José Azar, Ioana Marinescu and Marshall Steinbaum ‘Labour Market Concentration’ NBER Working Paper No. 24147

The paper – which can be found here – seeks to quantify the level of labour market concentration across a wide range of occupations and for almost every commuting zone in the US. In a nutshell, it finds that labour market concentration is high, and that higher concentration is associated with significantly lower posted wages. Given current high concentration levels in labour markets, mergers have the potential to significantly increase labour market power. The authors argue that this type of analysis could be used by antitrust agencies to assess whether mergers can create anti-competitive effects in labour markets. With this, they seek to challenge how little attention antitrust regulators have devoted to labour markets, despite the labour economics literature finding that firms can have substantial market power in these markets. The paper is structured as follows: Section 2 describes the data and how the paper will go about measuring labour market concentration. They use proprietary data from CareerBuilder.com, the largest…

Ioana Marinescu and Herbert Hovenkamp ‘Anticompetitive Mergers in Labour Markets’ (forthcoming) Indiana Law Journal (2018)

The paper – which can be found here – looks at mergers that facilitate anticompetitive wage and salary suppression from an antitrust perspective. It also looks at other potentially anticompetitive practice in labour markets, so the paper’s title is misleading. The paper’s fundamental argument is that that antitrust law is under-enforced as regards mergers affecting employment markets, and that this is important for several reasons. First, the share of the gross domestic product (GDP) going to labour has been declining at an alarming rate, and this seems to be correlated with an increase in market concentration. Second, US antitrust law does not condemn unilateral price setting by dominant firms – including the setting of wages. A second best solution to the problem of suppressed wages can therefore be found in merger law, which can interdict wage-suppressing mergers before they occur. Third, antitrust law is properly directed at all output reducing practices, and there is certainly no principled reason for excluding…

Suresh Naidu, Eric A. Posner, and E. Glen Weyl ‘Antitrust Remedies for Labor Market Power’ Harvard Law Review (forthcoming)

The paper – which can be found here –  criticises the historic imbalance between product and labour market antitrust enforcement, which has no basis in economic theory: from an economic standpoint, the dangers to public welfare posed by product and labour market power are exactly the same. It is argued that antitrust agencies should take more seriously the danger that mergers may lead to labour market power as well as product market power. The paper is organised as follows: The introduction tries to explain why antitrust has traditionally ignored labour markets. Four explanations are advanced: (i) while economic theory treats product and labour markets similarly, legal theory has placed more emphasis on product markets as a result of a focus on consumer welfare; (ii) it was assumed that labour markets are reasonably competitive, and that labour market power was not an important social problem; (iii) the traditional legal approach to protecting workers, which took place “outside” antitrust law, may have…

ric Biber, Sarah Light (Berkeley), J. B. Ruhl, and James Salzman (UCLA) “Regulating Business Innovation as Policy Disruption: From the Model T to Airbnb” (2017) 70 Vand. L. Rev. 1561

The argument of this paper – which can be found here – is straightforward: scholarship about the platform economy has been ahistorical; focusing on the immediacy and novelty of the platform economy misses the fact that its interaction with the legal system does not raise fundamentally new questions from a law and policy perspective. From a business or economic perspective, history is full of technological and management advances that fundamentally disrupted business models over a brief period of time. This is not to say that current developments do not pose challenges to public policy. Regulatory policy generally—even necessarily—presumes a certain kind of organizational model for the activities that it regulates.  When business innovation upends that pre-existing model, the result is a disjunction between the structure of the regulatory system and the industry that is being regulated: a policy disruption. This has occurred in the past. Debates over whether and how the regulatory system should adjust to the rise of platforms…

Kenneth A. Bamberger and Orly Lobel ‘Platform Market Power’ (2018) 32 Berkeley Tech. L.J. 1051

In this paper – which can be found here – the authors seek to develop a framework for considering the market power of platform companies that use digital technology to connect a multisided network of individual users. Throughout, they use Uber as an example.  The framework identifies a number of questions that may be helpful in assessing whether a platform has market power. The first question one should ask is whether the success of a platform is a result of innovation or of undesirable regulatory arbitrage. The authors argue that understanding the net impact of digital platforms requires careful inquiry into the gains arising from the entry of platforms into mature markets and their disruption of staid industries; and to the harm they may pose to regulatory protections set out to protect valuable social goods. This means that antitrust law cannot be asked to answer – as it has been asked to do by some authors – questions of regulatory…

Christopher Townley, Eric Morrison and Professor Karen Yeung ‘Big Data and Personalised Price Discrimination in EU Competition Law (2017) Yearbook of European Law 36 683

This paper – which can be found here – seeks to determine whether ‘algorithmic consumer price discrimination’ can amount to an abuse of a dominant position. It is structured as follows: Section 2 explains how ‘big data’ allows for greater personalisation of prices, and how recourse to digital algorithms facilitates personalised pricing. The paper seeks to identify whether ‘algorithmic consumer price discrimination’ enhances or diminishes economic efficiency. To do so, the paper reviews, in detail, the main economic theories on price discrimination, which have already been summarised when describing the paper reviewed in the post below. The authors observe that price discrimination can have rent-transfer effects (from consumers to producers), allocation effects (reflecting consumers’ willingness to acquire the product) and output effects (by pricing some consumers into the markets and/or out of the market). Which of these effects predominates in imperfectly competitive markets is a very hard question. Ultimately, the effects of price discrimination will have to be assessed on a…

Inge Graef  ‘Algorithms and fairness: what role for competition law in targeting price discrimination towards end consumers?’

This paper – which can be found here –  tries to identify when algorithmic price discrimination will be anticompetitive. Price discrimination is not per se unlawful or anticompetitive; on the contrary, price discrimination  may be efficient and lead to increased output. However, personalised pricing is commonly felt to be unfair – and it is undisputed (in Europe, at least) that some forms of price discrimination can be anticompetitive. This paper seeks to distinguish between those situations when algorithmic price discrimination is anticompetitive and those in which it is not. The paper is structured as follows: Section 2 looks at how price discrimination can harm competition. Two types of harm are identified: (i) primary line injury occurs where the supplier’s conduct discriminates against competitors in markets in which the supplier also operates; and (ii) secondary line injury takes place when a supplier discriminates between a number of its customers as against one another. While behaviour giving rise to primary line injury…

Peter Menell  ‘Economic Analysis of Network Effects and Intellectual Property’ in Ben Depoorter & Peter S. Menell (eds.), Research Handbook on the Economics of Intellectual Property Law: Vol I. Theory (2018)

This piece – which can be found here – is a rather long , but very comprehensive book chapter that surveys and integrates the economic, business strategy and legal literatures on IP, competition and network effects. It is structured as follows: Part I introduces network effects. I have done this to death in the past, so I’m not going to repeat it here. Suffice it to say that the author looks mainly at demand side network effects, and what its implications are for IP and competition policy: ‘In a static economic model (i.e., one without innovation), consumers benefit from robust competition within product standards. Open access to product standards encourages realization of network externalities. Although bandwagon effects can enhance consumer welfare in a static context, they can also make it more difficult for developers of improved platforms to enter the market. Consumers and suppliers of complementary products can face significant switching costs in migrating from one platform to another.’ Like…

Jorge Padilla, John Davies and Aleksandra Boutin ‘The Economic Impact of Technology Standards‘

This Compass Lexecon report – which can be found here – argues that standards can lead to significant efficiencies: they not only solve coordination problems, they also seem to promote more rapid innovation than would otherwise be the case. Whether standards accelerate innovation depends greatly on who the ‘gatekeeper’ to the technology is. Among possible ‘gatekeepers’, the most pro-competitive one are voluntary standard setting organisations (SSOs). SSOs and the licensing arrangements they support enable a “market for technology,” in which smaller and specialized technology providers can thrive. As a result, competition authorities should be loath to interfere with the contractual arrangements that underpin the functioning of SSOs, should as clauses regarding FRAND terms. In more detail, the paper is structured as follows: The paper begins with an overview of why standards are valuable. Standards help certain industries achieve scale, giving users and suppliers the confidence to buy or make compatible products. While not exclusive to the IT sector, the ‘economics of…

Florian Wagner Von Papp ‘Competition Law in EU Free Trade and Cooperation Agreements (and What the UK Can Expect After Brexit)’ European Yearbook of International Economic Law, Forthcoming

This paper – which can be found here – focuses on the interplay between trade and competition from a competition perspective. Its basic argument is that the more integrated a trade area is, the more similar competition rules are likely to be, and the easier it will be for international cooperation to occur.  The focus of the paper is on demonstrating how this occurs in practice, by looking at “the concentric circles of cooperation around the EU by examining the intergovernmental and inter-agency agreements concluded by the EU to face the complexities of the transnational economy of the 21st century.” Section 2 contains a short overview of the relationship between free trade and competition law. Free trade interacts with competition law on many levels, and their relationship is mainly symbiotic and self-reinforcing. However, competition and trade law conflict at points. Free trade should increase competition, since market entry by foreign competitors undermines domestic market power. Competition law is then useful…