Daniel Sokol ‘Reinvigorating Criminal Antitrust?’ (2019) William & Mary Law Review 60 1545

A number of non-cartel antitrust infringements remain crimes under US law, even if they are not prosecuted in practice. This article, available here, deals with the implications of recent claims for increased antitrust enforcement for the application of such provisions.  A natural extension of enforcement would be to advocate the use of criminal sanctions for various antitrust violations outside of collusion which are “on the books” but have not been used in over a generation. The article argues that a return to the criminalisation of non-collusion related antitrust abuses is problematic not only as a matter of optimal deterrence, but also unconstitutional as a matter of law. Section one describes how antitrust criminalisation is a form of achieving deterrence. Antitrust enforcement builds on models of optimal deterrence. Under an optimal deterrence antitrust framework, a firm or individual will be deterred where the expected costs of illegal activity, taking into account the probability of detection and magnitude of the penalties, exceed…

Cyril Ritter ‘Antitrust in two-sided markets: looking at the U.S. Supreme Court’s Amex case from an EU perspective’ Journal of European Competition Law & Practice (2019, forthcoming)

As reviewed in last week’s email/posts, the U.S. Supreme Court recently found that American Express’s ‘anti-steering’ rules did not violate U.S. antitrust law (in a decision reviewed here). In its judgment, the Supreme Court addressed a variety of topics essential to antitrust analysis – market definition, two-sided markets, harm through price effects and output effects, cross-market efficiencies and ancillary restraints – in ways which are at odds with the European approach. This paper, available here, seeks to compare the EU and US approaches in this respect.   It is structured as follows: Section three contains a comparison of the AmEx majority and dissenting opinions. In the interest of clarity, I will review it here, instead of following the paper’s structure. In Ohio v American Express, the majority held that only one market should be defined in two-sided transaction markets. Because there is a single relevant market, cognisable harm must refer to net harm across merchants and cardholders. Even demonstrating that the benefits…

Dennis Carlton ‘The Anticompetitive Effects of Vertical Most-Favored-Nation Restraints and the Error of Amex’ (2019) Columbia Business Law Review 88

Ohio v American Express involved the use of what are called “no steering” restraints, in which a retailer is not allowed to use a variety of tactics to steer a consumer away from using an American Express (“Amex”) card and towards using another payment mechanism, such as money or competing payment cards. The reason why a merchant might want to do this is because the cost that the merchant incurs when a customer uses an Amex card can be higher than when the customer uses another credit card, debit card or cash. Although not challenged in the case, the Amex contractual rules also prevent a retailer from imposing a surcharge on customers who use an Amex card to reflect the higher merchant cost. The contractual clause at stake in this case was a type of vertical most-favoured-nation (‘MFN’) restraint, i.e. a restraint in which one supplier tells a retailer that the retailer cannot set the retail price of its product…

Joshua Wright and John Yun ‘Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express’ (2019) Review of Industrial Organization

This article, available here, argues, contrary to the arguments made in the piece above, that the Supreme Court decided the Ohio v American Express case correctly. Multisided platforms have distinct and critical features that set them apart from single-sided markets. Any prima facie antitrust assessment of competitive harm must incorporate the impact on consumers in all sides of a market regardless of market definition, and output effects should be the primary emphasis of any such competitive effects analysis. The paper is structured as follows: Section 2 identifies two broad schools of thought on market definition and competitive effects for multisided platforms. There is a divide among antitrust practitioners, courts, and economists regarding how multisided platforms should be assessed in antitrust investigations. A first school advocates for a separate effects and markets’ approach. Because users on different sides of a platform have different economic interests, it is inappropriate to view platform competition as being for a single-product offered at a single (i.e., net,…

Erik Hovenkamp ‘Platform Antitrust’ Journal of Corporation Law (forthcoming),

This paper argues that the recent Supreme Court decision in American Express v Ohio is misguided. It is available here. Platform competition creates challenges for antitrust, but does not warrant the upheaval of the antitrust laws that the Supreme Court’s majority opinion prescribed. Instead, the traditional rule-of-reason approach is much better suited to deal with such cases. The paper is structured as follows: The paper begins by providing an overview of the distinctive features of platforms and platform competition, as reflected in the platform economics’ literature. There is no universally accepted definition of a two-sided platform, since multi-sidedness is a matter of degree. The economic literature identifies various types of platforms, such as: (a) transaction platforms, i.e. platforms that provide instrumental value by facilitating transactions between the two sides of a market; and (b) media platforms, where the two-sides of a platform comprise consumers of content and advertisers. It is sufficient here to describe a two-sided platform as a firm that (a)…

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…

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…

A Quarter Pounder tying with Cheese

I would like to refer you to a very interesting (i.e. entertaining) class action – which you can find here. In short, the claim is that McDonald’s Quarter Pounder and Double Quarter Pounder with Cheese constitutes an unlawful tying of Quarter Pounders and … cheese. While a customer may still obtain (single or double) Quarter Pounders without cheese, this is not a listed product in stores and a customer who enters into a physical store in the US will still be forced to pay the price of the (single or double) Quarter Pounder with cheese. This leads to an overcharge of 30 to 90 cents, reflecting the price McDonalds charges for the additional slices of cheese which customers ‘do not want, order, or receive’. I would point out that this requires evidence that McDonald has market power in the market for… fast food? Burgers? Fast-food burgers? Coronary-disease inducers? You may feel that this is a silly class action. But one…

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…