Steven Salop  ‘An Enquiry Meet for the Case: Decision Theory, Presumptions, and Evidentiary Burdens in Formulating Antitrust Legal Standards’

Because legal decisions are adopted with imperfect information, decision-makers must strive to create a decision process and make decisions that are rational in light of the costs and benefits of information-gathering and the inevitable uncertainty under which they decide. Presumptions play an important role in this.  Antitrust law contains a number of important presumptions, which: ‘run the gamut along a continuum from irrebuttable (i.e. conclusive) anticompetitive presumptions to rebuttably anticompetitive to competitively neutral to conclusively procompetitive and finally to irrebuttable procompetitive presumptions. These presumptions are based on the effects inferred from the market conditions’ and most capture the central tendency of the category of conduct to increase or decrease competition and consumer welfare. This paper – which can be found here – seeks to understand, through the lens of economic decision theory, how the appropriate presumption for various categories of conduct should be established, and how rational presumptions and their associated post-rebuttal evidentiary burdens of production and persuasion can be better…

Herbert Hovenkamp ‘Antitrust Balancing’ (2016) NYU J. L. & Bus. 12 369

The basic argument of this paper, which can be found here, is that courts very rarely engage in any balancing even when cases fall under the rule of reason. Most people who are familiar with Hovenkamp’s work will not be particularly surprised by this argument. The interesting claim in this paper is that he thinks that there can be meaningful balancing in merger control – particularly when determining whether merger-induced efficiencies are sufficient to offset upward pricing pressures created by the merger. The paper is structured as follows: A first section looks at balancing under the Sherman Act. It points out that “aside from naked price fixing, market division, and a few boycotts, most agreements among competitors are addressed under the rule of reason”. It then explains (as he has done so many times before) that in practice: “the courts pursue rule of reason analyses through a verbal sequence something like this: first, the plaintiff has the burden to show…

Carl Shapiro and Herbert Hovenkamp ‘Horizontal Mergers, Market Structure, and Burdens of Proof’ (2018) Yale Law Journal 127(7) 1996

This paper, which can be found here, deals with the ‘structural presumption’ for merger control set out in US law by the Philadelphia National Bank case in 1963. In this case, the Supreme Court stated: “That ‘competition is likely to be greatest when there are many sellers, none of which has any significant market share,’ is common ground among most economists, and was undoubtedly a premise of congressional reasoning about the antimerger statute.’ The Supreme Court held that a merger producing a firm that controls an “undue percentage share” of the market and that “results in a significant increase in the concentration of firms in that market” is “inherently likely to lessen competition substantially.” As a result, the merger should be prohibited, at least “in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects” The merging parties can then rebut this structural presumption by showing that the market shares do not accurately…

The CAT’s Paroxetine decision (Paroxetine GSK v CMA [2018] CAT 4)

This post contains a fairly long discussion, so those who are familiar with the case may want to skip it. This decision – which can be found here – concerns  a pay for delay case and identifies a number of interesting questions regarding this type of conduct – some of which were referred to the Court of Justice of the European Union (CJEU). I do not propose to summarise the decision (it is 180 pages long). Instead, I will merely review the parts that I found most interesting. In particular, the judgment contains a very clear discussion of how the law stands as regards pay-for delay agreements in Europe. It also reviews EU law, particularly in the context of the Tribunal’s decision to make a preliminary reference to the CJEU. These questions flow mostly from the debate, apparent in my earlier posts, regarding whether pay-for-delay agreements should be treated as restrictions by object or by effect under EU law following…

Chris Fonteijn, Ilan Akker and Wolf Sauter  ‘Reconciling competition and IP law: the case of patented pharmaceuticals and dominance abuse’,  in Gabriella Muscolo and Mariaanna Tavassi (eds.) The Interplay between Competition Law and Intellectual Property – An international perspective (Kluwer Law International, Forthcoming)

The paper – a draft of which can be found here – discusses how competition law may be applied with regard to abuses of dominance involving patented pharmaceuticals. It argues that the pay for delay cases in both the US and the EU are only the first step in exploring the application of competition law to such products. The paper then examines abuses of the patent system with the aim to exclude competitors and, second, whether excessive prices can be sanctioned as regards IP-protected pharmaceutical products. The paper is structured as follows: Section II investigates the interaction between IP and competition law. This has been covered extensively in previous emails, so I will merely summarise the basic points. Inasmuch as IP law creates temporary monopolies, this would seem to create a tension with competition law, but this tension is merely apparent. Both competition and IP law ultimately seek to promote consumer welfare, and the protection granted by IP law does not amount…

Elisabetta Maria Lanza and Paola Roberta Sfasciotti ‘Excessive Price Abuses: The Italian Aspen Case’ (2018) Journal of European Competition Law & Practice 9(6) 382

This paper – which can be found here – is of particular interest because the authors were the case handlers in this case, which is one of the (very) few recent cases on excessive pricing. The paper begins with a discussion of why enforcement against excessive pricing is frowned upon by competition agencies (and absolutely discarded in the US). First, there may be a negative impact on investment caused by limits to a company’s freedom to set prices, which may limit its ability to recover capital invested in research. Second, in normal conditions regulatory intervention is unnecessary: the market will self-correct, because excessive prices will stimulate the entry of competitors into the market. Third, as a rule competition authorities seek to avoid having to decide what is the ‘correct’ or ‘fair’ price, since this would require a judgement which is closer to the competences of a sectoral regulator. Fourth, the analysis of situations of excessive pricing faces significant difficulties in…

Margherita Colangelo ‘Reverse Payment Patent Settlements in the Pharmaceutical Sector Under EU and US Competition Laws: A Comparative Analysis’ (2017) World Competition 40(3) 47

As its name indicates, this paper – which can be found here – compares the European and American approaches to pay-for-delay agreements – i.e. those agreements between an originator and a generics manufacturer where the former pays the latter to settle a patent injunction and agrees conditions to delay generic entry into the market. This payment goes against the standard expectation that a defendant in a patent suit would pay an IP-holding plaintiff to settle, but it is nonetheless economically rational for both parties: ‘the profit that the generic entering the market anticipates selling at a significant discount to the price of the brand-name product will be much less than the profit the brand-name drug company loses from the same sales applying the monopolistic price’. Settling the dispute eliminates the potential for competition and allows the parties to share profits that would otherwise be eroded by lower prices. The argument is that, while the case-mix on each side of the…

Jonas Severin Frank ‘Patent Settlements in Europe and the Lundbeck Case: A Competition Law and Economics Perspective’

This paper is part of a dissertation at the University of Marburg, and can be accessed  here. While it focuses on developing an economic perspective on the Lundbeck decision, it is fairly similar to the paper reviewed in the post above – except that it concludes that a presumption of illegality of reverse payments in patent settlements, and a safe harbour rule for agreements without reverse payments, should be adopted. The paper is structured as follows: First, it provides an overview of the patent settlement debate in the economics literature. This includes a review of various economics papers and models that identify when and how a reverse payment from the branded drug originator to the generic provider has the ability to delay market entry and, thus, harm consumers through longer periods of monopoly pricing. The whole debate flows from discussions on the probabilistic nature of patents – and was ultimately triggered by Shapiro’s work on how, under a consumer welfare…

Sven Gallasch ‘Activating Actavis in Europe – the proposal of a ‘structured effects-based’ analysis for pay for delay agreements’ (2016) Legal Studies 36(4) 683

This article – which can be found here – criticises the adoption of a ‘by-object’ approach in the EU for pay-for-delay agreements, and argues that Europe should instead adopt a test along the lines of the rule of reason approach delineated by the US Supreme Court’s decision in Actavis. This paper is structured as follows: Section 2 compares the EU and US regulatory frameworks. While broadly consistent with the papers above, this paper emphasises two points which merit attention. First, it is pointed out that the existence of a period of exclusivity for the first generic entry can, when coupled with the possibility of the generic supplier settling a patent validity claim with the branded drug originator, skew the incentives of the parties in favour of settlement to the disadvantage of final consumers. Instead of solving the patent dispute in court, the parties settle their dispute. The generic company is nonetheless granted the 180 days of generic exclusivity. The parties…