Anticompetitive Effects Research Articles

Old tools for the new economy? Counterfactual causation in foreclosure assessment and choice of remedies on data-driven markets

Abstract Under the Digital Markets Act, gatekeeper platforms abide by numerous ex-ante rules, including narrow data-sharing obligations that address data-driven market tipping. Gatekeepers also remain subject to ex-post competition interventions. While interventions under both ex-ante and ex-post (antitrust) mandates are not novel, they must be approached with extra care in data-driven digital markets, where uncertainty and error costs are high. Therefore, we argue that post-DMA competition enforcement against gatekeepers requires rigorous ex-post economic effects analysis at two levels: foreclosure assessment and devising appropriate remedies. Regarding foreclosure assessment, we propose a ‘multiple-counterfactual-causation-test’ for establishing anticompetitive effects, which should ensure a nuanced analysis of the competitive landscape on data-driven digital markets in the post-DMA world. Regarding remedies, a fine-grained, proportionality-driven assessment of the need for ex-post data-related obligations is vital.

The role of trademark rights expansion in the formation and abuse of market power

Trademarks play a critical role in the creation and abuse of market power, in the sense that when expansively protected, trademark rights yield legal advantages that can be leveraged to lock in consumers and raise entry barriers. But this role has long been underestimated or even overlooked. Based on empirical research and qualitative case analysis, we find that the legal advantages created by the expansion of trademark rights are a key factor in the formation of firms’ market power in product domains with a high degree of information asymmetry. In situations where firms have market power, the geographical and cross-category expansion of trademark rights can enable and rationalize the implementation of abusive practices such as price discrimination and tying. Limiting the anti-competitive effects of the expansion of trademark rights requires the combined efforts of ex post antitrust and ex ante regulation.

An Antitrust Analysis of the NCAA Transfer Policy

The National Collegiate Athletic Association (“NCAA”) is no stranger to antitrust law. As a trade association composed of nearly all U.S. colleges offering competitive sports, its rules are regularly challenged under antitrust law. In the past 40 years, the NCAA has faced challenges to rules limiting televised game broadcasts, curtailing assistant coaches’ pay, and restraining players’ compensation, among other issues. Restraints on college athlete transfers also could subject the Association to reasonable legal scrutiny. Restrictions on the ability to transfer can harm athletes by preventing their immediate eligibility even though transferring could allow them to be closer to family, enroll in more academically rigorous schools, or escape abusive coaches. Transfer restraints have an especially restrictive effect on players hoping to one day play in the National Football League (“NFL”). For these individuals, the college football system is the primary opportunity to showcase talent before declaring for the League’s draft. The NCAA’s transfer rules keep many of these elite players on their teams’ benches. This hurts their ability to prepare for careers in the NFL. And it denies football fans the opportunity to watch them perform in college. The NCAA’s rules that prevent football players from freely transferring between schools have changed over time. Why? Because of the changing preferences of members of the NCAA Division I Council (“NCAA Council”), a group of college athletic directors and administrators. In April 2021, the NCAA Council changed its rules to facilitate the movement of football players between schools, allowing athletes who had not previously switched schools to pursue transfer opportunities by entering a portal within a 60-day window. On October 4, 2023, the NCAA Council reduced the transfer window from 60 to 45 days. In this Essay, we explore the antitrust consequences of this latest action by the NCAA Council, as well as the broader competitive effects of limits on college football player movement. We conclude that: (1) the NCAA’s transfer limits impose substantial anticompetitive effects; (2) the NCAA could offer (but would need to prove) a justification based on reduced fan interest from a lack of team stability; (3) less restrictive alternatives (including the 60-day transfer window) are available; and (4) the restraint’s anticompetitive effects are likely to outweigh its procompetitive effects.

California Bill Would Tighten Oversight on Private Equity Hospital Purchases

No abstract available. Article truncated after 150 words. According to Medscape California lawmakers are considering a bill that would tighten oversight of private equity and hedge fund buyers of hospitals and healthcare facilities (1). Private equity investment in hospitals and physician groups has been under scrutiny in recent months after a slew of high-profile failures, including bankruptcies and hospital closures. California lawmakers have drafted a bill that would require private equity firms and hedge funds to give the state attorney general written notice before purchasing a healthcare facility or provider group. The attorney general would have to approve the transaction. Buyers would also be required to submit written notice to any federal or state agency as required by law within 90 days of the transaction, and the attorney general could extend that period. The bill gives the attorney general the power to halt an acquisition if there is a "substantial likelihood of anticompetitive effects" or if it would …

The Unintended and Anticompetitive Consequences of Laws to Control Health Care Costs

The Unintended and Anticompetitive Consequences of Laws to Control Health Care Costs

Strategic exit counterfactuals and remedies in Irish retail banking mergers

Strategic exit arises when a business decides to leave a market, but is not necessarily financially failing. As part of the exit strategy, the business may sell its assets, creating a merger situation. A merger which would otherwise look problematic may not give rise to anticompetitive effects if the counterfactual to the merger includes strategic exit. What counts as credible evidence of strategic exit? What happens if the decision to exit is taken after the merger is already in contemplation? Why might a flexible approach to remedies be useful when there is a risk of exit in the event of merger prohibition?

Anticompetitive effect of drug name trademark registration: lessons from China

The Chinese Trademark Law does not entirely exclude the possibility of generic names being registered as trademarks, which is inconsistent with the international standards. The necessity and rationality of allowing the trademark registration of drug names are worth of further research. This study analyzes the rules and cases that involve the trademark registration of drug names and makes comparisons with international counterparts. It displays that in Chinese judicial practices, drug name listed in the National Drug Standards may be registered as a trademark if it has acquired distinctive characteristics by use, which contradicts the nature of generic names and may exert an anticompetitive effect and have adverse implications on the development of the related drug industry and patient well-being. This study proposes that the drug name sign is different from descriptive sign, and cannot obtain distinctiveness through use. Based on the particularity of the drug industry, the trademark registration of drug names in the National Drug Standards should be prohibited. This arrangement is conductive to addressing the imbalance of interests among drug operators and safeguarding public health. This study can provide insights and policy recommendations for Chinese lawmakers offering a framework to reconcile trademark protection with the pharmaceutical industry’s unique characteristics and regulatory demands.

A New Approach for Better Industrial Strategies

Industrial policy is back. After having been considered a taboo since the 1970s, “new industrial policies” are at the core of governments’ strategies to support countries during crises and enable the green and digital transitions. Virtually, every government has used and uses industrial policy, despite continued concerns related to anticompetitive effects, within and across countries, captured by vested interests and the opportunity cost of public funds, which economists have pointed out, based on previous unsuccessful experiences. In this paper, we contribute to the debate on industrial policy by presenting both a sound and simple framework to help design industrial policies and also data that allow the comparison of industrial strategies and their priorities across countries. First, this paper summarises our recent framework for industrial strategies, which is designed to offer practical policy advice and shed light on the complementarities between different policy instruments. Such a framework is particularly useful when designing complex mission-oriented industrial strategies promoting the green transition of the business sector. Second, this paper presents some salient results from the new “Quantifying Industrial Strategies” (QuIS) project, which gathers harmonised data on industrial policy expenditures, policy priorities, and policy instruments, thereby allowing the benchmarking of industrial strategies across countries. Based on the aforementioned conceptual framework, QuIS measures industrial policy expenditures across 9 OECD members, for the period 2019–2021. The data, now publicly available on the OECD website, show the importance of industrial policy expenditures, and the growing role of green industrial policies in countries industrial strategies.

Competition after mergers near review thresholds

Size thresholds determine whether a national authority reviews a merger and separate national and supranational responsibility. Firms could pursue competition-reducing mergers before they come under any regulatory oversight. Using data on German procurement auctions, I analyse competition effects near review thresholds. Four years after a merger, competition in procurement auctions decreases after mergers that are reviewed by the German national authority, relative to mergers below the threshold. However, when acquiror and target competed in procurement auctions before the merger, competition relatively increases after a German national merger review. Anti-competitive effects after nationally reviewed mergers without pre-merger activity in procurement may get unnoticed by the authority.

Online travel agencies, minimum advertized prices and online intermediation services: some lessons from the Swedish Finnair case

ABSTRACT In 2023, the Swedish Competition Authority adopted a decision accepting commitments from Finnair to reverse a policy implemented with online travel agencies. Specifically, Finnair was preventing online travel agencies from marketing Finnair airfares at a discounted level (relative to the airfares offered by Finnair to the online travel agencies) to customers who were searching for Finnair tickets online, in particular on metasearch websites. This case is noteworthy for three reasons. First, this commitments decision has commercial and strategic implications for the sector across the European Union. Second, while conflicting legal arguments were raised, the economic assessment was quite unequivocal, pointing to the challenged conduct being very likely to generate anti-competitive effects. Third, the Swedish Competition Authority’s investigation overlapped with the entry into force of the 2022 European Commission’s Vertical Block Exemption Regulation and showed some potential ambiguity in its interpretation and application, which the investigation’s outcome has hopefully alleviated.

Common ownership and corporate innovation strategy

It is empirically challenging to test the effect of common ownership on corporate innovation as the observed impact of common ownership on corporate innovation is a net effect due to two offsetting powers: technological spillover and market stealing. This paper tends to mitigate that issue by investigating the impact of common ownership on the strategic features of corporate innovation. We analyze the effect of common ownership on corporate innovation activities using stacked difference-in-differences analyses based on events of financial institutional mergers and acquisitions. We find no significant effect of common ownership on research and development (R&D) expenditures, patent applications, and citations, whereas we find a positive effect of common ownership on exploitative innovation strategy. Our findings suggest that the weak market-stealing effect of exploitative innovation incentivizes common owners to encourage a higher weight of exploitative innovation among innovation outputs. Our study contributes to the current literature in three ways. First, it provides new evidence of the anti-competitive effect of common ownership. Second, it empirically examines competing theoretical predictions of common ownership impacts on corporate innovation. Third, it identifies common ownership as one of the determinants for variations of innovation strategy.

Does common institutional ownership improve the similarity of behavior between firms? Evidence from China

This study investigates whether common institutional ownership (CIO) between firms in the same industry leads to more similar behavior between them in the context of firm investment. Using a sample of Chinese A-share listed firms from 2003 to 2021, we find, at the firm-pair level, that the stronger the CIO ties between two firms, the more similar their investment behavior. Further analysis shows that the impact of CIO on investment similarity is more pronounced in industries with lower market concentration (i.e., more intense market competition). CIO is not associated with underinvestment but is linked to higher investment efficiency and firm value. Common institutional investors with greater industry power can strengthen the negative relationship between CIO and investment dissimilarity. These results are consistent with the underlying logic of knowledge-sharing in the presence of CIO but are inconsistent with anti-competitive effects.

A Normative Framework for Assessing the Information Curation Algorithms of the Internet

It is critical to understand how algorithms structure the information people see and how those algorithms support or undermine society’s core values. We offer a normative framework for the assessment of the information curation algorithms that determine much of what people see on the internet. The framework presents two levels of assessment: one for individual-level effects and another for systemic effects. With regard to individual-level effects we discuss whether (a) the information is aligned with the user’s interests, (b) the information is accurate, and (c) the information is so appealing that it is difficult for a person’s self-regulatory resources to ignore (“agency hacking”). At the systemic level we discuss whether (a) there are adverse civic-level effects on a system-level variable, such as political polarization; (b) there are negative distributional or discriminatory effects; and (c) there are anticompetitive effects, with the information providing an advantage to the platform. The objective of this framework is both to inform the direction of future scholarship as well as to offer tools for intervention for policymakers.

Single monopoly profits, vertical mergers, and downstream foreclosure

We review the Chicago school's single monopoly profit theory whereby an upstream monopolist cannot increase its profits through vertical integration as it anyway has sufficient market power. In our model the dominant supplier has full bargaining power, uses observable two-part tariffs, and is only constrained by a less efficient source (such as in-house production). We show that, by vertically integrating with a downstream incumbent, the supplier can profitably commit to pricing more aggressively if a downstream entrant refuses its supply contract. This can foreclose the downstream market. The anti-competitive effects arise from the seemingly pro-competitive elimination of double marginalization.

The Practice of Efficiency Defense in Antitrust Cases: A Comparison of BRICS and European Cases

In non-merger antitrust cases efficiencies should play a significant role when authorities decide on cases as many potentially anticompetitive practices may have pro-competition effects, according to economic theory. In many jurisdictions rule of reason or effect based legal standard is claimed to be the policy adopted according to the own authorities. For such legal standards, considering efficiencies is part of the standard analysis protocol. We review the practice of efficiency defense in antitrust cases in selected BRICS and European countries. The case study shows that efficiencies are considered in rulings less often than expected. Similar arguments are used across countries, suggesting a common underlying economic analysis across jurisdictions that may have different legal institutions. We have employed the cross-country comparison based on Brazil, Russia, India, and South Africa cases. We also summarize the main reasons for efficiencies analysis not to be able to reverse the concluded anticompetitive effect from a business practice.

Competitive effects of mergers and of spectrum divestment remedies in mobile telecommunication markets

Motivated by recent mergers in mobile telecommunications markets, this paper investigates the merger induced effects on consumer surplus in a setting where: (i) the industry is modeled as a triopoly in which firms sell products that are both horizontally and vertically differentiated; (ii) the merging parties are able to pool their spectrum assets; and (iii) the joint management of pooled spectrum assets enables merging parties to offer a better quality service, for which customers are willing to pay more. From a merger policy perspective, our contribution is two-fold. First, we conclude that mergers may benefit consumers even in the absence of any cost-related efficiencies and establish under which circumstances this is more likely to occur. Second, our results also indicate that when the merger has a negative impact on consumer surplus, remedies based on reallocation of spectrum are not very likely to change this outcome. The reason is that the circumstances under which the merger is unlikely to benefit consumers are precisely those under which spectrum reallocation will be unable to fix merger-induced anticompetitive effects.

The rule of reason and the fundamentals against more presumption-based illegality legal standards: highlights on CADE’s decisions on digital economy issues

Abstract This article advocates against more presumption-based illegality legal standards. The focus is on the Rule of Reason analysis, which is in line with CADE’s case laws for analysing unilateral conducts, distinguishing between restraints with an anti-competitive effect (or resulting in conduct likely to cause such injury) that are harmful to the consumer, and restraints stimulating competition that are in the consumer’s best interest. In this sense, the article recalls some basic concepts, such as market power, dominant position, concentration indexes, and its interactions, since the recent discussions appear to have forgotten its basics. Moreover, a brief analysis of CADE’s procedures and the Brazilian Competition system, especially the analyses of unilateral conduct cases, is made in order to present a background for the readers. At the end, we report three digital antitrust cases judged by Cade to demonstrate the steps used by the authority in order to reach a decision on the case. In a nutshell, CADE has not shifted the analysis of unilateral conduct from the use of the rule of reason to a more presumption-based illegality approach.

Taking Innovation Seriously: A Dynamic Competition Model for Antitrust Law

Although innovation is often portrayed as a byproduct of competition, innovation and related dynamic aspects of competition are also, and perhaps more so, drivers of competition. The current antitrust framework, as illustrated by merger law and the agency guidelines that bear on that law, emphasizes static, demand-side conditions in defining markets and assessing likely anticompetitive effects. Only after the market has been defined and competitive effects assessed are innovation and dynamic, supply-side developments considered, and then in the context of rebutting anticompetitive findings already made on the basis of the static assessment. In addition, the burden of demonstrating and quantifying the supply-side developments is placed on the merging parties despite their relatively limited access to competitor capabilities, strategies, and plans. The following article suggests a new framework that places the burden of addressing dynamic considerations primarily on the enforcement agencies that must be met before the agencies can establish a presumption of illegality against a proposed transaction or a prime facie case against a competitive practice. It also suggests a more qualitative assessment of innovation and likely supply responses that is elaborated in the accompanying article by Professor David J. Teece.

Pay-for-delay settlements and patent expansion practices

Pay-for-delay (reverse payments) settlements and patent expansion practices (PEP), such as preemptive patenting, product hopping and evergreening, have been criticized for their potential anticompetitive effects. This paper shows that reverse payments and PEP are strategic substitutes and, when the information over the patents’ strength is asymmetric and patents’ strength is endogenous, a ban on reverse payments may reduce consumer surplus. This effect is stronger the more generic competition reduces industry profits. When the cost of using PEP is sufficiently high, a ban on reverse payments is optimal, otherwise it is optimal to allow reverse payments at the minimal level consistent with the originator not engaging in PEP. Results are qualitatively robust to allowing PEP to increase patent quality and consumer surplus.

Causation and counterfactual analysis in abuse of dominance cases – lessons from the General Court’s Qualcomm ruling

ABSTRACT Counterfactual analysis, which compares the competitive situation prevailing with and without the allegedly abusive behaviour, is nowadays regarded the lynchpin of an effects-based approach to the analysis of dominant firm conduct under Article 102 TFEU. This article draws on the recent Qualcomm ruling by the General Court of the European Union to critically reflect on the use and requirement of counterfactual analysis in abuse of dominance cases. It argues that Qualcomm offers two lessons on the role of the counterfactual analysis in modern competition law. First, it shows that counterfactual analysis is vulnerable to under-inclusiveness and type II errors when it ignores the problem of concurrent causes of foreclosure effects, disregards standard economic analysis of exclusivity rebates, and remains oblivious to dynamic competition. Second, Qualcomm sheds light on the intricate relationship between the counterfactual analysis and the requisite standard of harm for finding anticompetitive effects under Article 102 TFEU. In limiting the relevant counterfactual scenarios to a very narrow set of actual or nearby likely worlds, Qualcomm is but the last indication of a much more profound transformation of Article 102 TFEU: the transition from a capability to a balance of probabilities or beyond reasonable doubt standard of harm.