Antitrust Enforcement Agencies Research Articles

An economic perspective of standards and FRAND enforcement in China

China has confronted issues surrounding fair, reasonable and non-discriminatory terms (FRAND) for standard essential patents (SEPs) and has become an important arena for FRAND-related antitrust enforcement and litigation. This article summarizes the key enforcement activities in China to date by the Chinese courts and three antitrust enforcement agencies with regard to FRAND issues. These activities indicate that China’s approach to analysing and enforcing FRAND terms has been under the framework of the abuse of dominance. Chinese authorities’ decisions to date appear to indicate the following logic when deciding the FRAND issues: SEP holders generally possess market dominance in licensing SEPs, and that disputes concerning SEPs licensing terms may be scrutinized for the risks of abuse of market dominance. This abuse may take the form of charging excessive rates, imposing unreasonable licensing terms, or both. They also reflect that Chinese authorities appear to place an emphasis on preserving FRAND commitments, regardless of whether they are requested by a standard setting organization or unilaterally made by an individual company.

Lifting Confidentiality of FRAND Royalties in SEP Arbitration

No patent dispute in recent years draws more attention than the “Smartphone Wars.” At the center stage of the Smartphone Wars is the “fair, reasonable, and non-discriminatory (FRAND)” commitment to license standard-essential patents (SEPs). Later added to the stage is the new form of SEP enforcement targeting small businesses and end-users. As a result, the efficacy of FRAND commitments comes under criticism from the antitrust enforcement agency, leading scholars, and the President of the United States. With a view to breathing life into the meaning of “FRAND,” this Article explores arguments against confidentiality of FRAND royalties in SEP arbitration, primarily focusing on an analogy to section 294 of the Patent Act. Section 294 may provide an adequate platform for this discussion because it already lifted confidentiality of patent validity and infringement in the interest of the public and competition. Similarly, lifting confidentiality of FRAND royalties in SEP arbitration could be an effective measure to tackle unfair competition and deceptive business practices and to empower the public in the Smartphone Wars and in the face of SEP enforcement.

Antitrust in Zero-Price Markets: Foundations

“Zero-price markets,” wherein firms set the price of their goods or services at $0, have exploded in quantity and variety. Creative content, software, search functions, social media platforms, mobile applications, travel booking, navigation and mapping systems, and myriad other products are now widely distributed at zero prices. But despite the exponential increase in the volume of zero-price products being consumed, antitrust institutions and analysts have failed to provide an adequate response to markets without prices.Modern antitrust law is firmly grounded in neoclassical economics — price theory. Steeped in price theory, preeminent antitrust theorists have unsurprisingly urged that without prices there can be no markets, or at least no exercise of market power. This heavy methodological dependence on positive prices has led federal courts and antitrust-enforcement agencies to overlook potentially massive consumer-welfare harms. The dramatic consolidation of the broadcast-radio industry as a result of deregulation in the late 1990s provides one example: during hundreds of merger reviews, the U.S. Department of Justice failed even to consider potential harm to listeners. Yet recent empirical research indicates that such harm likely occurred.These failures to conceive of zero-price markets as antitrust “markets” indicate how fundamentally zero prices challenge traditional theories and analytical frameworks. This Article establishes a novel taxonomy of customer-facing costs, distinguishing “market-signaling” from “non-market-signaling” costs. Crucially, it demonstrates that market-signaling costs are present in many zero-price contexts. The absence of positive prices thus does not foreclose antitrust scrutiny; “trade,” for purposes of the Sherman and Clayton Acts, encompasses zero-price transactions. To continue ignoring welfare harms in these markets would be both unjust and inefficient. The Article concludes by identifying antitrust law’s proper role within — and stance toward — zero-price markets.

Competition policy in health care markets: navigating the enforcement and policy maze.

US health care is in ferment. Private entities are merging, aligning, and coordinating in a wide array of configurations. At the same time, there is a great deal of policy change. This includes the federal government's Affordable Care Act, as well as actions by Medicare, state legislatures, and state agencies. The health system is built upon markets, which determine how (and how well) goods and services are delivered to consumers, so it is critical that these markets work as well as possible. As the primary federal antitrust enforcement agencies, the Federal Trade Commission and the Department of Justice are charged with ensuring that health care markets operate well, but they are not alone. The functioning of health care markets is also profoundly affected by other parts of the federal government (notably the Centers for Medicare and Medicaid Services) and by state legislation and regulation. In this current period of such dynamic change, it is particularly important for the antitrust agencies to continue and enhance their communication and coordination with other government agencies as well as to maintain vigilant antitrust enforcement and consumer protection in health care markets.

Enforcement Under China’s Anti-Monopoly Law: So Far, So Good?

With the launch of the Opening-Up and Reform Policy in the late 1970’s, China has undertaken the difficult transition from a planned economy to a market economy. In parallel with the significant economic reforms, China's legal system has been remodelled. The Anti-Monopoly Law is a key law in China’s effort to lay out the legal framework for an effective market economy. Each of the three antitrust enforcement agencies in China has achieved progress, and private litigation in courts is evolving quickly. Nonetheless, as China’s transition has not been completed, it is natural that antitrust enforcement encounters considerable challenges. The lawsuit against the General Administration of Quality Supervision, Inspection and Quarantine, the questions raised in relation to the China Unicom/China Netcom merger and the issue in the TravelSky case illustrate some of these challenges. China should continue its efforts to increase the effectiveness of antitrust enforcement. In particular, it is necessary to raise the awareness in society about the concept of competition and the importance of competition policies, and to improve the authorities' antitrust enforcement capabilities.

The Saitama Saturday Club Case: Political Meddling, Public Opinion, and Antitrust Enforcement in Japan at a Turning Point

This paper tells the story of the Saitama Saturday Club case and how it changed antitrust enforcement in Japan. Although the case is often cited as an example of failed antitrust enforcement, in fact, the case had a lasting and positive impact in many unexpected ways. The case opposed Japan’s antitrust enforcement agency against the country’s mighty construction industry. For years, the construction companies had rigged bids for thousands of public works in Saitama Prefecture, in clear violation of Japan’s Antimonopoly Act. Yet they escaped relatively scot-free, as the Japan Fair Trade Commission decided not to bring criminal charges and instead handled the case with a trifle administrative penalty.But this docile treatment triggered a public backlash. Angry citizens sued the bid-riggers for damages, an unprecedented move that would subsequently be replicated in over eighty other cases throughout Japan. More broadly, the case heightened public awareness of the pernicious nature of bid-rigging and galvanized popular support for more robust antitrust enforcement. In turn, this support enabled the Japan Fair Trade Commission to move against entrenched interests and, in the years that followed, gradually step up enforcement, an evolution that continues to this day. In this sense, the Saitama Saturday Club case constituted a turning point for antitrust enforcement in Japan.

Strategic Effects of Three-Part Tariffs Under Oligopoly

A three-part tariff refers to a pricing scheme consisting of a fixed fee, a free allowance of units up to which the marginal price is zero, and a positive per-unit price for additional demand beyond that allowance. The three-part tariff and its variations are commonly used in both final-goods and intermediate-goods markets. Recently, the offering of three-part tariffs and the like by dominant firms has become a prominent antitrust issue. Existing studies have focused on monopoly models, interpreting the three-part tariff as a price discrimination device. In this paper, I investigate the strategic effects of three-part tariffs in a sequential-move game and offer an equilibrium theory of three-part tariffs in a competitive context. I show that, compared with linear pricing equilibrium and two-part tariff equilibrium, a three-part tariff always strictly increases the dominant firm's (the leader's) profit when competing against a rival (the follower) with substitute products, in the absence of usual price discrimination motive. To explore the effects of a three-part tariff on welfare, I further perform comparative statics analysis using general differentiated linear demand system. I show that the competitive effect of a three-part tariff in contrast to linear pricing depends on the degree of substitutability between products: Competition is intensified when two products are more differentiated, yet softened when two products are more substitutable. This is in stark contrast with the competitive scenario posed by a two-part tariff: A two-part tariff always enhances competition and gives the highest total surplus of these three pricing schemes. Moreover, the rival firm always gets hurt in both profit and quantity sale when the dominant firm switches from linear pricing to a two-part tariff, yet it enjoys higher profit when the dominant firm moves from a two-part tariff to the more ornate three-part tariff, despite the fact that its quantity and market share are decreased even further. My findings offer a new perspective on three-part tariffs, a perspective which could help antitrust enforcement agencies distinguish the exclusionary three-part tariff from the procompetitive one.

A Summary Evaluation of the Antitrust Implications in Helios Towers' Acquisition of Multi-Links

Business combinations in telecommunications market have occurred since 1904 when the first combination between Pioneer Telephone & Telegraph Company, Shawnee’s Long Distance Telephone Company and the North American Telephone & Telegraph Company of Muskogee took place in Oklahoma, America. The merging parties will usually claim efficiencies to justify the combination but nevertheless in the last three decades, national Antitrust authorities have as a matter of practice reviewed such combinations whether they may substantially lessen competition or tend to create a monopoly. In August 2011, the Department of Justice (DoJ), America’s lead Antitrust enforcement agency successfully instituted a lawsuit permanently injuncting the proposed merger between AT&T Inc. and T-Mobile USA Inc., two of the nation’s largest Mobile Network Operators (MNOs). On the other side of the Atlantic, in Nigeria, Helios Towers recently acquired Multi-Links. Both companies operate in the Nigerian Telecommunications market.In this article, I summarily evaluate the Antitrust implications of the transaction, if any. I also briefly discuss the “failing company” defence invoked to justify the acquisition of an ailing company and conclude by proposing various measures that would substantially mitigate any potential harm caused by the transaction to competition in the affected markets.

Antitrust Risk in Practice Mergers: A Framework for Evaluation

Antitrust Risk in Practice Mergers: A Framework for Evaluation

Anti-Competitive Practices In The Tourism Industry: The Case Of Small Economies

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.6in 0pt 0.5in;"><span style="font-size: x-small;"><span style="font-family: "Times New Roman","serif"; mso-bidi-font-style: italic;">Who benefits from the proliferation of ecolodges, beachfront resorts, safari parks, river cruises, forest forays and other similar and increasingly popular ventures popping up in developing economies across the world? Critics hold that multinational hotel chains, influential tour operators and foreign interests sometimes in association with powerful domestic groups often engage in anticompetitive practices at the expense of local communities, domestic workers and other stakeholders where the tourism activities take place. In this paper, we examine the possibility of market power abuses in the tourism industry in small economies or small national economies.<span style="mso-spacerun: yes;">  </span>Many of these small economies have recently inaugurated antitrust enforcement agencies charged with curtailing market power abuses and other anticompetitive practices.<span style="mso-spacerun: yes;">  </span>We also examine how effective these agencies are likely to be in challenging the powerful tourism industry. Succinctly, we conclude that monopsonistic practices may arise in the tourism sector of small economies. But we argue that domestic competition agencies are not suited to challenge monopsony for various reasons including a lack of political will.<span style="mso-spacerun: yes;">  </span>We also analyze the plausible cartelization role of regional marketing boards.<span style="mso-spacerun: yes;">  </span>Regional marketing boards are collaborative efforts by groups of countries.<span style="mso-spacerun: yes;">  </span>Because it is entrusted with cross jurisdictional enforcement of competition laws, a “regional” agency with jurisdiction in several countries across a region may be more likely to successfully confront monopsony problems.<span style="mso-spacerun: yes;">  </span>However, we conclude that a regional enforcement agency is equally unlikely to successfully challenged cross-border anticompetitive practices because it is not likely to challenge the impairment of consumer welfare of foreign nationals.</span><span style="font-family: "Times New Roman","serif";"> </span></span></p>

Physician collective bargaining.

Current antitrust enforcement policy unduly restricts physician collaboration, especially among small physician practices. Among other matters, current enforcement policy has hindered the ability of physicians to implement efficient healthcare delivery innovations, such as the acquisition and implementation of health information technology (HIT). Furthermore, the Federal Trade Commission and Department of Justice have unevenly enforced the antitrust laws, thereby fostering an increasingly severe imbalance in the healthcare market in which dominant health insurers enjoy the benefit of largely unfettered consolidation at the cost of both consumers and providers. This article traces the history of antitrust enforcement in healthcare, describe the current marketplace, and suggest the problems that must be addressed to restore balance to the healthcare market and help to ensure an innovative and efficient healthcare system capable of meeting the demands of the 21st century. Specifically, the writer explains how innovative physician collaborations have been improperly stifled by the policies of the federal antitrust enforcement agencies, and recommend that these policies be relaxed to permit physicians more latitude to bargain collectively with health insurers in conjunction with procompetitive clinical integration efforts. The article also explains how the unbridled consolidation of the health insurance industry has resulted in higher premiums to consumers and lower compensation to physicians, and recommends that further consolidation be prohibited. Finally, the writer discusses how health insurers with market power are improperly undermining the physician-patient relationship, and recommend federal antitrust enforcement agencies take appropriate steps to protect patients and their physicians from this anticompetitive conduct. The article also suggests such steps will require changes in three areas: (1) health insurers must be prohibited from engaging in anticompetitive activity; (2) the continuing improper consolidation of the health insurance industry must be curtailed; and (3) the physician community must be permitted to undertake the collaborative activity necessary for the establishment of a transparent, coordinated, and efficient delivery system.

Toward an Expansive Reading of FTC Act § 5: Beyond the Sherman Act and an Ex Post Model of Enforcement

This paper is an edited and lightly footnoted version of Remarks made at a session convened during the American Antitrust Institute’s most recent annual conference. The session was entitled “Can FTC Section 5 and E.U. Article 82 Converge?” The paper distinguishes between the “domestic question” of whether FTC Section 5 should be interpreted to go beyond Sherman Act Section 2, and the “cosmopolitan question” of whether convergence with Article 82 is desirable and achievable. The paper focuses on the domestic question; to the extent an expansive use of Section 5 would foster convergence, that would be a side benefit. The paper asserts three propositions: First, there is a strong and undisputed historical basis for the view that the FTCA is something different in kind from both the Sherman and Clayton Acts. Second, in this light, the FTC’s institutional character is properly understood as a competition commission to investigate, report, advise against, and if necessary stop practices deemed unfair methods of competition, ex ante, in their incipiency. The FTC is not an antitrust enforcement agency like the DOJ Antitrust Division. Third, federal court decisions beginning in the 1960s unanimously support the view that the FTC Section 5 and its enforcement by the Commission legitimately serve competition policy understood more broadly than antitrust law, i.e., than the Sherman Act. In sum, the FTC has a long-standing Congressional mandate and judicial invitation to be bold, to push past the antitrust laws, to investigate and stop in their incipiency “unfair methods of competition.” The Commission should be an innovator and investigator rather than an enforcer; it should spend significant resources working at the cutting edge of economic theory and legal doctrine. The FTC mission, properly understood, is to engage in research and development of competition policy at the forefront of changing commercial circumstances.

SHOULD ANTITRUST CONSENT DECREES REGULATE POST-MERGER PRICING?

Competitors proposing to merge sometimes propose price regulation in a consent decree as a condition of receiving merger approval. Antitrust enforcement agencies in the United States have been reluctant to use such price-regulating decrees, as they suffer from practical problems in implementation. It is less recognized, however, that the use of consent decrees to regulate post-merger prices may be unlawful. Such decrees exceed the scope of antitrust law and blur the distinction between the legislative power to regulate prices and the executive power to enforce the antitrust laws. Despite the willingness of merging parties to accept price regulation in consent decrees, economic and constitutional considerations counsel against antitrust enforcement agencies adopting this practice.

Standard-Setting Organizations: Patents, Price Fixing, and Per Se Legality

Standard-setting organizations (SSOs), private groups that collaboratively select and adopt uniform technical standards for goods and services, are a critical element of modern economy. Competitors within an industry often seek to make competing products interoperable by establishing industry-wide technical standards. To accomplish this end, competing companies join SSOs and work together to select particular technologies as industry standards. This process of product standardization benefits both producers and consumers: It promotes price competition among firms, creates demand-side economies of scale, and encourages product innovation by reducing risks of future research and development efforts. Accordingly, antitrust enforcement agencies have recognized the important role of standard-setting in technological innovation that will drive much of this nation's competitive vigor in 21st Century.1 However, attempts by SSOs to avoid antitrust liability for price fixing now endanger viability of standard-setting process. When SSOs select patented technologies as industry standards, SSO patent policies typically require patent owners to offer fair, reasonable, nondiscriminatory2 licenses to SSO members. These licensing obligations are left intentionally vague to avert price-fixing liability. While this equivocal language has successfully insulated SSOs from antitrust liability, patent owners and SSO members repeatedly have been forced into high-risk litigation over definition of fair,reasonable, nondiscriminatory license terms. This litigation has exposed both SSO members and patent owners to potential liability for patent infringement and antitrust violations, and has consequently created strong disincentives to take part in SSO process. In turn, these disincentives now threaten important social and economic benefits of standardization.

International Antitrust Co-Operation Agreements

This article addresses recent developments in the application of national antitrust laws to cross-border business activities, and the resulting need for antitrust enforcement authorities in different countries to co-ordinate their enforcement efforts. This article attributes the increase in cross-border antitrust enforcement to four trends: the increasing globalisation of business, the increasing proliferation of new antitrust laws around the world, the increasing acceptance of the "effects" test for antitrust jurisdiction, and the increasing liberalisation of trade barriers. The article then highlights both political and practical problems that have arisen from the points of view of antitrust enforcement agencies and affected private sector interests, stemming from the increasing extraterritorial application of antitrust laws. This article presents an overview of international co-operation agreements, focusing on US bilateral and multilateral co-operation agreements, and discusses how international co-operation in this area may affect private sector interests. Companies based in Europe should understand that any cartel conduct in which they may be involved, and any merger transactions, may be subject to review by antitrust enforcement authorities in multiple jurisdictions, including the United States, to the extent that those activities may injure or threaten injury to consumers in those jurisdictions.

Policy Watch: Developments in Antitrust Economics

This article highlights recent developments in antitrust economics that have influenced the way the federal antitrust enforcement agencies analyze five issues: efficiencies from mergers, entry conditions, practices facilitating coordination, exclusionary practices, and the unilateral competitive effects of mergers.

A robust test for consumer welfare enhancing mergers among sellers of a homogeneous product

Antitrust enforcement agencies and courts use net effect on price as a touchstone for the legality of mergers. This paper derives a simple condition for implementing that standard when industry equilibrium is static Nash in quantities (Cournot), and that condition is robust to different specifications of demand and cost.

Did Congress Actually Create Innovation Markets

The antitrust enforcement agencies claim that they protect competition in markets in which innovation is itself the product. Congress seems to support the agencies' attempts to regulate competition in these innovation When, in 1984, Congress enacted the National Cooperative Research Act, it told the agencies and courts to protect competition in properly defined, relevant research, development ... markets. Yet, as this article shows, the agencies have actually protected competition, not in innovation markets, but rather in future goods In other words, the agencies have identified markets in which the relevant firms probably will compete in the future. In the appropriate cases, the agencies have acted to protect competition in these future The agencies have, for example, required merging firms to license technology. The agencies hope that competitors will use this technology to stop the merging firm from monopolizing the future market. The antitrust enforcement agencies explain how they define an innovation market most importantly in their 1995 Intellectual Property Licensing Guidelines, and in a law review article written by two then-high ranking DOJ officials. This article analyzes the agencies' innovation market methodology. The article shows that this methodology allows the agencies to find, not innovation markets, but rather future goods

Physician-Run Health Plans and Antitrust

Letters1 February 1997Physician-Run Health Plans and AntitrustMichael Werner, JDMichael Werner, JDAmerican College of Physicians, Washington, DC 20005Search for more papers by this authorAuthor, Article, and Disclosure Informationhttps://doi.org/10.7326/0003-4819-126-3-199702010-00024 SectionsAboutFull TextPDF ToolsAdd to favoritesDownload CitationsTrack CitationsPermissions ShareFacebookTwitterLinkedInRedditEmail IN RESPONSE:On 28 August 1996, the U.S. Federal Trade Commission and the U.S. Department of Justice issued new guidelines that will give physicians greater leeway to form networks and to integrate their practices under the antitrust laws [1]. By making it easier for physicians to band together, these guidelines address many of the concerns outlined by Dr. Duvall.The guidelines were originally published in 1993 by the federal antitrust enforcement agencies to help physicians, hospitals, and other health providers understand the application of the antitrust laws to the health care market. In December 1995, the agencies announced that they ...

Market share and market power in merger and monopolization cases

In light of the growing sophistication of the tools of industrial organization economics and reliance on the federal courts to resolve complicated competitive issues, it may be time for the courts to make greater use of economists in analyzing antitrust cases. While the costs of such an endeavor remain unexplored, we argue below that the benefits may be significant. In particular, we assert that the legal precedent requiring the courts to draw inferences about market power based primarily or exclusively on market shares and/or market concentration1 can often be misleading. However, the only alternative to such judge-made bright-line rules is to utilize modern economic tools to undertake more extensive competitive analyses. The latter choice is essentially the course that the antitrust enforcement agencies are following. This article explores some of the arguments in favor of such an approach.