Antitrust Authorities Research Articles

Anticompetitive effects of horizontal acquisitions: The impact of within-industry product similarity

Theory predicts that horizontal acquisitions can effectively increase incumbent firms’ market power in concentrated industries with high product similarity. Using a novel measure for industry product similarity, we show that in such industries firms’ propensity to make horizontal acquisitions is greater and that the acquisitions result in more positive announcement returns for the acquirer and rival firms and in a larger premium paid for the target. Also, the deals harm dependent customer and supplier firms and they are more likely to be challenged by antitrust authorities. Overall, by emphasizing the importance of product similarity, our results help explain mixed empirical findings on whether horizontal acquisitions are used to reduce competition intensity.

Hotel Aggregator vs Russian Antitrust Authorities: Perspectives of Upcoming Litigation

The legal battles between aggregators such as Booking.com and antitrust authorities of the European Union (EU) commenced some time ago. Now it is the turn of the post-Soviet countries and the preliminary court hearing between Booking.com and the Russian Federal Anti-Monopoly Service (FAS) was held on 24 March 2021 in the Commercial Court of Moscow, the subsequent hearing took place on 19 May 2021. The background to the Russian case appears very similar to the European cases. In December 2019, the FAS opened a case against Booking.com regarding imposing a price parity condition on hotels and hostels (accommodation facilities). The FAS accused Booking.com of imposing unfavourable conditions on Russian accommodation facilities. According to the FAS, due to the agreement with Booking.com, accommodation facilities could not set prices lower on other platforms. After two official cautions, the FAS issued an order to Booking.com, compelling it...

Embodied Cost of Collusive Bidding: Evidence from China’s Construction Industry

Collusive bidding is regarded as one of the most socially harmful, anticompetitive, and illegal practices in the construction sector. The process of collusion is hidden from public sight, making it difficult to calculate its cost. A model was developed in this study for calculating the embodied cost of the convenor in collusive bidding cases using the regression analysis technique. The model was tested using 254 publicized collusion cases in China, and the results were verified by online interviews with a fair number of experts with extensive experience. It was found that the embodied collusion cost composed of side payments and administrative penalties has a positive relationship with awarding price. Also, from a box plot, it was found that the embodied collusion cost has a low growth trajectory for lower awarding prices, but remains stable for higher awarding prices. This study provides an effective tool for antitrust authorities to detect the existence of additional cartel members by comparing the difference between the reported and calculated values of side payments.

Are 28 days a month? Price competition with consumer confusion

ABSTRACT This paper contributes to the literature of price framing by analysing the effect of temporal price framing. We introduce in a homogeneous duopoly à la Bertrand, where firms compete with an advertised price that is expressed in a certain periodical frame (i.e. 4-week, daily) that could differ from the standard periodical price (for instance, monthly or yearly price). The model focuses on the effect of the perception of the periodical price by consumers and not on the confusion or complexity of the price frames that leads to a product differentiation. Indeed, on equilibrium the two firms choose the same standard and advertised price, but their profits are greater than the standard Bertrand case. This result gives an important insight regarding the 4-week billing antitrust case conducted by the Italian Antitrust Authority and concluded in January 2020.

Abuse of Dominant Position on Digital Market: Is the European Commission Going back to the Old Paradigm?

Purpose: The study concerns abuse of a dominant position on digital markets on the example of practices used by Google. The main purpose of the article is to draw attention to the lack of appropriate tools for assessing abuse of a dominant position in such markets. Methodology: The article was prepared based on the method of analyzing documents (mainly the European Commission and FTC) and literature on competition low and policy. The article also uses legal acts and the guidelines of the European Commission. Findings: The study adopts the hypothesis that the European Commission is limited to instruments created for the needs of mature markets, whose attribute is static competition and not innovation. Such tools are not appropriate to assess the behavior of entrepreneurs on digital markets and should be used in a selective and flexible manner. The Commission's rigid approach to the application of existing mechanisms may harm innovation and expansion of companies operating under dynamic competition. Practical implications: The article critically assesses the approach of the European Commission and indicates the factors that should be considered in assessing the abuse of a dominant position by entrepreneurs on digital markets. Originality/Value: As a result, it was pointed out that abuse of a dominant position on digital markets is a relatively new practice and their antitrust assessment mechanisms have not yet been developed. This study provides a voice in the discussion on how antitrust authorities approach towards the assessment of abuse of dominance on digital markets and their sanctioning. At the same time, it draws attention to the need to develop appropriate tools for assessing a dominant position and then its abuse in markets with dynamic competition and whose main attribute is innovation.

Optimal destabilization of cartels

This paper introduces an oligopoly model that includes three actors: a cartel (comprising two or more firms that operate like one merged company), a group of competing fringe firms, and a welfare maximizing antitrust authority. The cartel is the Stackelberg quantity leader and the fringe firms are in Cournot competition with respect to the residual demand. The cartel is internally stable if none of its member firms finds it profitable to become a fringe firm. The antitrust authority can destabilize the cartel in the sense of making the cartel internally instable. To this end, the antitrust authority has three policy instruments at its disposal: its own effort, a fine for detected cartels, and a leniency program for cartel members that cooperate with the authority. Taking into account that the use of these instruments is not costless for society, a unique optimal antitrust policy is derived. The analysis reveals that both, the optimal force and mix of the antitrust authority’s policy depend on market characteristics such as the efficiency of the authority’s operations, the public respect for the rule of law, the ethical standards of the firms’ managers, the market volume, and the number of firms operating on the market.

Separation of Powers and Antitrust: On Common Grounds?

The separation of powers principle and antitrust both relate to power and notably deal with the concentration of power. Both occupy center stage in our challenging times, but their respective histories differ and their interactions have never been examined. Even though one relates first and foremost to state power and the other to economic power, they may indeed interact in two ways, especially in an era that sees an unprecedented accumulation, by a few firms of the digital economy, not only of economic power but also of political power. On the one hand, separation of powers-type considerations may be used in antitrust matters. The concentration of power in one company, including the power to adopt rules which set standards for an industry and have a broad impact in society, raises questions which are similar to some at the heart of the separation of powers principle. Antitrust may establish requirements for checks and balances within or for a firm. The latter may even have to abandon the control over the content of important principles, rules or codes. On the other hand, the concentration of power in dominant or monopoly firms whose platforms or search engines have become part of the political and electoral process means a partial rethinking of the separation of powers principle. Non-discriminatory access to these firms’ services and products allowing the targeting of voters becomes an important issue in this context. Antitrust may play a role in this respect and help preserve or rebuild some trust in democracy, though this should be considered as one of its rather indirect goals. In this regard, some separation between “data power” and political power may result from the intervention of antitrust authorities. Antitrust may thus contribute to some form of separation of powers in a data era and, ultimately, to trust.

Spatial pricing and collusion

AbstractThe stability of collusion is compared assuming quadratic transport costs under two spatial pricing schemes, uniform mill pricing and spatial price discrimination. This comparison uniquely allows fully endogenous location choice and examines when two firms collude, when two of three firms collude and when three firms collude. Spatial price discrimination facilitates collusion more than uniform pricing in the first two of the three examinations but not in the third. This heterogeneity argues that the presence of price discrimination by itself does not inform antitrust authorities about the likelihood of collusion.

The Evolution of Judicial Standards: Evidence from Litigated Merger Trials

Monday-morning assessments of antitrust merger trial outcomes are common. Critics of a court decision blocking a merger may opine that the outcome is an indication that the judiciary has become overzealous in its interpretation of the Clayton Act’s prohibition of mergers whose effects “may be to substantially lessen competition, or tend to create a monopoly.” Similarly, in the wake of an adjudicated merger that is allowed to proceed, critics may argue that the judiciary has become too lax in its interpretation of the Clayton Act. Less common are attempts to systematically assess the body of merger outcomes to determine judicial trends and tendencies. This void is particularly salient because in recent years a substantive narrative has emerged that judicial application of the antitrust laws — overly influenced by the Chicago School — has become increasingly hostile toward antitrust authorities’ (Agencies’) challenges of mergers over time. A corollary of this narrative is the claim that the shifting composition of the judges hearing merger cases has also contributed to the propensity of the courts to deny the Agencies’ merger challenges. In this paper, we first describe the historical context within which the current narrative has arisen. Although this narrative builds upon certain developments in merger enforcement over the years, we find that a more complete assessment of the evolution of merger enforcement and judicial outcomes yields a substantially more ambiguous interpretation of the evolution of judicial standards than has been proffered. That is, the current narrative does not provide an unambiguous basis upon which to draw conclusions regarding shifts in judicial standards in litigated merger cases. Given this ambiguity, the paper then develops a theoretical model designed to capture the essence of the interplay among merging firms, antitrust authorities and the courts. The model yields clear predictions on shifts in judicial standards from the outcomes of both litigated mergers cases and those that settle prior to trial. The paper then provides an empirical investigation of litigated merger outcomes based on the population of all merger challenges in the United States over 1979-2019. Two-stage econometric methods are employed to account for the potential that the set of litigated mergers is a non-random sample of all merger challenges. This empirical analysis reveals that, contrary to the current narrative, judicial standards have shifted in favor of the Agencies over time. The probability that merger challenges proceed to trial has declined over time while the probability that antitrust agencies win trials has increased over time — both results are indicative of judicial standards applied to merger challenges that have grown increasingly pro-enforcement over time. We find no statistically significant evidence that the outcomes of antitrust merger cases vary according to whether the judges involved were appointed by Republican or Democratic presidents.

Emergence of Intellectual Property Ecosystem of Connected Cars and its Analysis

Connected Car has attracted a high interest in the automotive industry. V2X is a standard and a core technology of Connected Car. There are many standard essential patents (SEP) in V2X. In addition, OSS is also used in platforms of Connected Cars. To date, there have been many patent infringement lawsuits based on essential patents in the telecommunications industry around the world, and antitrust authorities in various countries have established guidelines to curb such lawsuits. In other words, patent holders are required to promise licenses based on FRAND declarations, and patent licensees are also required to negotiate licenses in good faith. In the connected car business as well, disputes and lawsuits between patent holders and patent implementers over patents related to SEP and others are unfolding, and an IPR ecosystem is being formed through cooperation among companies to deal with these disputes and lawsuits. In this paper, the formation of IPR ecosystems around connected cars and the battles between patentees and licensees in these ecosystems are summarized and explained.

Competition and Co-Operation When Consumers' Sustainability Preferences Depend on Social Norms

We posit that consumers' preferences for more sustainable products depend on the perceived social norm, which in turn is shaped by average consumption in society. We explore the implications of such preferences for firms' incentives to introduce more sustainable products and to co-operate in order to either foster or forestall their introduction. Our main motivation lies in the increasing pressure put on antitrust authorities to exert more leniency towards horizontal agreements that are motivated by sustainability considerations.

Assessing EU Merger Control Through Compensating Efficiencies

Worldwide, the overwhelming majority of large horizontal mergers are cleared by antitrust authorities unconditionally. The presumption seems to be that efficiencies from these mergers are sizeable. We calculate the compensating efficiencies that would prevent a merger from harming consumers for 1,014 mergers affecting 12,325 antitrust markets scrutinized by the European Commission between 1990 and 2018. Compensating efficiencies seem too large to be achievable for many mergers. Barriers to entry and the number of firms active in the market are the most important factors determining their size. We highlight concerns about the Commission’s merger enforcement being too lax.

Won't Get Fooled Again: A Supervised Machine Learning Approach for Screening Gasoline Cartels

In this article, we combine machine learning techniques with statistical moments of the gasoline price distribution. By doing so, we aim to detect and predict cartels in the Brazilian retail market. In addition to the traditional variance screen, we evaluate how the standard deviation, coefficient of variation, skewness, and kurtosis can be useful features in identifying anti-competitive market behavior. We complement our discussion with the so-called confusion matrix and discuss the trade-offs related to false-positive and false-negative predictions. Our results show that in some cases, false-negative outcomes critically increase when the main objective is to minimize false-positive predictions. We offer a discussion regarding the pros and cons of our approach for antitrust authorities aiming at detecting and avoiding gasoline cartels.

The Evolution of Antitrust Regulation in Russia in Digital Era

The article includes a comprehensive analysis of changes that have been taking place in Russian antitrust enforcement in response to the digitalization of the economy. Digitalization has led to increase of the role of information and digital platforms in day-to-day business activities of the market players. Digitalization vanished geographical boundaries of the digital markets and modified market structures in general. Innovative technologies, big data, and intellectual property have become the key drivers of economic growth. The authors analyze new violations of antimonopoly legislation in the digital era (in particular collusive tendering using auction robots), the anticompetitive effects resulting from the use of pricing algorithms, and the first approaches of the antitrust authority to regulations of the algorithmic pricing. In addition, within the framework of this article, the first legal positions of the antitrust authority regarding the use of pricing algorithms, as well as the new approaches of the regulator to the analysis of digital markets in merger control are considered, taking into account such factors as network effects, big data and technologies. Moreover, the authors analyze the first practice of using the technology transfer as a remedy in merger control by the antitrust authority to mitigate anti-competitive effects of the transactions planned in the Russian market. Finally, the authors conduct an overview of the new legal provisions governing the mandatory pre-installation of applications by Russian developers, and also describe the background for this initiative. When considering the above topics, the authors deeply analyze the relevant Russian and foreign legislation, draft laws, and the law enforcement practice of the Federal Antimonopoly Service. New approaches of the regulator to the analysis of digital markets in the framework of antitrust investigations and merger control, as well as automation of the processes of detecting antitrust violations, demand more attention from market players. Companies are encouraged to take these trends into account in their business activities, reflect them in antitrust compliance programs, as well as implement additional measures to prevent potential antitrust violations in digital markets, in particular, committed with the use of pricing algorithms.

Влияние интеллектуальной собственности на вопросы согласования сделок экономической концентрации на примере России и ЕС

The article reveals the problems of controlling economic concentration in commodity markets related to the use of intellectual rights that appear in connection with the transformation of the global economy. The article analyzes the approval by the Russian and European antitrust authorities of one of the largest global transactions between Bayer and Monsanto, and examines the main trends related to the economic concentration in the commodity markets related to the use of intellectual property rights, using the example of a number of transactions agreed by the European Commission.

The Role of Antitrust Authorities Regarding the Digital Economy

The advent of the digital era has not only had a profound impact on markets, but also on those areas of the law that relate to these markets – amongst them: competition law. This Austrian report on the role of antitrust authorities regarding the digital economy addresses the manifold ways in which the Austrian legislator, the Austrian (Supreme) Cartel Court and the Austrian Federal Competition Authority have dealt with digital markets in the recent past and what developments may lie in store for digital markets in the near future. Preceding the actual report, some introductory remarks embed the Austrian experience within a broader picture, highlighting some emerging trends in the application of competition law to digital markets.

The Ban of Off-Net/On-Net Price Discrimination in Chile†

Abstract Chilean antitrust authorities banned termination-based price discrimination in mobile calls in 2012. This paper discusses the antitrust process that led to this prohibition and analyzes its merits. We characterize the discriminatory plans that the largest mobile company in Chile—Movistar—offered in 2010, when the legal dispute began, calibrate a competition model for the Chilean market—both for pre- and post-paid customers—and compare the observed price differentials with those which are justifiable on competitive grounds. The main result is that in most plans, efficiency and strategic reasons could explain the observed differential only for large call externality parameter values. We also discuss Competition Court rulings in the context of several other changes that affected the mobile telephony market in Chile and report the evolution of several key market indicators after the ban was introduced.

Tropical medicine: The economics and the evolving practice of antitrust remedies in Brazil

Antitrust remedies are a central part of the competition policy toolbox. Their actual use and design depends on interrelated factors such as the Antitrust Authority’s analytical capabilities, institutional design and bargaining power. Economics can contribute to the design of remedies, using a transaction cost, principal-agent incomplete contract framework, as remedies are generally drawn as an agreement between the Authority and parties under extensive information asymmetries. This provides a rationale for the principles and policies’ choices of the Brazilian Antitrust Authority, CADE, on remedies over the past decade. There has been a shift towards agreements instead of unilaterally imposed remedies, extensive use of trustees and communication by an Antitrust Remedies Guide to signal CADE’s policies.

Attitudes Toward Collusion in Chile

ABSTRACT In the last two decades, competition agencies around the world have increasingly directed their attention to enforcement against cartels. With the encouragement of the antitrust authorities of the United States, and the Organization of Economic Cooperation and Development, various countries have introduced leniency programs, and sanctions for individuals found guilty of colluding. Critics are concerned, however, that these measures are not backed by broad public support, which could jeopardize their enforcement. This paper explores public attitudes toward cartels in Chile, an emerging economy that introduced a leniency program in 2009 and criminal sanctions in 2016, by presenting the results of a public opinion survey conducted in this country in August–September 2019. The results of the survey show high awareness of cartels and the harm they cause, and high public disapproval of cartel conduct among the Chilean respondents. In particular, up to 70 percent of the respondents support prison sentences against individuals found guilty of colluding. Such strong public support for anti-cartel measures could be considered positive from the perspective of enforcement. The results also emphasize the importance of continued competition advocacy directed at the society to explain and gain public support for the anti-cartel agenda.

FRAND to address competition issues posed by major digital platforms?

ABSTRACT Major digital platforms (MDPs) such as App Store, Amazon e-commerce site, Google search engine, or Facebook have increasingly shown their significance in our daily lives. The convenience they bring, nonetheless, may distract us from noticing how they are capable of executing their powers to influence different markets or even politics on a global scale. While competition (antitrust) law struggles to deal with the advanced, cutting-edge nature of MDPs, some scholars and antitrust authorities have conceived of applying FRAND (or a quasi-FRAND model), which has proved considerably successful in the field of telecommunication standardization, as a regulatory measure to control unprecedented powers of MDPs. Having said that, to that end, certain complicated policy and technical issues must be analyzed and addressed thoroughly.