Antitrust Authorities Research Articles

A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures

Antitrust authorities search public documents to discover anticompetitive mergers. Thus, investor disclosures may alert them to deals that would otherwise go undetected, creating disincentives for managers to divulge certain transactions. We study this behavior in publicly traded US companies. First, we employ a regression discontinuity approach to estimate the effect of mandatory disclosures. We find that releasing information to investors poses antitrust risk. Second, we introduce a method for measuring undisclosed mergers that relies on financial accounting reporting requirements. We find that undisclosed mergers total $1.85 trillion between 2002 and 2016. (JEL D22, G32, G34, G38, K21, L41, M41)

Social Media and Deceptive Patterns: A Way Forward for Antitrust Enforcement

Abstract The digital public sphere's significance, amplified by the COVID-19 pandemic, highlighted concerns on how the concentration of market power can shape social interactions. Antitrust, in particular, has faced calls for reform to better serve democratic goals in this context. However, experts disagree on whether antitrust should be geared towards achieving these objectives. This paper discusses antitrust’s potential in fostering a healthier digital public sphere, particularly through the analysis of deceptive patterns deployed by social media platforms and their competition impact. It first discusses how the concept of deceptive patterns should be conceived—as there is no clear definition universally adopted in either academia or enforcement circles. It then moves on to explore ways to align traditional consumer-welfare antitrust analysis with this topic, by reviewing existing deceptive patterns’ literature, looking at existing taxonomies and how they can help clarify effects on consumers, markets, and society, with a narrowed focus on social media. Lastly, it attempts to offer a framework for the assessment of deceptive patterns in social media by antitrust authorities.

On the motivation for pharmaceutical manufacturer coupons: Brand loyalty or customer acquisition?

To generate evidence regarding the offensive (customer acquisition) versus defensive (customer retention) motivation for pharmaceutical manufacturer coupons. Retail prescriptions from IQVIA's Formulary Impact Analyzer data between 2017 and 2019. Ordinary least squares regression models with person, therapeutic class, drug, and time-fixed effects to measure the association between switching medications and coupon usage as well as the association between patient out-of-pocket spending and switching to a drug and using a coupon. To study switching type heterogeneity, reanalysis of associations for any type of switch, generic-brand switches, and brand-brand switches. Reestimation of baseline analyses for sodium-glucose cotransporter-2 inhibitors, anticoagulants, and inhaled corticosteroids/long-acting beta2-agonists to assess heterogeneity by drug class and market maturity. 1,167,132 privately insured patients that utilized at least one coupon between 2017 and 2019 for one or more prescriptions. Coupon usage was associated with a 1.0 percentage point reduction in any kind of drug switch in the full sample and by 0.65-2.9 percentage points for the drug class subgroups. However, these estimates are governed by market dynamics; the probability of switching increased by 40% on the first coupon usage before declining by more than 50% on subsequent coupons. Switching after the first coupon use may be explained by systematic savings implied by coupon use; we find coupons reduced patient out-of-pocket spending by $45.00 (i.e., the majority of patient out-of-pocket costs). In subgroup analyses, coupon savings were $6.43 larger than average for anticoagulants, characterized by the highest levels of brand and generic competition among the considered therapeutic classes. Pharmaceutical manufacturers may be using coupons to acquire customers and then build brand loyalty, especially in markets with more generic competition. Antitrust authorities and other regulators should scrutinize the impact of coupons on market competitiveness and drug spending.

Consumer environmental awareness and green R&D subsidy policy under Cournot–Bertrand comparisons

ABSTRACT This study examines the impacts of consumer environmental awareness on green R&D subsidy policies under different market competition modes when firms adopt green strategies for emissions-reduction activities. We demonstrate that governments grant fewer subsidies to Cournot firms than Bertrand firms. Thus, Cournot firms produce lower outputs and invest less in green R&D. However, firms’ profits and social welfare are higher (lower) in Cournot than in Bertrand firms if the product substitutability is high (low). We also investigate an endogenous competition mode game and find that a Cournot (Bertrand) competition is a socially desirable equilibrium when products substitutability is relatively high (low) while consumer environmental awareness is not sufficiently high (low). These findings suggest that through appropriate green subsidies, antitrust authorities should monitor not only consumer environmental awareness but also firms’ competition mode coordination.

A Counterfactual Analysis of Amazon’s Acquisitions Under the 2023 Merger Guidelines

The fact that Amazon was allowed to acquire hundreds of companies as it rose to become the fourth most valuable U.S. company in terms of market capitalization and a leader in three lines of business has been viewed by some as damning evidence of underenforcement by the United States antitrust authorities. In this article we ask the obvious question: If the 2023 Guidelines had been in place instead of prior guidelines, what effects would they have had on Amazon’s development? To provide an answer, we identify relevant changes in the guidelines and then select for review a subset of Amazon’s 280 acquisitions over the period 1998 to 2022. In our counterfactual, we analyze five horizontal acquisitions, four vertical acquisitions, and two sets of serial acquisitions. We find that the 2023 Guidelines would have broadened the bases for potential challenges and thereby would have increased the likelihood that Amazon would have faced greater resistance from antitrust authorities. The lack of safe harbors, the plasticity of individual Guidelines, and the optionality to challenge mergers under alternative theories would have exposed most of Amazon’s acquisitions to challenge. The lack of meaningful guidance about which individual transactions would have been challenged suggests that going forward enforcer discretion will play a yet larger role. Regarding Amazon’s serial acquisitions of nearly one hundred technology firms, we find that the 2023 Guidelines would have provided multiple rationales for intervention. Therein lies a weakness in the Guidelines and in antitrust policy: the lack of a framework for assessing both the anticompetitive and procompetitive effects of such acquisitions in high-tech industries.

Unilateral effects of mergers with price regulation and quality competition

Merger screening tools are increasingly used in the review of horizontal mergers. They offer insights into the firms’ incentives to increase prices post-transaction. This paper proposes a new indicator, the Quality Reduction Incentive (QRI) index, that can be applied when competition is based on quality rather than prices, as in some healthcare and higher education markets. It represents the minimum percentage reduction in marginal costs necessary to eliminate the merging firms’ incentives to lower quality. Therefore, it can be directly compared to the cost efficiency gains claimed by the parties. Two versions of the QRI index are provided. The first one ignores the feedback effects between the parties, while the second one, more comprehensive, incorporates these interactions. The paper then explains how antitrust authorities can apply this tool with relatively little data.

The Brazilian antitrust authority publishes non-horizontal merger guidelines

The Brazilian antitrust authority publishes non-horizontal merger guidelines

E-Commerce and Live Stream Slip-Ups: Sic Transit Gloria Italian Top Influencer Chiara Ferragni. Uncovering New Attitudes in both Consumer Behavior and Brand Strategies

For those unacquainted with Latin brocards, the title alludes to the downfall of the Italian influencer Chiara Ferragni, currently embroiled in a significant scandal. In contemporary times, numerous international brands resort to influencers to endorse and bolster the sales of their products. Among the various prominent figures, such as footballers, singers, and actors, the 36-year-old Chiara Ferragni distinctly stands out as one of the most renowned fashion bloggers, a designated celebrity, and an influential opinion leader on the global stage. In a span of just a few years, Ferragni successfully established an extensive economic and commercial empire, facilitating the launch and sale of products bearing her name. Moreover, she became a pivotal figure for numerous luxury companies, leveraging her media influence to enhance their profitability, constituting the foundational underpinning of social influencer marketing. Over time, Ferragni endorsed a myriad of products from renowned brands, spanning clothing, female beauty accessories, and food products, amassing a current fortune of 45 million euros. However, on December 15, 2023, the Italian Antitrust Authority (AGCM) imposed a fine of over 1 million euros on Ferragni for deceptive advertising practices and consumer deception. According to the AGCM, the influencer omitted pertinent information in her online advertisements, disseminated false information, and employed forms of undue influence. Subsequently, Ferragni also faced suspicions of alleged criminal fraud. This qualitative research paper aims to explore the ongoing investigations, Ferragni’s defense strategies, and the reactions of her followers and clients. The findings reveal a trend where numerous significant brands are severing ties with Ferragni as sponsors, leading to an erosion of consumer trust in the influencer category, and prompting a shift towards a more discerning consumer attitude.

Pro-competitive merger under R&D revisited

Mergers may increase process innovation and become pro-competitive compared to non-cooperation if firms cannot observe rivals' R&D investments. Hence, the antitrust authorities may not need to be overly concerned about mergers when R&D investments are not readily observable.

Why do people think price fixing is unfair? An empirical legal study on public attitudes in the USA

Abstract The present article advances the understanding of antitrust law by providing theoretical considerations and empirical results of people’s attitudes towards price fixing, specifically within the context of fairness in US antitrust laws. Attitudes were obtained through experimental surveys on Amazon Mechanical Turk in the USA between 2018 and 2021. The empirical results suggest that perceptions of fairness influence public attitudes towards price fixing. Moreover, consumer reaction to price fixing will depend on how the consumer perceives the rules of fairness underlying the competitive market mechanism and the point used to set prices (dual entitlement theory). Results indicate that perceived outcomes and consequences of market transactions influence respondents’ judgment of price fixing. For example, public attitudes will be more lenient whenever a cost-increasing event outside firms’ control affects firms’ profit. The main implication of these findings is that antitrust authorities should not take for granted that people view price fixing as unfair and therefore consider how fairness considerations play out in their approach when dealing with price-fixing cases. The suggestion is for antitrust authorities to focus corporate compliance programmes on people’s attitudes to improve compliance to prevent cartel agreements.

Cross ownership and merger under technology adoption

PurposeThis paper aims to consider the effects of a merger on technology adoption and welfare in the presence of passive cross ownership. Merger increases investments in process technology and may increase welfare. The results are important for antitrust policies and suggest that the antitrust authorities may not need to be too concerned about mergers in industries with cross ownership.Design/methodology/approachGame-theoretic analysis.FindingsMerger increases investments in process technology and may increase welfare.Originality/valueTo the best of the author’s knowledge, this study is original.

Do shipping alliances affect freight rates? Evidence from global satellite ship data

Shipping alliances (SAs) can facilitate their members’ coordination on price and capacity decisions. Although this helps reduce the oversupply of capacity and cutthroat competition during market downturns, the possible freight rate increase due to potential collusion among member shipping lines is another concern. This study aims to empirically investigate the impacts of SAs on container freight rates on nine major shipping corridors for the period from 2015 to 2020. To measure market concentration, data from a satellite-based Automatic Information System (AIS) is used to identify liner shipping companies' services in each market. We propose to use the alliance-level Herfindahl-Hirschman Index (HHI) and Concentration Ratio Index (CR) to measure market concentration. Then we used the simulated market concentration measures as the instrumental variable to address the endogeneity issue between freight rates and alliances’ market share. The main finding is that both alliance-level HHI and CR are negatively associated with freight rates, implying that SAs may help reduce prices. This finding provides new insights for antitrust authorities when investigating alliance applications in the liner shipping sector.

Article: The Issue of Consumer Compensation Before Antitrust Authorities: Commitments, Cooperation and Competence: The Hungarian Experience

The compensation of consumers for damages stemming from a breach of EU competition law rules has been in the forefront of discussions in the last years. A recent important aspect of the debate is whether a mixing of public and private enforcement efforts could enhance the effectiveness of consumer compensation. In Hungary, consumer compensation for breach of another field of EU law (unfair commercial practices) has been championed by a public authority, the Hungarian Competition Authority, which has achieved significant results to the direct benefit of consumers in this respect. This paper reviews the authority’s recent practices, key decisions and main achievements in this area (including some earlier cases concerning antitrust) and then provides a detailed assessment of the corresponding advantages and disadvantages. The authors argue that some key achievements in Hungary in this respect are very well suited for further use in the development of consumer compensation in the field of antitrust law on both an EU and national level. public enforcement, private enforcement, antitrust, consumer protection, damages, EU, Hungary

Coordination in the Fight against Collusion

While antitrust authorities strive to detect, prosecute, and thereby deter collusive conduct, entities harmed by that conduct are also advised to pursue their own strategies to deter collusion. The implications of such delegation of deterrence have largely been ignored, however. In a procurement context, we find that buyers may prefer to accommodate rather than deter collusion among their suppliers. We also show that a multimarket buyer, such as a centralized procurement authority, may optimally deter collusion when multiple independent buyers would not, consistent with the view that “large” buyers are less susceptible to collusion. (JEL D21, D43, D44, L12, L14)

Improving Compliance With Antitrust Measures Through Commercial Policies

Commercial policies for major market participants were introduced in Russia about a decade ago in order to improve compliance with antitrust provisions and as a partial substitute for them. Experts were initially rather sceptical about this move because it was a departure from prevailing international practices and also imposed additional regulatory burdens on companies. This article examines whether commercial policies have been an effective way to improve antitrust compliance by Russia’s pharmaceutical companies, reduce erroneous accusations, and drive down the costs of antitrust enforcement for both the antitrust authorities and market players. Analysis of the commercial policies of several large pharmaceutical companies indicates that their rules are meant to address the abuse of market dominance in the sector which has been alleged by the Federal Antimonopoly Service of the Russian Federation (FAS). Inasmuch as a refusal to supply counts as an infringement of Russia’s legislation on competition and also in view of particular aspects of competition in the Russian pharmaceutical markets, such commercial policies have great potential, first, to diminish erroneous accusations and, second, to reduce the costs of enforcing the legislation on competition. The authors conclude that introducing commercial policies has been beneficial for both consumers (as represented by the FAS) and the pharmaceutical companies.

A Theoretical Analysis of Collusion Involving Technology Licensing Under Diseconomies of Scale

Abstract This study focuses on firms with cost-efficient technology that use licensing to influence product market behaviour, market prices and outputs and the resulting welfare effects. We show how licensing fees can be constructed that lead to identical collective industry outputs as under collusion while industry output is equal to or higher than that achieved under competition and sustained in equilibrium. Hence, consumers are either indifferent to firms’ collusion or better off when they do collude, whereas firms (producers) are always better off due to the improved cost efficiency of integrating the new production technology. This provides a theoretical foundation that explains why technology licensing is observed in highly concentrated industries characterised by significant diseconomies of scale relative to demand. We contribute to the literature by demonstrating how technology licensing involving collusion can reduce the dissipation effect and improve social welfare in oligopolistic industries. An important policy implication is that collusion involving technology licensing should not always be challenged by antitrust authorities, particularly when it does not transfer welfare from consumers to producers.

A Study Beyond the See-Saw of Relevant and Global Turnover: Finding a Mechanism for Adequate Penalty

The Competition Act, 2002 (the Act) is the governing legislation to enforce compliance against antitrust practices in the Indian market using multiple tools, the primary being the imposition of penalties. Penalties have the effect of punishing offenders and deterring others. Under the current legislation, one of the crucial aspects while computing the amount of penalty is determining the “turnover” of the undertaking, as it is used as a proxy to determine the base fine. There exist other proxies, but “turnover” is the most accepted globally. The act of imposing a penalty is also accompanied by ensuring a balance i.e., the fine should be adequate to deter and should not be excessive to break the undertaking. Hence, the imposition of a penalty is not a mere mathematical exercise but a judicious one. With this backdrop, focusing on the Indian Competition Law, the authors in this paper will comprehensively analyze the concept of “turnover” along with an evolutionary analysis of its different shades i.e., relevant, and global turnover, and how they have failed to help in fulfilling the core objectives of the penalty regime. In the latter part of the paper, the authors provide an alternative perspective based on foreign jurisprudence to argue that “turnover” is not the only proxy available and demonstrate the best practices from around the world. Lastly, having understood the strengths and weaknesses of relevant and global turnover and gained an international perspective, the authors will be suggesting a flexible approach in the context that Indian antitrust authorities will have multiple tools/proxies at their disposal for tackling every situation with the best possible approach, but this flexibility will be exercised within a particular framework/guideline. This holistic approach is essential, as considering just relevant or global turnover would eventually defeat the very purpose of imposing penalties.

Sustainability and Net Zero climate agreements – a transatlantic antitrust perspective

The climate crisis requires a transition to a Net Zero economy. Such a transition is possible only through concerted public and private action. While a number of financial institutions and insurance companies had agreed to align their activities with Net Zero targets, reconsidering support for new coal and fossil fuel projects, these initiatives have come under attack from political groups in the US, who have labelled such agreements ‘collective boycotts’. Such accusations feed a collective action problem, and thus hinder private sector cooperation. This article discusses the background to Net Zero Agreements, and the recent antitrust criticisms, under US, EU and UK antitrust law and precedent. Net Zero Agreements can alleviate market failures, resolve collective action problems, and improve consumer welfare by lowering the potentially huge costs to consumers of an unmitigated climate crisis. Under a rule of reason, antitrust authorities and courts in the US, EU, and UK can and should give room for private sector cooperation between companies pursuing an effective transition to a clean economy, where these agreements correct market failures and resolve collective action problems.

Competition and Competitors: Evidence from the Retail Fuel Market

Policy makers and antitrust authorities are concerned about the lack of competition in the fuel retail market and its impact on consumer prices. The aim of this article is to empirically evaluate the role of the intensity of competition and competitors’ brand affiliation on retail fuel prices. To this end, we use a panel data set with detailed daily on nearly 8,500 gas stations and 2 million price observations; we estimate a reduced-form fuel price equation that accounts for supply (input costs and local competition) and demand shifters (income, traffic intensity, and location) as well as for brand and time fixed effects. We use an instrumental variable estimation strategy, to account for the endogeneity of the intensity of competition. Our results show that premium brands and low-cost brands affect the prices of rival firms in an opposite way. On the one hand, premium brands soften competition in the local markets where they operate and thereby allow their rivals to set higher prices. Besides, price setting by premium-brand stations react differently depending on whether the nearest rival sells the same brand (a friendly competitor) or some other brand. By contrast, low-cost brands contribute to reducing prices through their own prices (direct effect), thereby encouraging competitors to lower their prices (indirect effect). Our results suggest that regulation limiting the entry of premium operators whilst promoting the entry of low cost gas stations will enhance competition at the retail level.

The Essential in Essential Facilities

The paper examines the applicability of the Essential Facilities Doctrine (EFD) in the context of competition policy in digital platform markets. It begins by comparing this doctrine with the traditional antitrust approach to anti-competitive practices such as tying and raising rivals' costs. It demonstrates that both approaches aim to address antitrust harm resulting from the extension of market power into additional competitive environments. However, the EFD also considers specific conditions that warrant non-discriminatory access obligations and potential regulatory intervention. This comparative analysis of similarities and differences is employed to address antitrust issues in digital platform markets, given the existence of bottlenecks and gatekeepers that can exploit market power. The paper uses the Buscapé v. Google (Google Shopping) case, which was examined by Brazilian antitrust authority in 2019, as an illustrative example to highlight the possible approaches to these antitrust concerns. KEYWORDS: Essential Facilities Doctrine; Refuse to Deal; Market Power Leveraging; Digital Platforms, Antitrust Policy.