Vertical Restraints,the <Emphasis Type="Italic">Sylvania</Emphasis> Case,and China’s Antitrust Enforcement

We briefly review the relevant economic theories and legal treatment of vertical restraints, and especially focus on the 1977 landmark case of Sylvania and its possible influence on China’s antitrust enforcement on vertical restraints. China’s competition policy, and particularly its antimonopoly law, does not explicitly instruct with respect to the enforcement approach (per se versus rule of reason) toward vertical restraints. But from an overview of China’s recent antitrust cases, we find that there is a division in the approaches taken by public versus private enforcement: Even though the administrative enforcement is more inclined to the application of per se prohibitions (or the application of the EU-style prohibition-plus-exemption approach), it seems that a rule of reason is the (increasingly) prevailing approach that is taken by the courts.     

Delusions Regarding the Proper Role of Markets and Antitrust Policy

William Curran and Donald Wellington have criticized capitalism,neoclassical economics and antitrust policy. This article defendscapitalistic institutions against both the strong forms ofsocialism as practiced in the former Soviet Union and againstits milder forms as practiced in the welfare states of Europe.The article endorses some of Curran's and Wellington's concernsabout neoclassical economics, but recommends that neoclassicaleconomics be adapted to make it more useful for scientificresearch rather than abandoned outright. Some suggestions areoffered in this direction. The article totally rejects the notionthat antitrust policy can be a tool for correcting the ills ofcapitalism as Curran and Wellington see them, and argues that thegoal of antitrust policy should be to improve capitalism not todestroy it.     

Introduction to the RIO Special Issue on Antitrust and the Platform Economy

The emergence of large technology platforms has raised fundamental questions about antitrust enforcement. These questions, which are the subject of this RIO special issue, are now challenging scholars and policy makers. The topics covered here include the role of economics and the consumer welfare standard in antitrust; lessons from historic antitrust cases; the role of big data in antitrust analysis; antitrust analysis of multi-sided markets; and the interplay between competition and privacy regulation.

     

<Emphasis Type="Italic">Leegin</Emphasis> and the Economics of Resale Price Maintenance

When the U.S. Supreme Court overturned its century-old precedent that treated resale price maintenance (RPM) as a per se violation of the antitrust laws, it signaled approval for the vertical restraint’s widespread use. But the increased use of RPM occurred under a pre-existing rule that permitted RPM as long as no formal agreement over price was reached. This paper documents not only the increased use of RPM post Leegin but also the importance of avoiding the appearance of agreements to control resale prices. The paper then discusses how plaintiffs, previously enamored of claims of RPM, are now recasting vertical RPM arrangements as ancillary to horizontal agreements among distributors that are made effective though enforcement by producers.     

The cyclical behavior of the Department of Justice’s antitrust enforcement activity

We study the cyclical behavior of antitrust enforcement as measured by the number of cases initiated by the US Department of Justice. The key result is that antitrust case activity is countercyclical. This finding is robust across alternate indicators of economic activity which include stock prices, corporate profits and business cycles, and across different types of cases. The finding of countercyclical case activity does not appear to lend support to interest-group theories that predict greater regulatory protection towards producers during economic contractions. One interpretation of our result would be that antitrust violations tend to increase during economic downturns, leading to an increase in the number of cases initiated, the broad implication being that the Antitrust Division primarily acts as an antitrust law enforcement agency. Our results show that politics, as measured by the party of the President and the Republican versus Democrat composition of the House and Senate, does not have a clear impact on case activity. Finally, the number of cases initiated are significantly affected by the extent of funding.     

“High-Tech” Antitrust: Incoherent,Misguided, Obsolete,or None of the Above? Comments on Crandall-Jackson and Wright

That prominent antitrust cases have been in the “high-tech” arena is not surprising, since high-tech industries are often susceptible to the scale economies that lead to highly concentrated or monopoly markets. Crandall and Jackson’s observations on the IBM case are on point. Regarding AT&T, the salient observation is that recent changes in legal doctrine may make it impossible to bring antitrust cases in regulated industries. The problem with the Microsoft case was not that it was right or wrong, but that it was fundamentally incoherent. Wright’s critique of the Federal Trade Commission’s case against Intel is problematic because buyers in exclusion cases tend to be better off, not victims as they would be under collusion or anticompetitive mergers. As these observations apply more generally to cases in sectors that are not associated with high-tech, I offer a few thoughts on some antitrust issues that are particular to high-tech sectors, specifically how the prospect of innovation could affect market definition in merger cases and, more broadly, whether dynamic efficiencies reduce the need for antitrust enforcement.     

Correlation,causality, and all that jazz: The inherent shortcomings of price tests for antitrust market delineation

A substantial economics literature has developed in which price data have been relied upon to delineate antitrust markets by empirically implementing definitions offered by classical economists. The forces driving these price tests are not the same as those that give rise to market power, and therefore these price tests are likely to reach erroneous conclusions if used to delineate antitrust relevant markets. The price tests should be used with great caution, if at all.     

Bagging bundle benefits in broadband and media mergers: Lessons from Sky/Vodafone for antitrust analysis

The historic precedents in telecommunications antitrust findings have tended towards finding harm to competition when network operators integrate downstream and bundle the provision of applications and services. The reason for this is that market power in network provision is thought to be extended into the applications market(s). More recently however, proposed mergers have been between telecommunications and media distribution firms, both of whom have some degree of market power, already sell their own services in bundles, and who may or may not have been offering combined bundles already via contractual agreements. Examples include Sky/Vodafone in New Zealand, and Time Warner/AT&T in the United States as well as Vodafone/Unitymedia in Germany and Media Capital/Altice in Portugal. These complex proposed arrangements pose challenges to competition authorities, whose legal and procedural rules and precedents, especially those defining the relevant markets affected by the merger or vertical integration activity, have been developed from the analysis of simpler cases. These precedents may not be sufficient to analyse current cases, characterized by multiple products catering to heterogeneous consumer preferences, and consumers are not constrained to buying only one variant of the products in each of the upstream and downstream markets.We illustrate the challenges by way of a case study of the proposed merger between Sky and Vodafone, declined by the New Zealand Commerce Commission in February 2017. Limitations in existing market definition processes and the evaluation of market power where bundling already occurs risk overlooking complex demand-side interactions that influence the profitability and efficiency of various structural and contractual strategic choices. We propose that classic merger and antitrust analysis based on econometric cost-benefit analysis can be augmented by using simulation and numerical analysis of a range of bundle offers expected to be relevant in decision-making. We develop a simple model and use it to illustrate how it may be used to inform broadband and content mergers, and other complex antitrust cases, such the assessment of the effects of two-sided markets and firm pricing decisions.     

The antitrust implications of electronic business-to-business marketplaces

Electronic marketplaces (e-marketplaces) allow networks of buyers and sellers to conduct business online and to exchange information more efficiently using Internet technology. Despite the benefits that e-marketplaces potentially afford firms, concerns have been raised that these markets may damage competition and potentially violate antitrust laws. This study considers the antitrust legislation related to e-marketplaces and examines the possible antitrust concerns that they raise. Potentially anticompetitive features of e-marketplaces are examined and guidance for firm conduct when creating or participating in an e-marketplace is offered.     

The role of antitrust in a small open economy: The Commerce Act in New Zealand

This paper reviews the New Zealand antitrust regime represented by the Commerce Act 1986. The context is a rapidly liberalising, small open economy with light-handed regulation. New Zealand antitrust draws on recent US microeconomics for its underlying economic principles, but more on the Australian Trade Practices Act for its legal framework. The influences of these and other countries on the operation of New Zealand antitrust are traced through precedent and an analysis of major cases. Increasingly interpretations have differed from those in Australia, with more weight being put on the promotion of efficiency and less on traditional competition objectives.I acknowledge the assistance of G. Connors, J. Feil, D. Round, G. Sellens and M. Malan. The views expressed are those of the author, and not the institutions with which he is associated.     

Predatory Pricing and the Speed of Antitrust Enforcement

A common complaint is that in certain industries antitrust action against predation istoo slow to ensure that a true victim can survive until the antitrust process has beenconcluded. This paper discusses, in the context of two recent antitrust cases, the sources of delay in the antitrust process, and different policy reforms aimed at speeding up the process or otherwise protecting a true victim.     

Towards a typology of collusive industrial networks: Dark and shadow networks

The prevailing understanding of collusive B2B networks is primarily based on the theories of industrial economists and organizational criminologists. ‘Successful’ collusive industrial networks (such as price-fixing cartels) have been seen to endure due to formal managerial structures of coordination and control. In this paper, we seek to transcend and challenge the understanding of these illegal forms of co-opetition by drawing on evidence from an in-depth examination of four price-fixing cartels that were facilitated chiefly by marketers. Our contribution introduces the notion of ‘shadow networks’ (networks where although attempts are made to ensure secrecy, multilateral modes of network structure dominate akin to ‘normal’ managerial endeavours such as joint ventures) and ‘dark networks’ (networks which appear more opaque and secretive through the adoption of bilateral modes of network structure and limited bureaucracy) to illustrate the types of collusive network forms that may exist. In addition, this allows us to build a deeper understanding of collusive network forms and related inter-firm interaction for an industrial marketing audience. We provide implications for marketing practice, theory, and policy. Specifically, we outline how organizations and the marketing function can perform self-administered antitrust audits in order to help avoid breaches of antitrust. Further, we consider the importance of the two forms of collusive inter-firm networks uncovered where marketers have attempted to render these secret from antitrust agencies, introducing a relatively new line of inquiry to the industrial marketing literature.     

论市场结构范式的标准与评价体系

出于反对重商主义和垄断的需要,自由经济理论建立了完全竞争范式,并把完全竞争奉为经济学的金科玉律。自从20世纪40年代,熊彼特深刻地批判了完全竞争的缺陷以后,经济理论研究实际陷入了市场结构范式缺失的境地。50年代,舒马赫重谈完全竞争的老调,提出了“小的是美好的”理论。近期有学者根据SCP标准,提出了寡头垄断范式。也有学者希望通过对垄断企业的科学规制,建立完全垄断的市场结构范式。毫无疑问,作为经济学的基础理论,市场结构范式不可或缺。因此,建立一个合理的市场结构范式评价体系刻不容缓。     

Economics at the FTC: Pharmaceutical Patent Dispute Settlements and Behavioral Economics

Economics at the Federal Trade Commission (FTC) supports both the competition and consumer protection missions of the agency. In this year’s essay we discuss two issues, one from each of the agency’s missions. First, we focus on intellectual property issues in pharmaceuticals. Specifically, we discuss the principal rationale for antitrust concerns about certain patent dispute settlements in the ethical drug industry. Then, we discuss consumer economics, our recent behavioral economics conference, and how behavioral economics influences our thinking about consumer policy.     

A Structural Approach to Market Definition With an Application to the Hospital Industry

Market definition is common in merger analysis, and often the decisive factor in antitrust cases. This has been particularly relevant in the hospital industry, where many merger challenges have been denied due to disagreements over geographic market definition. We compare geographic markets produced using frequently employed ad hoc methodologies to structural methods that directly apply the ‘SSNIP test’ to California hospitals. Our results suggest that markets produced using previous methods overstate hospital demand elasticities by a factor of 2.4 to 3.4 and were likely a contributing factor to the permissive legal environment for hospital mergers.     

Exclusive Dealing,Preferential Dealing,and Dynamic Efficiency

Several recent antitrust cases brought by the U.S.Department of Justice have challenged exclusivedealing by firms with market power. This paperreviews the legal treatment of exclusive dealing andanalyzes the economic implications of contracts thatpenalize customers for trading with a rival supplier. These contracts include arrangements that make it morecostly for customers to trade with a rival(preferential dealing) as well as contracts thatprohibit such trades (exclusive dealing). Theanalysis assumes that buyers and sellers negotiateefficiently, so the focus is on the implications ofcontract terms for investment behavior (dynamicefficiency). When investment is limited to theentrant, the optimal contract between a monopolyseller and a buyer imposes a socially excessivepenalty for trade with a rival. The paper contraststhe dynamic efficiency consequences of contractualpenalties and volume discounts. Both penalties andvolume discounts reduce a customer's gains from tradewith rival firms. However, in many circumstances,penalties harm dynamic efficiency because they lowera rival firm's marginal incentives to invest.     

Walter Adams and Chicago

Walter Adams is one of the strongest critics of the Chicago School of Economics. Yet he was trained at the University of Chicago. This article traces Adams' education in economics and delineates two distinct Chicago traditions of antitrust policy. Adams is linked to the earlier Chicago tradition of Henry Simons and, to some extent, Frank Knight. The consistency of Adams' policy views on antitrust is shown and the connection of these views to pragmatism and Jeffersonian precepts is argued.     

Natural Oligopoly Responses,Repeated Games,and Coordinated Effects in Merger Analysis: A Perspective and Research Agenda

Review of Industrial Organization - When the 1968 Merger Guidelines were drafted, both the economics and antitrust literatures addressed how competition could be softened when oligopolists...     

Markets,Morals, or Wealth? Delusions of a Standardized Antitrust Value

Since the 1980s, courts have chosen corporate wealth generation as antitrust's sole value, justifying their choice under``Chicago School' economics, while abandoning counter-values like justice and democracy. The difficult consequences of``Chicago's' univocal corporate wealth generating ``value' are explored in this article, while a broader, multi-valued, antitrust alternative is discussed and proposed.