A New Perspective on Entry in Horizontal Merger Analysis

I analyze horizontal mergers in procurement settings in which sellers incur costs to participate. Considering existing sellers’ contest-level entry differs from antitrust authorities’ typical emphasis on new sellers’ market-level entry to counteract a merger’s anticompetitive harm. I show that profitable mergers can increase consumer and total surplus by inducing more and stronger contest-level entry by the merged seller, which echoes common claims from merging parties that their merger is beneficial because it creates a stronger competitor. This finding suggests caution by antitrust authorities: when contest-level entry costs matter, standard models that ignore those costs prescribe blocking procompetitive mergers.

     

Restraints of trade by durable good producers

Whether they face competition or not, durable good producers may have an incentive to impose vertical restraints on their customers in order to protect quasi-rents in the aftermarkets for maintenance and repair. In this paper, we show that these vertical restraints have little to do with the usual antitrust concerns regarding tying arrangements. Nonetheless, imposing such restraints involves antitrust risks. We examine these risks and the associated antitrust policy questions in light of the Supreme Court's recent Kodak decision. We also offer some suggestions for the appropriate antitrust policy.     

Attention Platforms,the Value of Content,and Public Policy

This paper shows that two related aspects of attention platforms are important for the sound economic analysis of public policy including antitrust: first, attention platforms generate valuable content. Even though people often don’t pay for content, we know from revealed preference that content is valuable because people spend a considerable amount of time—which has an opportunity cost—consuming it. Second, demand for advertising and the supply of content are interdependent. A decrease in the demand for advertising reduces the returns to supplying content and therefore the amount of content that is provided. Accounting for the value of content and these positive feedbacks cannot determine optimal interventions; but failing to do so can result in policies that reduce consumer—as well as advertiser—welfare. The paper then considers the implications of these considerations for public policy: particularly privacy regulation and antitrust enforcement. From the standpoint of promoting consumer welfare, the failure to account for the value of content and the ad-content interdependencies increases the chances that authorities do not intervene when they should and do intervene when they should not.

     

The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets

In this paper, we discuss whether the consumer welfare (CW) standard needs to be replaced or revised in order for antitrust law to deal effectively with the economic challenges of the platform economy. We argue that both the general and platform-specific assaults on the CW standard are misguided, that the CW standard is capable of addressing the economic concerns that critics have raised, and that the proposed alternatives would make things worse—not better.

     

Department of Justice Antitrust Enforcement, 1955—1997: An Empirical Study

This is an empirical study of Department of Justice(DOJ) enforcement of the antitrust laws. Its purposeis fourfold:1. To update Posner's study ``A Statistical Study ofAntitrust Enforcement' (Posner, 1970, pp. 365–419).2. To provide consistent andcomparable measures of antitrustenforcement effortby the Department of Justice.3. To report these measurements in a concise andsystematic way inorder to encourage empiricalstudies of antitrust issues.4. To explore some implications for antitrustissues.The purpose is to present the overall historicalrecord of DOJ antitrust activity as well as somepatterns in that history. More detailed analysis isleft for future work.The following information for cases undertaken by theDOJ are reported: number of cases, choice of civil orcriminal remedies, alleged violations, corporateofficials prosecuted, won-loss record, civil andcriminal sanctions imposed, and length of theproceedings. The principal source of data is theCCH Trade Regulation Reporter, commonly referred toas the CCH Bluebook which contains briefsummaries of all DOJ antitrust cases in order of theirfiling.     

Digital Data,Platforms and the Usual [Antitrust] Suspects: Network Effects,Switching Costs,Essential Facility

This paper asks whether the large amounts of digital data that are typically observed on large technology platforms—such as Google, Facebook, Uber and Amazon—typically give rise to structural conditions that would lead to antitrust concerns. In particular, I evaluate whether digital data augments or decreases concerns with regard to network effects and switching costs. I also evaluate whether data should be thought of as an ‘essential facility’.

     

The NCAA and the Rule of Reason

This brief essay considers the use of antitrust’s rule of reason in assessing challenges to rule-making by the NCAA. In particular, it looks at the O’Bannon case, which involved challenges to NCAA rules that limit the compensation of student athletes under the NCAA rubric that protects the “amateur” status of collegiate athletes. Within that rubric, the Ninth Circuit got the right answer. That outcome leads to a broader question, however: Should the NCAA’s long held goal, frequently supported by the courts, of preserving athletic amateurism be jettisoned? Given the dual role that colleges play, that is a complex question, which raises issues that are not only commercial but also educational. More important for the purpose at hand, is whether jettisoning amateurism in NCAA athletics is a suitable task for an antitrust tribunal. This paper argues that antitrust law is not an appropriate vehicle for addressing that issue. This does not mean that antitrust has no role to play in policing athlete compensation in NCAA schools. But it does suggest that that role be limited to addressing restraints on trade that occur within the rubric of amateur status—at least until such time as a more competent body decides whether amateurism in collegiate athletics is worth preserving.     

The Determinants of State-Level Antitrust Activity

While there has been a considerable literature exploring the determinants of antitrust enforcement in the United States, these studies have been based either on aggregate federal enforcement data over time (exploring cyclical influences) or cross-industry studies, usually for a single year or aggregated over several years. What has never been investigated is the pattern of state-level antitrust litigation. This is somewhat surprising, as this has been a major activity of many state attorneys general. In this paper, we explain state antitrust activity across states, examining a number of the economic and political determinants that have been proposed in the literature.     

The Australian merger guidelines: A comparison with the U.S. merger guidelines

Modern Australian antitrust had not begun when the first U.S. merger guidelines appeared in 1968. Even now, twenty five years later, no similarly detailed, formal administrative guidelines have been developed in Australia. This paper reviews the way in which the AustralianTrade Practices Act 1974 handles mergers and market definition, and considers how the Courts and the Trade Practices Commission, Australia's sole antitrust enforcement agency, have handled market definition and evaluated mergers. The key role played by the Trade Practices Tribunal, a quasi-judicial body, in influencing the Australian approach to mergers and market definition is highlighted. Contrasts are made with the 1992 American guidelines, and reasons for the different approaches are suggested.     

Shared ownership and pricing in a network switch

We observe that many wholesale switches in automated teller machine (ATM) networks are jointly owned by their members and that this tends to occur more frequently when the wholesale industry is highly concentrated. We also observe that network switches are ‘natural monopolies’, their costs being largely fixed and their demand exhibiting substantial network externalities. Motivated by these observations, we model the competition for members between wholesale switches and the role joint ownership can play in attracting members. The model analyzes both the adoption decision (which network a bank chooses to join) and the subsequent pricing of switch and ATM services. We compare competition between two solely owned switches with competition between one solely owned and one jointly owned switch. Our analysis shows that a more concentrated structure results under the latter and that retail prices are higher. This calls into question the leniency of antitrust policy toward jointly owned structures.     

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.     

The Dubious Antitrust Argument for Breaking Up the Internet Giants

Recent calls for using the antitrust laws to break up the large Internet giants are misplaced for a number of reasons. First, similar efforts against oil, tobacco, motion-picture, and telecommunications monopolies have not proved to be beneficial to economic welfare. Second, the failure to break up Microsoft using Section 2 has not proved to be a mistake: competition in operating systems and Internet browsers has flourished recently. Finally, a Section 2 case against Amazon, Facebook, or Google could not succeed if it focused on the digital advertising market. Even in a case based on market power on the other side of their platforms, a structural remedy—a break-up—would not improve economic welfare in the long run.

     

Patent Hold‐Up and Antitrust: How A Well‐Intentioned Rule Could Retard Innovation

Licensing technology essential to a standard can present a hold‐up problem. After designing new products incorporating a standard, a manufacturer could be confronted by an innovator asserting patent rights to essential technology. This hold‐up problem can be solved with a damages remedy provided by antitrust or some other body of law, but a damages remedy can reduce the innovator's licensing revenue and thereby retard innovation. The availability of an ex post damages remedy also alters the licensing terms in ex ante bargaining with the result that fewer socially beneficial R&D projects are undertaken.     

THE ENGINEERING ECONOMIST: AIMS AND SCOPE OF FOCUSED AREAS

The Engineering Economist is a refereed journal published jointly by the Engineering Economy Division of the American Society of Engineering Education (ASEE) and the Institute of Industrial Engineers (IIE). The journal publishes articles, case studies, surveys, book and software reviews, and readers' comments that represent current research, practice, and teaching involving problems of capital investment.

The journal seeks submissions in a number of areas, including, but not limited to, capital investment analysis, cost estimation and accounting, cost of capital, design economics, economic decision analysis, education, policy analysis (i.e., governmental), and research and development.

As noted in the editorial, we are celebrating the 50th volume of our journal and we are taking this opportunity to reinvigorate our purpose. This is to be facilitated with the designation of area editors assigned to specific submission focus areas. These areas are clearly defined below and the representative area editors are introduced. Their contact information is provided in case prospective authors have questions about potential submissions in prospective areas. However, all submissions should be sent to the editor-in-chief. The focus areas are listed alphabetically, followed by case study and book/software review submission guidelines. Following the definition of the areas are the new electronic submission guidelines for the journal.     

Antitrust in the Reagan administration: A report from the Belly of the beast

This paper is a report on selected aspects of antitrust policy in the Reagan administration. It was written while the author was Director of the Bureau of Economics at the Federal Trade Commission. The topics covered include: merger guidelines, the general drift of antitrust policy, deregulatory initiatives, consumer protection policy, and the stronger emphasis on economic analysis in the conduct of antitrust policy. The conclusions drawn are not very sanguine in a normative sense. perhaps our solace lies in the positive study of why the antitrust bureaucracies behave as they do.     

<Emphasis Type="Italic">GTE Sylvania</Emphasis> and Interbrand Competition as the Primary Concern of Antitrust Law

Footnote 19 of the landmark U.S. antitrust decision in Continental T.V. v. GTE Sylvania, Inc. 433 U.S. 36 (1977) declares that “Interbrand competition … is the primary concern of antitrust law.” We trace the antecedents and influence of this declaration, argue that it is inappropriate, and conclude that it should be abandoned.     

企业集团引发的反垄断难题

本文从企业集团的界定、性质和域外管辖权三个角度提出了其所引发的反垄断难题。本文的主要观点是企业集团作为一种企业间组织。兼有“企业性”与“市场性”二重属性：企业集团的“二重性”是导致企业集团垄断行为隐蔽性和复杂性的根本原因；处理企业集团的反垄断问题需要准确判断企业集团行为属性。本文通过案例研究．分析了美国和欧盟处理企业集团反垄断难题时的一些典型做法：提出了处理企业集团反垄断难题的基本原则。     

Policy Implications of the Effects of Concentration and Multimarket Contact in China’s Airline Market

Unlike many other mergers in developed countries, which might have been assessed and their effects estimated by antitrust authorities before being granted antitrust immunity, the airline mergers that swept China’s airline industry in 2002 occurred with no antitrust challenge. These mergers provide the opportunity to study important market power issues in China’s airline markets. Given that increased concentration and multimarket contact are the main legacies of an airline merger, the effects of mergers on these variables can raise the potential for the exercise of market power. However, an examination of the period 2002–2004 during which the Chinese airline mergers occurred shows that the resulting increased concentration and enhanced multimarket contact did not have important consequences for airfares in Chinese city-pair markets. The presence of Hainan Airlines appears to have played an important role in suppressing the airfares charged by China Eastern and China Southern.     

The FTC in the 1980s

This paper reviews the antitrust activities of Federal Trade Commission during the 1980s with special emphasis on the role of economics and economists. We contrast the FTC during the 1980s to its record in the 1970s and conclude that the agency was more active during the 1980s than is popularly believed. Perhaps more significant than changes in the level of enforcement activity was the agency's move to a more economics-oriented approach to antitrust enforcement and an increased role for Commission economists. The paper also comments on what FTC economists learned about American industry during the 1980s.     

The Sound of One Hand Clapping: The 2010 Merger Guidelines and the Challenge of Judicial Adoption

There is ample justification for the consensus view that the Horizontal Merger Guidelines have proven one of antitrust law??s great successes in the grounding of antitrust doctrine within economic learning. The foundation of the Guidelines?? success has been its widespread adoption by federal courts, which have embraced its rigorous underlying economic logic and analytical approach to merger analysis under the Clayton Act. While some have suggested that the Guidelines?? most recent iteration might jeopardize this record of judicial adoption by downplaying the role of market definition and updating its unilateral effects analysis, we believe that these updates are generally beneficial and include long-overdue shifts away from antiquated structural presumptions in favor of analyzing competitive effects directly where possible. However, this article explores a different reason to be concerned that the 2010 Guidelines may not enjoy widespread judicial adoption: the 2010 Guidelines asymmetrically update economic insights underlying merger analysis. While the 2010 Guidelines?? updated economic thinking on market definition and unilateral effects will likely render the prima facie burden facing plaintiffs easier to satisfy in merger analysis moving forward, and thus have significant practical impact, the Guidelines do not correspondingly update efficiencies analysis, leaving it largely as it first appeared 13 years earlier. We discuss two well-qualified candidates for ??economic updates?? of efficiencies analysis under the Guidelines: (1) out-of-market efficiencies and (2) fixed-cost savings. We conclude with some thoughts about the implications of the asymmetric updates for judicial adoption of the 2010 Guidelines.