Search

The competition literature documents that leniency programmes can either destabilize or reinforce the sustainability of horizontal cartels. We contribute to this body of literature by looking at a specific type of cartels, namely hub and spoke cartels. Drawing on earlier work of Van Cayseele and Miegielsen (2013)11 P Van Cayseele and S Miegielsen, ‘Hub and Spoke Collusion by Embargo’ (2013) CES-Discussion paper series, DPS13. 24 1, 1–20. on hub and spoke cartels, and Chen and Rey’s dynamic leniency model for horizontal cartels (2013),22 Z Chen and P Rey, ‘On the Design of Leniency Programs’ (2013) 56(3) Journal of Law and Economics 917, 917–57. this paper builds a model that measures the impact of leniency programmes on hub and spoke cartels. From our model it follows that it is always desirable to offer some ex-ante leniency to the first-reporting hub and spoke cartel member to discourage cartel formation and that this optimal leniency rate is unique for both the hub and spokes.P Van Cayseele and S Miegielsen, ‘Hub and Spoke Collusion by Embargo’ (2013) CES-Discussion paper series, DPS13. 24 1, 1–20.Z Chen and P Rey, ‘On the Design of Leniency Programs’ (2013) 56(3) Journal of Law and Economics 917, 917–57. [ABSTRACT FROM AUTHOR]

Innovation plays a crucial role in defining competitive dynamics. Given this fact, one might expect 'innovation' to play a consistent role in antitrust law. The present article conducts a systematic content analysis of the case law of the Court of Justice of the European Union to test this hypothesis. The findings suggest that EU courts treat innovation inconsistently in competition law cases, often assigning different weight to innovation in similar contexts and neglecting central parameters agreed upon in the literature. To address this inconsistency, the article proposes measures to maintain the predictability of competition law analysis while giving innovation a more central role in the definition of relevant markets, evaluation of market power, and assessment of practices. [ABSTRACT FROM AUTHOR]

The European Commission (EC) has recently announced its intention to issue Guidelines on exclusionary abuses. In this paper, we explain how economics can and should be used to inform a sound and effects-based approach in the enforcement of Article 102 TFEU. In particular, the EC should be guided only by a consumer welfare standard; exclusive dealing and exclusivity rebates should be subject to a (rebuttable) presumption of harm; price–cost tests are meaningful only for predation and other practices that do not reference rivals; essentiality of the input should not be a requirement for vertical foreclosure cases of any type, but such cases should be limited only to dominant firms that satisfy certain criteria. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of Resale Price Maintenance (RPM) agreements in Europe by studying a legally permitted form of RPM in the book market. In particular, we study the effects of such agreements on prices and sales, finding that countries which have Fixed Book Prices policies witness higher book sales, relative to countries without such a policy, with no noticeable effect on the average price of books. We suggest that the mechanism for these findings is that FBP policies promote non-price competition and a diverse network of retailers, increasing quantity, whereas a change in bargaining power reduces double marginalisation, offsetting upward pricing pressure from RPM. While these results are limited to the book sector and are based on a limited number of countries changing policy, they nonetheless highlight that RPM agreements have the ability to confer positive competition effects and absolute prohibition of such agreements may not always be warranted. [ABSTRACT FROM AUTHOR]

'Restrictions "By Object" After Generics, Lundbeck , and Budapest Bank: Are We Any Wiser Now?' summarizes the CJEU's jurisprudence on the question when an agreement or a concerted practice between undertakings restricts competition 'by object' and when 'by effect', Article 101(1) TFEU. It turns out that there are few certainties in this area. Instead, there is a bewildering array of standards for assessing the consequences of agreements on the relevant market. Time and again, it is unclear how 'abstract' or 'concrete' the assessment has to be. Not much more clarity comes from the recent judgments in Generics, Lundbeck , and Budapest Bank on patent settlement agreements and price fixing, respectively. Nevertheless, they contain the elements of a simple and comprehensive test that dispenses with the complications that have built up in the case law. [ABSTRACT FROM AUTHOR]

While business users face difficulties accessing and porting data on platforms, the Digital Markets Act has been hailed as the legislative tool enabling business users access and transfer the data they have generated on platforms controlled by gatekeepers. The tool provided by the Digital Markets Act is discussed in this article and the author argue that business users should have a more elaborated right to first access the data they produce on platforms and in ecosystems, and secondly transfer such data from platform to platform, cloud to cloud, thing to thing or in-house. A right to access and transfer data could have several benefits; it benefits dissemination of data, creativity and innovation in connected markets and it promotes competition between platforms, clouds and ecosystem providers. Creativity will be enhanced because necessary data—being the raw material for new innovations—will be more broadly disbursed. It will also benefit consumers having a disbursed and disseminated data commons for the development of ideas, innovations, and the exchange of knowledge. [ABSTRACT FROM AUTHOR]

This research uses the publicly available World Input-Output Database (WIOD) to investigate the relationship between an industry’s markup and its upstreamness, the industry’s position in the vertical chain of production; the research also identifies common attributes among high-markup industrial sectors: higher-markup industries display a higher level of capital compensation and a lower share of labour and other inputs in the value of output. Finally, it is found that upstream industries, those producing mostly raw materials and intermediate products enjoy higher market power than their downstream counterparts. This result could be among the first in the literature to find evidence of double marginalization at an industry level of aggregation. It also suggests that virtually all final product prices may incorporate substantial markups through their inputs.

This article reviews an abuse of dominance decision against the main outsourced ticketing firm in South Africa. The decision of the Competition Tribunal in January 2019 was upheld by the Competition Appeal Court in October 2019. The case clearly illustrates an economics approach to evaluating exclusionary conduct. As this article sets out, the market and contractual environment in which Computicket operated corresponded closely to the assumptions of the economic theory of anti-competitive exclusive dealing. These conditions, taken together, imply that Computicket's exclusive contracts are likely to have led to significant anti-competitive effects in the relevant market. [ABSTRACT FROM AUTHOR]

Macrobrewers initially responded to the rapid growth of the craft beer segment by product differentiation: offering versions of their own "craft beer." When this proved unsuccessful, they began acquiring independent craft brewers. We examine the consequences of Anheuser-Busch InBev's acquisition of Goose Island. We find large gains in sales for craft brewers post-acquisition, which suggests that marketing spillovers attracted new consumers to craft beer. We also find large negative effects on product variety, which suggests greater difficulty for craft brewers gaining shelf space in off-premise accounts. These variety effects are particularly pronounced in Goose Island's regional "birthplace": Illinois. [ABSTRACT FROM AUTHOR]

It has been shown that manufacturers can employ vertical practices and restraints to prevent entry in markets where upstream entrants require downstream accommodation. I show that if downstream product investment is important and encouraged by the restraint, foreclosing entry this way may not be credible. Additionally, publicly mandated vertical restraints and termination restrictions could prevent foreclosure, but if these restrictions reduce downstream product investment, they could have the opposite effect and decrease entry. [ABSTRACT FROM AUTHOR]

We study the welfare effects of input price discrimination when an upstream firm that supplies two cost-asymmetric downstream firms undertakes R&D investments. With observable two-part tariffs, banning discrimination always decreases R&D levels and long-run welfare. Under unobservable two-part tariffs, banning discrimination may increase or decrease R&D levels—depending on the degree of downstream cost-asymmetry; but it always decreases long-run welfare. Thus, with unobservable two-part tariffs, a ban on input price discrimination is detrimental to welfare even when its effect on upstream R&D investments is positive. [ABSTRACT FROM AUTHOR]

We study upstream horizontal mergers when one of the merging parties is vertically integrated. Under observable contracting in the pre-merger case, we show that such type of mergers always harm consumers. However, under unobservable contracting in the pre-merger case, the input price may decrease and consumer surplus may increase as a result of the merger even in the absence of exogenous cost-synergies between merging firms. A necessary condition for this finding is that the unintegrated downstream firm is more cost-efficient than the downstream division of the integrated firm. [ABSTRACT FROM AUTHOR]

Copyright of ORDO: Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We study two types of vertical contracts that reference rivals: the "vertical price constraint" (VPC) requires retail prices for a manufacturer's product to be no higher than for its competitors' products. The "vertical margin constraint" (VMC) requires retail margins for a manufacturer's product to be no higher than for its competitors' products. These agreements are found in the soft drink and cigarette industries, and in travel platforms. With two asymmetric manufacturers, we find that only the larger adopts a VPC in a subgame perfect equilibrium. We also analyze incentive compatibility issues with optional VPC agreements. Apart from leading to increased prices, the VPC leads to lower profits for the smaller manufacturer. In contrast, the VMC leads to lower prices. Under certain conditions, by adopting the VMC, a larger manufacturer will gain enough to compensate the retailer and still be better off, while making its competitor worse off. These two vertical contracts work because they alter the price elasticities of demand that face upstream manufacturers. [ABSTRACT FROM AUTHOR]

Pricing decisions are increasingly in the "hands" of artificial algorithms. Scholars and competition authorities have voiced concerns that those algorithms are capable of sustaining collusive outcomes more effectively than can human decision makers. If this is so, then our traditional policy tools for fighting collusion may have to be reconsidered. We discuss these issues by critically surveying the relevant law, economics, and computer science literature. [ABSTRACT FROM AUTHOR]

A previous study finds that in a market where a manufacturer faces uncertain demand and sells to consumers through competitive retailers, the manufacture wishes to support adequate retail inventories by imposing resale price maintenance (RPM). I show that if retail inventories are allocated to consumers through first‐come‐first‐served rule rather than efficient rationing rule in the game with unconstrained retail competition, imposing RPM may not be profitable. It may not encourage more retail inventories either. RPM may also lower consumer surpluses and social welfare. This study casts some doubt on the demand uncertainty theory that supports RPM. [ABSTRACT FROM AUTHOR]

Most-favored-nation (MFN) clauses in wholesale contracts have been the subject of recent controversy and renewed antitrust scrutiny. We demonstrate that a vertical environment where MFN clauses may be endogenously adopted shares equivalence properties with an environment where a final goods monopolist sells a good exhibiting negative consumption externalities directly to consumers and is faced with an exogenously imposed uniform pricing requirement. By leveraging these equivalence results, we are able to offer a new and useful framework for assessing the welfare effects of wholesale MFNs and which generates new insights. [ABSTRACT FROM AUTHOR]

Henry G. Manne, our friend, Mentor, and colleague, was a pioneer in the economic analysis of law. By consistently challenging the notion that existing institutions were well understood, he expanded the domain of economics to new and fertile ground. In that spirit, our goal in this article is to bring out of the shadows an institution that has thus far evaded the light of economic analysis: antitrust consents. In our view, competition authorities around the world should be asking themselves what ratio of litigation to settlement is optimal for their agency. Over the last 35 years, the United States Federal Trade Commission and the Antitrust Division of the Department of Justice have shifted dramatically toward greater reliance upon consent decrees than upon litigation to resolve antitrust disputes. As an aid to national competition agencies considering the desirability of adopting a similar approach, we focus upon the importance of economic analysis in evaluating movement along the continuum from a law enforcement model to a regulatory model of agency behavior. We draw upon the U.S. experience to substantiate our claim that the costs associated with a shift toward the regulatory model, including the potential distortion in the development of substantive antitrust doctrine, may be under-appreciated and discernable only in the long run. We acknowledge that consent decrees can and should be an important tool in an antitrust agency’s toolkit for resolving antitrust disputes. We contend, however, that a full economic analysis of reliance primarily upon consent decrees is necessary to inform each competition agency’s strategic decision about the optimal mix of law enforcement and regulatory techniques. [ABSTRACT FROM AUTHOR]

Factors facilitating collusion may not successfully predict cartel occurrence: When a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra‐competitive profits. We illustrate this issue with laboratory data. We run n‐firm Cournot experiments with written cheap‐talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four, and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate. [ABSTRACT FROM AUTHOR]

We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader-follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lump-sum payments in exclusivity contracts (by all suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the incumbent supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation. [ABSTRACT FROM AUTHOR]

Pricing schemes in business-to-business (B2B) relationships reflect price discrimination and bargaining over rents. Bargaining outcomes are determined by upstream market power and countervailing buyer power downstream. This paper uses a panel of B2B transactions in the UK brick market to study B2B transaction prices. The empirical analysis identifies three effects on prices: nonlinear volume and freight absorption effects; countervailing power effects that arise from buyers’ local commercial significance; and competition effects that are due to the buyers’ local potential suppliers. And it shows that small buyers benefit more from competition than do large buyers because they are not constrained by the suppliers’ capacity. [ABSTRACT FROM AUTHOR]

A tie-in contract has frequently come under scrutiny for its role as an exclusionary device. A firm that is a monopolist in a primary market can utilize such contracts to exclude a more efficient rival in a secondary market. When the firms sell through competing retailers, the leveraging firm may offer tie-in contracts to the retailers inducing them to purchase both primary and secondary products entirely from it such that the rival is excluded. We examine whether such tie-in contracts are profitable for an incumbent firm under different conditions of (i) the ability to commit to prices by the upstream firms and (ii) downstream competition among the retailers. We show that when retailers compete in prices, then regardless of whether the entrant is able to commit to its own prices, an exclusionary tie-in strategy is profitable (not profitable) for the incumbent when it is able (unable) to commit to prices. However, when retailers compete in quantities, the entrant’s commitment ability does matter. Specifically, an exclusionary tie-in strategy (i) may be unprofitable for an incumbent when both upstream firms are able to commit to their prices, depending on the degree of cost advantage of the entrant; (ii) is always profitable when it alone can commit to its price; and (iii) is unprofitable when both upstream firms cannot commit to their prices. Our results extend to situations where the products are complementary or substitutes and where the retailers may be asymmetric in nature. [ABSTRACT FROM AUTHOR]

Quantity commitment discounts (QCDs) are vertical agreements in which a seller conditions price discounts on the specified quantity or share of a product line that the buyer commits to purchase from the seller. QCDs are a natural outcome of sales-promoting competition among differentiated sellers and would be commonly used absent any possibility of excluding rivals. Both economic theory and the law recognize that in some cases pricing and business practices of sellers may harm or weaken rivals and might also reduce social welfare. Absent clear standards defining the bounds of illegal conduct, the mere threat of antitrust liability may dampen rivalry among firms, with resulting harm to the competitive process and, ultimately, consumers. Existing tests for exclusionary effects are unreliable and biased in favor of finding anticompetitive harm. [ABSTRACT FROM AUTHOR]

Advances in technology are creating new business models. The internet means that consumers can access a wide variety of potential suppliers. Those suppliers may have extensive data on individual consumers, and the interactions between buyers and sellers may be moderated by large, potentially dominant, platforms such as Google and Facebook. Competition authorities and policy makers are grappling with the issues raised by technology. However, the tools available to regulators are often laws that were designed for a pre-internet world. It is not clear if these laws can adapt. This article briefly surveys three areas of particular concern for both economic researchers and competition authorities: the competitive implications of two-sided markets; price restrictions imposed by internet platforms on retailers; and the use of personalized data by sellers. [ABSTRACT FROM AUTHOR]

If one firm buys inputs from a competitor, the input price may be used to internalize the competition between the firms. Thus, positive unilateral pricing effects may arise if one firm starts to buy inputs from a competitor. Conversely, unilateral pricing effects may be small if two firms with vertical relations merge, as pre-merger competition is partly internalized through the input price. We present a method for adjusting the formula of Hausman et al. (Econ Lett 111(2):119-121, 2011), in order to predict correct unilateral pricing effects not only for horizontal mergers, but also for structural changes in markets where one firm sells inputs to a rival. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]

The starting point of this paper is a January 1977 judgment of the Indian Supreme Court, which applied the rule of reason to vertical restraints and anticipated many of the arguments of the Sylvania judgment. After summarizing the background of the Indian case, I set out the main points of similarity and difference between the two judgments, and finally assess the somewhat erratic influence of post- Sylvania antitrust thinking on Indian competition law and jurisprudence. [ABSTRACT FROM AUTHOR]

We compare the wholesale model and the agency model that characterise a vertical relation in a bilateral duopoly framework. Results suggest that the agency model may be regarded as an example of retailer power resale price maintenance and provide an economic view of why restraints of this kind should be evaluated under the rule of reason. While competition is more likely to be undercut under the agency model, relative to the wholesale model, the agency model benefits consumers by offering relatively lower retail prices and greater demand. [ABSTRACT FROM AUTHOR]