Michael Katz and Jonathan Sallet ‘Multisided Platforms and Antitrust Enforcement’ (2018) Yale Law Journal 2142

This paper,  available here, looks at two questions regarding competition enforcement in platform markets: (i) how should one account for the distinct characteristics of platforms when defining an antitrust market; and (ii) how, if at all, should one weigh user groups’ gains and losses on different sides of a platform against one another. In short, the authors argue that enforcers and courts should use a multiple-markets approach to multisided platforms, in which different groups of users on different sides of a platform belong in different product markets. This approach allows one to account for cross-market network effects without collapsing all platform users into a single product market. They further argue that enforcers should consider the price structure of a platform, and not simply its net price, when assessing competitive effects. This justifies the use of a separate-effects analysis, according to which anticompetitive conduct harming users on one side of a platform cannot be justified just because that harm funds benefits for users…

Lapo Filistrucchi ‘Two-sided v Complementary Products’ (2018) CPI Antitrust September Chronicle

This paper, which can be found here, It aims to clarify whether and to what extent two-sided platforms are different from platforms selling complementary products. It also seeks to explain why the distinction matters for the purposes of competition assessments of firms’ behaviour. The paper is structured as follows: A first section explains why firms operating in two-sided markets are different from firms selling complementary products. According to the economic literature, a two-sided platform is a firm that sells two different products or services to two groups of consumers, where the demand from one group of consumers depends on the demand from the other group and, potentially, vice versa. In other words, demand is affected by indirect network effects (i.e. consumers’ willingness to pay for a product depends on the number of consumers (or the quantity bought) of another product). A platform internalizes these indirect network effects. There are differences between platforms and firms selling complements. A first difference is that, in…

Gregory J. Werden and Luke M. Froeb ‘Why Patent Hold-Up Does Not Violate Antitrust Law’ (forthcoming, Texas Intellectual Property Law Journal)

As the title indicates, this paper argues that patent hold-up, as courts and commentators define the term, does not undermine the competitive process and thus cannot give rise to a valid antitrust claim, at least in the US. The paper is available here and is structured as follows: Part II describes patent hold-up and sets out the economic framework employed by many antitrust intervention advocates. A relatively recent phenomenon is that important standards are encumbered by many—perhaps thousands—of Standard Essential Patents (SEPs). “Inventors” own SEPs and grant licences to them, while “implementers” manufacture or sell standard-compliant components or devices. Antitrust intervention advocates argue that these sunk costs permit inventors to engage in “opportunism” by demanding royalties that could “capture part of the fruits of another’s investment,” i.e., part of the sunk investment of implementers. This “opportunistic” behaviour by inventors is what generally is meant by the term “patent hold-up.” Out of a conviction that inventor opportunism is a serious problem, advocates of…

Harry First ‘Excessive Drug Pricing as an Antitrust Violation’ (forthcoming on the Antitrust Law Journal)

In the US, there have been antitrust enforcement efforts against various pharmaceutical practices that elevate price above the competitive level, such as reverse payments (or pay-for-delay), product hopping, and collusion among generic drug manufacturers. However, the conventional wisdom is that U.S. antitrust laws do not forbid high prices simpliciter. This paper argues that the conventional wisdom may be mistaken: Section 1 engages in a general discussion of the problem of high prices and provides two examples of a non-antitrust approach to this problem. The standard antitrust/welfare economics paradigm condemns high prices at least on the grounds of resource misallocation and deadweight welfare loss. Many scholars go beyond deadweight welfare loss concerns, condemning monopoly pricing because of the redistribution of the consumer surplus from consumers to producers, but some are indifferent to this redistribution. There is an additional argument that can be made against high prices, but it is one to which antitrust is often indifferent: high prices can be seen…

Joshua P. Davis and Robert H. Lande on ‘Restoring the Legitimacy of Private Antitrust Enforcement’ in A Report to the 45th President of the United States (American Antitrust Institute’s Transition Report on Competition Policy), Chapter 6, page 219

This report, which can be found here, argues against the increasingly prevalent view that class actions are little more than legalised blackmail, and that class action lawyers are ambulance chasers rather than private attorneys general. The paper submits that there is no systematic empirical support for the view that frivolous antitrust litigation is a serious problem, and present a defence of the benefits of private antitrust enforcement. The paper is structured as follows: A first section argues that private antitrust cases are a critical component of effective antitrust enforcement. Government cannot be expected to do all or even most of the necessary competition enforcement. In addition to budgetary constraints, there are a number of reasons for this – including “undue fear of losing cases; lack of awareness of industry conditions; overly suspicious views about complaints by ‘losers’ that they were in fact victims of anticompetitive behavior; higher turnover among government attorneys; and the unfortunate, but undeniable, reality that government enforcement (or…

Makam Delrahim (Assistant Attorney General, Antitrust Division, U.S. DoJ) ‘Antitrust Enforcement in the Digital Era’

In these remarks, hich can be found here, AAG Delrahim defends the ‘broad antitrust consensus that still reigns today’ and considers how it might apply to the digital sphere. He begins by outlining the two key components of the current antitrust consensus. The first is the consumer welfare standard, which requires that some business practices should be condemned as unlawful only where they harm competition in such a way that consumers suffer. The second component is “evidence-based enforcement”. Outside the realm of naked horizontal restraints such as price fixing, bid rigging, and market allocation, antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications. Evidence-based enforcement also requires a readiness to adapt our existing antitrust framework and tools to new or emerging threats to competition. One such threat comes from digital platforms and the increased market concentration they give rise to. AGG Delrahim considers that the antitrust consensus approach is flexible to new business…

Tim Wu ‘After Consumer Welfare, now what? The ‘Protection of Competition’ Standard in Practice (2018) CPI Antitrust Chronicle April

The goal of this short piece, which can be found here, is to address arguments that abandoning the ‘consumer welfare’ standard would make antitrust law too unworkable and indeterminate. The paper argues that there is an alternative standard ‘protection of competition’ that is practicable and at least as predictable as the consumer welfare standard. This standard has the additional advantage of being much truer to the legislative intent underlying US antitrust laws than the consumer welfare standard. The piece is structured as follows The first section provides an overview of the two main criticisms of current antitrust practice. Critics of current antitrust practice are committed to antitrust revival, and broadly opposed to the extremes of the Chicago. However, they then divide as regards their approach to the “consumer welfare” standard. The first group – comprising mainly economist and lawyers – believes that the standard has been abused and misused, but nonetheless retains its utility as the anchor of antitrust law and policy….

Jonathan B. Baker, Jonathan Sallet & Fiona Scott Morton ‘Introduction: Unlocking Antitrust Enforcement’ (2018) Yale Law Journal 127(7) 1916

This piece is the introduction to a special issue by the Yale Law Journal on ‘Antitrust Enforcement’. I shall review a number of these articles in forthcoming posts. In the introduction, the authors begin by describing the context in which this special issue of the Yale Law Journal was published. This context is not dissimilar to that which led to the adoption of antitrust rules in the first place:  there is a market power problem which may contribute to slow economic growth and to widening economic inequality. This issue of the Journal tries to lay the foundation for an overarching enforcement agenda ‘in the long, but receding, shadow of the Chicago School, which brought economic analysis to the forefront of antitrust but failed to fully capture the realities of competition and the private actions that can curb it”. This small piece also explains the basic underpinnings of this new enforcement agenda. In particular, they consider that: “Economic analysis lies at…

The Competitive Assessment of Vertical Mergers: The ATT/TimeWarner judgment

The decision regarding  the first challenge to a vertical merger brought by the U.S. federal government since 1979  came out recently: it is the ATT / Time Warner merger judgment, decided on 12 June, which can be found at http://www.dcd.uscourts.gov/sites/dcd/files/17-2511opinion.pdf. The DoJ’s case was that the merger would substantially lessen competition in the video programming and distribution market by enabling AT&T to use Time Warner’s ‘must have’ television content to either raise AT&T’s rivals’ video programming costs or to drive those rivals’ customers to AT&T’s video distribution channels.  ATT / Time Warner’s (the merging parties) case was that the video programming and distribution market is in the middle of a revolution where digital players such as Netflix, Amazon and Hulu are integrating video programming and distribution, while companies such as Facebook and Google are syphoning advertising from the TV to the digital space. The merger of AT&T and Time Warner would allow them to catch up to the competition –…

How to define two-sided markets? Ohio v American Experess

A recent US Supreme Court decision is  likely to have an impact on antitrust practice: Ohio v American Express 585 U. S. [to be determined] (2018), available here. In short, the case is about the correct antitrust treatment of anti-steering provisions introduced by American Express (Amex) into its contracts with merchants. The United States and several States (collectively, the plaintiffs) sued Amex, claiming that its anti-steering provisions violate §1 of the Sherman Act. The District Court agreed, finding that the credit-card market should be treated as two separate markets—one for merchants and one for cardholders—and that Amex’s anti-steering provisions are anticompetitive because they prevent competition in the merchant side of the market and results in higher merchant fees. The Second Circuit reversed; it determined that the credit-card market is a single market, not two separate ones; and that Amex’s anti-steering provisions did not infringe the Sherman Act. You may remember that I reviewed the Circuit court decision almost two years…