The US Antitrust System and Recent Trends in Antitrust Enforcement

This paper provides a survey of recent research on the US antitrust system. First we provide an overview of the US antitrust system, describing the roles of the US Department of Justice, the Federal Trade Commission and case law. Second, we provide a new econometric trend analysis on the enforcement of US antitrust law, showing that (1) enforcement demonstrates some trend behavior, as well as comovement with business cycles; (2) the time series of antitrust cases demonstrates two distinct episodes, which we characterize as 'pre-deregulation' and 'post-deregulation;' (3) the time series of government antitrust filings leads the time series of private antitrust filings. Finally, we describe recent economic research relevant to the area of antitrust and the impact of this research on US antitrust policy.     

Beyond antitrust populism: Towards robust antitrust

The populist use of competition policies is on the rise again, associated with the growth of big-tech companies in the era of digital platforms. This article sees antitrust populism as a re-emerging force in the United States and Europe via greater politicisation of competition law enforcement. It addresses the basic tenets of antitrust populism in order to expose the fundamental problems that populist use of competition law entails. I argue for a rethink of antitrust policy on the intellectual foundations laid down by what Mark Pennington describes as ‘robust political economy’. We need greater regulatory humility and antitrust enforcement which takes both innovation and welfare seriously.     

Rationality, Ethnicity And Institutions: A Survey Of Issues And Results

Abstract.  This paper focuses on the relationship between institutions and ethnocentrism as discussed in the rational choice literature. The institutional environment can influence both the formation and the expression of ethnic tastes by rational individuals. Ethnocentrism is likely to be mitigated by, on the one hand, a private sector characterized by a wide and competitive market with effective property right and antitrust law enforcement provided by non-ethnic institutions and, on the other hand, a public sector which is characterized by institutional restrictions on the differential fiscal or regulatory treatment on the basis of ethnicity, a redistributive system based on non-ethnic criteria and finally, the possibility for decentralized collective decision making. These insights may be of particular utility when designing the institutions of potentially divided multi-ethnic states.     

International Financial Reporting Standards and Private Firms’ Access to Bank Loans

Prior research has focused on publicly listed firms when examining the economic consequences of adopting International Financial Reporting Standards (IFRS). This study extends the literature by examining the ability of private firms to attract bank loans through the use of IFRS. Based on firm-level data from 25 countries, we show that private firms that voluntarily use IFRS are associated with a higher propensity to attract debt from foreign banks. We find no such association when examining their relationships with domestic banks. Supplementary analyses show that the results are mainly driven by private firms operating in countries with strong regulatory enforcement. The findings suggest that, conditional on adequate enforcement, the use of IFRS provides useful information for foreign non-relationship banks.     

Market share and market power in merger and monopolization cases

In light of the growing sophistication of the tools of industrial organization economics and reliance on the federal courts to resolve complicated competitive issues, it may be time for the courts to make greater use of economists in analyzing antitrust cases. While the costs of such an endeavor remain unexplored, we argue below that the benefits may be significant. In particular, we assert that the legal precedent requiring the courts to draw inferences about market power based primarily or exclusively on market shares and/or market concentration¹ can often be misleading. However, the only alternative to such judge-made bright-line rules is to utilize modern economic tools to undertake more extensive competitive analyses. The latter choice is essentially the course that the antitrust enforcement agencies are following. This article explores some of the arguments in favor of such an approach.     

Platform economics and antitrust enforcement: A little knowledge is a dangerous thing

Although the economics of multisided platforms has developed important insights for antitrust policy, there are critical respects in which the body of academic knowledge falls short of providing useful advice to enforcement agencies and the courts. Indeed, there is a substantial risk that recent scholarship will be misapplied to the detriment of sound antitrust policy, as evidenced by the US Supreme Court's recent decision in American Express. In this note, I identify several areas in which economics research could potentially make significant contributions to the practical antitrust treatment of platforms.     

Mergers,strategic investments and antitrust policy

Established firms can diversify into new markets in two distinct modes: through internal development or through conglomerate merger. Building on a dynamic three-stage bargaining model with variable threats, this paper shows that a lenient antitrust position toward horizontal mergers can induce established firms that would otherwise not have entered to enter via conglomerate merger. The vigor of antitrust enforcement toward horizontal mergers also affects the conglomerate acquisition price but it does not influence the choice of entry mode. Finally, the paper brings to light a heretofore neglected avenue through which conglomerate mergers can increase welfare.     

Earnings Management in Domestic and Foreign IPOs in the United States: Do Home Country Institutions Matter?

Using a large sample of domestic and foreign IPOs in the US, we investigate how threats of enforcement by the Securities and Exchange Commission (SEC) and private litigation influence earnings management in IPO prospectuses. We propose that perceptions of foreign institutions may influence SEC enforcement action and private litigation. We provide evidence that enforcement and litigation threats are negatively related to the strength of legal institutions in the foreign IPO’s country of origin. We find earnings management is more pronounced in foreign IPOs from countries with strong legal institutions. We further explore whether earnings management is priced in the IPO market and find no relation between IPO proceeds and earnings management. Our results are consistent with upward earnings management as in Stein (1989), the magnitude of which is reduced when the anticipated cost of enforcement and litigation is higher. Collectively, our results cast doubt on the validity of the bonding hypothesis.     

Monopoly and the problem of the economists

By any measure economists have played increasingly prominent roles in antitrust policy making, at least since the early 1970s. Indeed, the approach to the analysis of public policy toward business pioneered by Chicago school economists dominates the academic literature nowadays. According to the Chicago school's adherents, their insistence that antitrust be examined through the lens of price theory should have produced discernably ‘better’ (read pro-consumer) laws and ‘better’ law enforcement. This paper contends that economists have in fact not had a positive influence on antitrust policy, but have instead actively contributed to its use as a way of subverting competitive market forces.     

Private law enforcement with competing groups

This paper introduces groups that are in conflict against each other in law enforcement policy. These groups can have an effect on the process of law enforcement by making upfront investments, such as bribes. We also investigate consequences when a policy maker acts to maximize a bribe instead of social welfare. Thus, this paper presents an inclusive framework for incorporating private law enforcement, corruption and avoidance activities. This article shows that this competition can lead to moderate and more efficient law enforcement activities. This indicates that inefficient law enforcement by authority with harm reduction motivation can be avoided. Additionally, this paper shows that depending on the policy maker’s objection between rent-seeking motivation or social welfare maximizer, deterrence effects vary. This paper provides a clear mechanism that the rent-seeking motivated policy maker tends to set less severe enforcement policies than the social welfare level.     

Criminalizing price-fixing

We assess whether recent US Department of Justice (DOJ) price-fixing cases exhibit characteristics that are associated theoretically with optimal use of criminal law. We take our welfare standard from seminal work on optimal legal design. Optimal legal design recognizes the private and public elements present in all areas of the law. The mixed results show that the characteristics to be expected in criminal cases are not all present in the DOJ cases. Criminal sanctions applied in these collusive antitrust cases do however show significant responsiveness to some of the variables derived from the economic analysis of criminal law.     

Reducing Brazilian greenhouse gas emissions: scenario simulations of targets and policies

This paper aims to evaluate the economic impacts of greenhouse gas emission reduction on the Brazilian economy. To this end, we developed an integrated input–output linear programming model for 2009 using the Supply and Use Tables and emissions data of the Brazilian Ministry of Science and Technology and Innovation. We simulated emissions targets for various potential scenarios in which the adopted policy design took account of sectoral composition in terms of emissions and available production technology. The results were directly affected by the high level of livestock emissions, counterbalancing this sector’s economic importance for Brazil. In the short term, sectoral emissions targets associated with taxation policy or emission permits could be developed in order to create private incentives to mitigate emissions. In this sense, the results also show that different sectoral targets may be able to balance environmental benefits with the possible economic losses incurred by such policies.     

Private Debt and Timely Loss Recognition

Abstract

In this study, we investigate whether private debt contracting provides incentives for borrowers to recognize economic losses earlier in accounting earnings. Focusing on the window around firms' issuances of private loans, we document that timely loss recognition significantly increases following an issuance. This effect is significantly stronger for debt contracts that include performance covenants acting as trip-wires when firm performance deteriorates. We also find that timely loss recognition is particularly used when writing debt contracts is hampered by uncertainty about a firm's future development. These findings are consistent with timely loss recognition being used to increase contract efficiency by facilitating state-contingent control allocation based on a borrower's performance over the loan term.     

Accounting Discretion in Goodwill Impairments: UK Evidence

This study examines managers’ use of discretion in determining goodwill impairment losses following the mandatory adoption of IFRS 3 “Business Combinations,” and whether this discretion reflects opportunistic reporting by managers or the provision of their private information. Although IFRS 3 was issued to improve the accounting treatment for goodwill and provide users with more useful and value‐relevant information regarding the underlying economic value of goodwill, it has been criticized on the grounds of the managerial discretion inherent in impairment testing. Therefore, ex‐ante, it is unclear how the impairment‐only approach has affected the reporting of goodwill impairment losses. After controlling for economic factors, empirical results reveal that managers are exercising discretion in the reporting of goodwill impairments following the adoption of IFRS 3. Specifically, goodwill impairments are more likely to be associated with recent CEO changes, income smoothing and “big bath” reporting behaviors. However, the results also indicate that goodwill impairments are strongly associated with effective governance mechanisms suggesting that managers are more likely to be exercising their accounting discretion to convey their private information about the underlying performance of the firm rather than acting opportunistically. These inferences are robust to various modeling specifications and variable definitions, suggesting that IFRS 3 has provided managers with a framework to reliably convey their private information about future cash flows consistent with the IASB's objectives in developing the impairment standard.     

Monopoly and Anti‐Monopoly in China Today

For three decades after liberation in 1949, the Chinese economy consisted almost entirely of state monopolies. Economic reforms, starting in 1979, sought to increase the efficiency of the economy by introducing competitive practices in many sectors of the economy. But the Chinese economy has been partially administered by the state for over two millennia. As a result, both state‐managed and private monopolies are still an intrinsic part of the Chinese economy today. Despite two decades of anti‐monopoly reforms, state‐owned enterprises (SOEs) continue to dominate key sectors of the economy, particularly in resource extraction and financial services. The government is aware of the inefficiencies and corruption caused by monopolies, both public and private. But Chinese tradition takes a balanced view of social harms and weighs the damage caused by monopoly against the stability that SOEs have provided China in recent decades. There is less reason for China to tolerate private monopolies, but most of them have arisen in conjunction with digital technology because of its distinctive cost structure (high entry costs, low marginal costs). China has made some use of antitrust law, but most economic regulation in China is administrative. Thus the anti‐monopoly activities that are used to restrain monopoly power in China are different from Western practices.     

Tying in two-sided markets with heterogeneous advertising revenues and negative pricing

We offer a theory of anticompetitive tying in two-sided markets when below-cost or negative pricing is possible. With the coexistence of two consumer groups (one regarding tying and tied goods as complementary and the other as independent), a tying-good monopolist may face difficulties in extracting rent under separate sales and wish to use tying to directly capture the large advertising revenue created in the complementary segment. We uncover two distinct mechanisms by which tying raises monopoly profits but reduces social welfare. Our theory of tying can be applied to real-world antitrust law enforcement, such as the Google Android case.     

Propertyless in Peru,Even with a Government Land Title

This article investigates the ability and process of government land titling as a method to achieve secure property rights institutions. Specifically, we analyze the impact of government land titling in rural Peru. Our findings suggest that land titling does not achieve the positive benefits associated with secure property, such as access to credit. We also find that individuals prefer private enforcement methods of securing property to public means. This suggests that government land titling is not always a channel through which countries can achieve secure property rights institutions.     

新经济政策下我国民营快递企业发展问题研究

具体分析了新经济政策下民营快递企业发展面临的机遇和挑战以及民营企业自身发展中存在的问题,并在此基础上．提出了民营快递企业发展具体策略。希望在一定程度上为民营快递企业发展决策提供依据。     

A Markov Decision Process approach for balancing intelligence and interdiction operations in city-level drug trafficking enforcement

We study a resource allocation problem in which law enforcement aims to balance intelligence and interdiction decisions to fight against illegal city-level drug trafficking. We propose a Markov Decision Process framework, apply a column generation technique, and develop a heuristic to solve this problem. Our approaches provide insights into how law enforcement should prioritize its actions when there are multiple criminals of different types known to them. We prove that when only one action can be implemented, law enforcement will take action (either target or arrest) on the highest known criminal type to them. Our results demonstrate that: (i) it may be valuable to diversify the action taken on the same criminal type when more than one action can be implemented; (ii) the marginal improvement in terms of the value of the criminals interdicted per unit time by increasing available resources decreases as resource level increases; and (iii) there are losses that arise from not holistically planning the actions of all available resources across distinct operations against drug trafficking networks.     

Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey

This paper studies the effects on registered employment and number of registered establishments of two employment subsidy schemes in Turkey. We implement a difference-in-differences methodology to construct appropriate counterfactuals for the covered provinces. Our findings suggest that both subsidy programs did lead to significant net increases in registered jobs in eligible provinces (5%–13% for the first program and 11%–15% for the second). However, the cost of the actual job creation was high because of substantial deadweight losses, particularly for the first program (47% and 78%). Because of better design features, the second subsidy program had lower, though still significant, deadweight losses (27%–46%). Although constrained by data availability, the evidence suggests that the dominant effect of subsidies was to increase social security registration of firms and workers rather than boosting total employment and economic activity. This supports the theory that in countries with weak enforcement institutions, high labor taxes on low-wage workers may lead to substantial incentives for firms and workers to operate informally.