Jerome Pouyet and Thomas Trégouët ‘Assessing The Impact Of Vertical Integration in Platform Markets’ (2018) Competition Policy International Antitrust Chronicle December

This technical economics paper, which can be found here, argues that, in the context of vertical mergers, indirect network effects create a form of demand complementarity downstream that softens the anticompetitive effects of vertical integration. At the same time, vertical integration creates various sources of market power. How such market power is exerted, and its impact on competition, depends on how the integrated firm balances its price instruments to harness indirect network effects. This depends, in turn, on how each side of the market values the participation of users from the other side, or, in short, the structure of indirect network effects. The authors show, in particular, that there is no systematic correlation between stronger upstream market power and foreclosure of competitors or consumer harm. The paper is structured as follows: Section II introduces a framework to analyse vertical integration with two-sided network effects. The literature on vertical integration between an upstream input supplier and a downstream manufacturer has highlighted…

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…

Thomas Vinje ‘Intellectual Property and Antitrust Review (3rd Edition) – Chapter 5 – European Union’ (The Law Reviews, 2018)

The task of the book to which this chapter belongs is to provide an annual practical overview of developments on the relationship between antitrust and intellectual property. This chapter, which can be found here, describes the competition / IP law interface in Europe. It is structured as follows: Section II is devoted to a review of developments that took place in 2017. The section begins with a succinct description of the Google cases, before turning to a discussion on standard essential patents (SEPs). It also reviews the European Commission’s Communication on ‘Setting out the EU approach to Standard Essential Patents’. The paper then briefly discusses e-commerce. It begins by mentioning the ECJ’s Coty decision and the Policy Brief prepared by the European Commission concerning this judgment. This Brief states that Coty provides more clarity and legal certainty to market participants by confirming previous case law and establishing a clear legal framework for online commerce. The paper also mentions the Commission’s e-commerce sector…

Marco Botta and Klaus Wiedemann ‘EU Competition Law Enforcement vis-à-vis Exploitative Conducts in the Data Economy’ Max Planck Institute for Innovation & Competition Research Paper No. 18-08

This long paper (90 pages), which can be found here, seeks to understand how traditional principles of EU law – particularly those related to exploitative abuses and respective remedies – apply to new business models that mainly rely on processing large amounts of users’ data. The analysis does not extend to the US because, following Trinko, the authors consider that antitrust law there does not extend to exploitative practices, even if the FTC has powers under the Sherman Act to pursue such practices under consumer and unfair practices law. I am afraid the review is rather long, because this paper’s contents are the equivalent of multiple articles. The paper is structured as follows: Section 2 provides an overview of European case law vis-à-vis exploitative abuses. Art. 102 TFEU lists a number of exploitative abuses. Nevertheless, the European Commission has long focused on investigating exclusionary, rather than exploitative abuses. While this has led to limited case law on exploitative abuses, the authors identify…

Ariel Ezrachi on ‘EU Competition Law Goals and The Digital Economy’ (2018) Report for BEUC – The European Consumer Organisation

This paper  can be found here. I have already reviewed it in an earlier post. At the time, I focused on the article’s overview of the goals of EU competition law. However, the article also contained a detailed discussion of the impact that the digital economy may have on these goals. I was unable to review this discussion then, so I propose to do it here. Competition policy is one of several instruments used to advance the goals of the European Treaties. According to the European Commission, competition on the market is protected as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources. This notwithstanding, EU competition law has also consistently been held to protect ‘not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such.’ Moreover, a genuinely indigenous objective is worthy of note, namely that of promoting European market integration. In addition…

Jorge Padilla and John Davies ‘Another look at the economics of the UK CMA’s Phenytoin case’ in Excessive Pricing and Competition Law Enforcement (ed. Yannis Katsoulacos and Frédéric Jenny, 2018, Springer)

In this book chapter, the authors criticise the CMA for relying on the same evidence of a gap between prices and costs in its assessment of each of market definition, dominance and abuse. When coupled with the absence of analysis of comparator prices – which, the authors argue, the CMA replaced with a failed search for justifications for a price-cost gap when finding that the price was ‘unfair in itself’ – this could serve as a precedent for a fragile and unreliable approach to assessing excessive pricing. The paper is structured as follows: Section 2 describes the framework for assessing excessive pricing under European law (and its British equivalent). The paper builds on United Brands‘ two-step test, and particularly the requirement that am excessive price must exceed the “economic value” of the product to such an extent that the price bears “no reasonable relation” with that value. The legal test set out by the ECJ is as follows. First, the test…

Robert O’Donoghue ‘The Political Economy of Excessive Pricing in the Pharmaceutical Sector in the EU: A Question of Democracy?’ (2018) CPI Antitrust Chronicle

This paper, which can be found here, argues that antitrust enforcement against excessive pricing by medicines runs against democratic choices reflected in the dense and intricate regulatory network that applies to the pharmaceutical sector. The paper is structured as follows: The paper begins with a quick overview of excessive pricing cases in the EU. There have only been a handful of excessive pricing cases in the EU. The rare cases that have been brought have fallen into rather specific categories: (i) cases involving copyright management societies in the EU, with de jure or de facto unregulated monopoly positions in each national territory; (ii) parallel trade or market integration cases, where the excessive price was a tool to discourage or prevent parallel trade; and (iii) cases where the main issue was exclusionary conduct, and the further concerns about pricing were really the corollary of other abusive practices. In fact, under EU law there has never been a truly standalone finding of excessive…

Margherita Colangelo and Claudia Desogus ‘Antitrust Scrutiny of Excessive Prices in the Pharmaceutical Sector: A Comparative Study of the Italian and UK Experiences’ (2018) World Competition 41(2) 225

This article, which can be found here,  pursues a comparative analysis of the recent case law on excessive pricing in the pharmaceutical sector, examining in particular the Italian and UK experience. The paper is structured as follows: Section 2 begins with a brief review of the existing literature on excessive prices in the EU. This section reviews the arguments for and against competition authorities intervening when prices are too high. On the one hand, it is argued that high prices should not be the subject of competition law intervention because such intervention may affect innovation incentives and dynamic efficiency; because high prices will attract competitors and, hence, will tend to self-correct; because there are high probabilities and costs of mistaken intervention; and because this is a task that should be left to specialised regulators. On the other hand, it is argued that correcting high prices directly increases consumer welfare, which is the goal of competition law; that high prices are not…