Sandra Marco Colino, Niamh Dunne, Knut Fournier, Sofia Pais, Derek Ritzmann ‘The Lundbeck case and the Concept of Potential Competition’ (2017) Concurrences n° 2-2017

This paper – which can be found here – contains the reflections of a number of legal scholars about European decisions regarding reverse settlement payments (also known as “pay for delay” agreements). Reverse settlement payments consist of payments by the owner of IP rights to entities that are challenging such rights in court – and they are particularly important in the pharmaceutical sector, where producers of generic drugs may challenge the IP of branded drugs, and the owner of the drug may pay the generics’ company not to challenge his/her/its IP (and, thus, not to enter the market). As noted in the introduction: “Schemes of this nature are bound to set off alarm bells in the mind of the antitrust erudite. Delaying the entry of would-be competitors would almost certainly entail pushing back the benefits typically derived from a competitive market, the very ones that competition law was designed to protect. And yet the fact remains that, when reverse payment agreements are entered…

Friso Bostoen ‘Margin Squeeze – Where competition law and sector regulation compete’ (2017) 53 Jura Falconis 3

This paper – which you can find here – provides an overview of margin squeeze as an antitrust infringement – i.e. the situation where a dominant undertaking charges “a price for the product on the upstream market which, compared to the price it charges on the downstream market, does not allow even an equally efficient competitor to trade profitably in the downstream market on a lasting basis”. The paper also looks at the relationship between margin squeeze and sectoral regulation. The article starts with an overview of the different ways an undertaking can abuse its dominant position through pricing (chapter 2). It then defines margin squeeze (chapter 3), before looking at how margin squeeze is assessed in a number of EU cases (chapter 4) and into the role of the as-efficient-competitor test in identifying margin squeeze situations (chapter 5). It then discusses why some undertakings appear to be more susceptible to commit this abuse than others, and lists the traits such…

Unwired v Huawei [2017] EWHC 711 (Pat)

This judgment – which you can find here – is a recent UK court decision on FRAND terms. The factual background to this decision is convoluted (including five “technical” trials relating to the validity and infringement/essentiality of the relevant patents, which preceded the present trial regarding all competition law and FRAND issues), but the situation can be summarised shortly. Unwired Planet is a company that owns a number of worldwide patents, including many of the foundational technologies that allow mobile devices to connect to the Internet (4G, 3G and the like) – most of the relevant portfolio in this case was acquired from Ericsson. A number of these patents are essential to the relevant technical standards, and are thus deemed Standards Essential Patents (“SEPs”). The process of standardisation involves holders of patents which are essential to an international telecommunications standard declaring them to be essential to the relevant standards body –  in this case, the European  Telecommunications Standards Institute (“ETSI”). Standard…

Jens Prufer and Christoph Schottmüller ‘Competition with Big Data’ CentER Discussion Paper 2017-007

This working paper – which can be found here – attempts “to better understand data-driven markets: i.e. markets where the cost of quality production is decreasing in the amount of machine-generated data about user preferences or characteristics (henceforth: user information), which is an inseparable by-product of using services offered in such markets”. The authors start from the assumption that data-driven markets are characterized by imperfect competition and subject to indirect network effects. In the light of this, they try to determine: (a) under which conditions a duopoly can be a stable market structure in a data-driven market; (b) when the propensity to market tipping (i.e. to monopolization) becomes overpowering; (c) the conditions that allow a dominant company in one data-driven market to leverage its position into another market. The paper begins, at least implicitly, by distinguishing between indirect network effects (which mix supply and demand effects. They occur where increased demand leads to decreasing costs in obtaining a product input – in…

A. Douglas Melamed ‘Antitrust Law is Not That Complicated’ (2017) Harvard Law Review 130(2) 163

This paper – which can be found here – is a reaction to Louis Kaplow’s article “On the relevance of market power” which I discussed here. It provides a much better summary of Kaplow’s article than what I managed to write then, and also a very apt critique of that paper. As such, I think it would be useful if I were to provide you with a summary of this piece. While seemingly agreeing with the conceptual framework developed by Kaplow, the author (a professor at Stanford) shares some of my critiques (which makes me feel rather relieved, because it means I understood at least parts of Kaplow’s paper). Like me, he reads Kaplow’s paper as implicitly assuming that competition law is ultimately a broad standard directed at maximising economic welfare on each situation. This standard is applied as follows: conduct that reduces economic welfare is unlawful, and conduct that increases economic welfare is lawful. Hence, market power is not really…

Lisa Khan ‘Amazon’s Antitrust Paradox’

This is a bold paper which argues that competition law, as it stands, is not an apt gauge of competition in the twenty-first century marketplace—especially in the case of online platforms. It was published in the Yale Law Review, and can be found here. The argument is built around a critique of the way antitrust has (failed to) deal with Amazon. In particular, it argues that a close look at Amazon’s business strategy reveals that the current framework of antitrust— especially how it equates competition with “consumer welfare”, and “consumer welfare”  with short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace. The paper holds that, instead, antitrust should analyse the underlying structure and dynamics of markets. Rather than pegging competition to a narrow set of outcomes, this approach would examine the competitive process itself. Animating this framework is the idea that a company’s power, and the potential anticompetitive nature of that power,…

Louis Kaplow ‘On the relevance of market power’

This article was published in the Harvard Law Review, and can be found at https://harvardlawreview.org/2017/03/on-the-relevance-of-market-power/. This is a book-length all-out attack on the conception of “market power” as it is currently applied. Like most  law and economics literature, it is concerned with how best to design laws in order to maximise the social benefit of law enforcement. While the argument is not easy to encapsulate, I think the main point is that greater market power – understood as  “the degree to which price can profitably be elevated above a competitive level, often taken as marginal cost” – does not necessarily mean that greater anticompetitive effects must follow. Instead, market power can have a variety of different effects, depending on the specific impact of the relevant practices on welfare. As such – and unlike what we do today – the concept of market power should be derived backwards from the level at which an antitrust infringement should be found, based on the impact that…

Daniel Sokol ‘Troubled Waters Between U.S. and European Antitrust’

This is an article-length review of The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy by Daniel J. Gifford and Robert T. Kudrle, a book on the differences between EU and American antitrust. It was published in the Michigan Law Review, and can be found at https://repository.law.umich.edu/mlr/vol115/iss6/10/. The review is interesting because: (I) it provides an overview of the book and its arguments, which is quite useful; (II) it describes how the different goals of antitrust and institutional framework on both sides of the pond lead to different enforcement priorities and allocation of powers to enforcement agencies; (iii) it assesses in some detail how single firm conduct is differently pursued on both sides of the Atlantic; and (iv) it compares different enforcement practices regarding cartels in Europe and the US. The main argument of both the book and the article is that: “With its steadfast economic focus, antitrust in the United States has a clear goal. In…

Massimo Motta and Chiara Fumagalli ‘On the use of price-cost tests in loyalty discounts and exclusive dealing arrangements: Which implications from economic theory should be drawn?;

You can find this paper in (2017) Antitrust Law Journal, 81(2): 537–85. The paper looks at  loyalty rebates and the use of price cost tests. It begins by describing recent European and American case law on the matter, and highlights differences in the judicial approaches on both sides of the Atlantic (i.e. the classic distinction between European formalism and American effects-based tests). The authors then distinguish between economic tests of predation and exclusionary rebates, while noting that both include common economic mechanisms that can involve sacrificing profits.In the last and most important section, they argue that rebates and contracts containing conditions regarding how much buyers purchase from rival suppliers can raise serious anti-competitive concerns. From this point of view, a stricter treatment of exclusive contracts and some loyalty discounts might be justified – which may imply that evidence of above-cost prices may work as a safe harbour for predation, but not for exclusive dealing and loyalty rebates. Overall, I think…

Elisabeth de Ghellinck ‘The As-Efficient-Competitor Test

This paper, published in the Journal of European Competition Law & Practice and available at https://academic.oup.com/jeclap/article-abstract/7/8/544/2194480, looks at the as efficient competitor test (known as AEC by its acquaintances) – the economic test that refuses to come to life (and God knows that some have tried to breathe life into it). After the European Commission tried to make this test the cornerstone of its enforcement activities on abusive practices (in its Guidance on Enforcement Priorities for Exclusionary Practices), and the European Courts first dismissed the relevance of the test in virtually all scenarios (Post Danmark II) before saying that it may actually be useful under certain circumstances (Intel), we have this piece is by an economist trying to identify when the test can be useful. A number of conclusions are reached, in particular:  it is sensible to decide that an AEC test is not a prerequisite for establishing the abusive character of a retroactive rebate scheme, since such a test can only…