideration maximize the impact and effectiveness of technical assistance provided to competition agencies.