EU group of experts, ‘Competition Policy for the digital era’

This Report, which can be found here, explores how competition policy should evolve to continue to promote pro-consumer innovation in the digital age. It is structured as follows. Chapter 2 describes the digital world and markets. The report focuses on three key characteristics of the digital economy: extreme returns to scale, networks externalities and role of data. Regarding returns to scale, the cost of production of digital services is disproportionate to the number of customers served. While this aspect is not novel as such (bigger factories or retailers are often more efficient than smaller ones), the digital world pushes it to the extreme and this can result in a significant competitive advantage for incumbents. Concerning network externalities, the convenience of using a technology or a service increases with the number of users that adopt it. Consequently, it is not enough for a new entrant to offer better quality and/or a lower price than the incumbent does; it also has to…

Stigler Center (University of Chicago) Report on Digital Platforms

This Report, which can be found here, was written by a working group who came together to address specific problems arising from the digital platforms’ reach, scale, scope, and use of data. They examined concerns stemming from the market structure contemporary platforms have created, and to investigate their competitive behaviour, including the consequences of network effects that can create barriers to entry for new innovators and entrench incumbents. The theme that runs throughout the report is the difficulty of entry into digital platform businesses once an incumbent is established. Whether the entrant is vertical or horizontal, has succeeded to some degree, is nascent, is a potential entrant, or is a large platform in an adjacent space, market entry improves consumer welfare by either providing more choice, different features, and a chance of higher quality, or creating a threat that spurs the incumbent to provide lower prices, higher quality and innovation, and to do so more quickly. The Report is structured…

Christian Catalini and Catherine Tucker ‘Antitrust and Costless Verification: An Optimistic and a Pessimistic View of the Implications of Blockchain Technology’

This paper’s basic argument is that the blockchain holds both promises and threats for antitrust. There is reason to think that the decentralised nature of some blockchain implementations may reduce the need for antitrust enforcement, as it prevents the accumulation of market power by digital platforms. But there is also reason to believe that the technology may pose practical challenges for antitrust enforcement. Antitrust law is set up on the premise that there is a clearly demarcated firm (or set of firms) that may try to seek market power. The decentralised nature of the technology means that identifying an entity to prosecute or hold responsible for any degree of market power (or its abuse) is impossible, and that collusion and price setting between competitors may be harder to detect. The paper begins by describing the blockchain, and why it should matter for antitrust. From an economics perspective, an implementation of blockchain technology has two key characteristics: (i) a set of…

Andres Caro ‘Leveraging market power online: the Google Shopping case’ (2018) Competition Law Journal 17(1) 49

The Google Shopping case raises many important questions, such as: how do we deal with the leveraging of market power in digital markets? How do we weigh the benefits to consumers against the potential harm to competition? And, lastly, what are the appropriate remedies for this type of behaviour? In addressing these questions, this paper is structured as follows: A first section describes the background to the Google Shopping decision by the European Commission. Google aggregates, sorts, displays and provides direct access to retailers’ webpages in exchange for a fee through Google Shopping. Other online platforms, including Nextag, Foundem and Shopzilla, offer similar services. However, until early 2018 ‘while competing comparison shopping services can appear only as generic search results and are prone to the ranking of their web pages in generic search results on Google’s general search results pages being reduced (‘demoted’) by certain algorithms, Google’s own comparison shopping service is prominently positioned, displayed in rich format and is…

Jose Luis da Cruz Vilaca on ‘The intensity of judicial review in complex economic matters – recent competition law judgments of the Court of Justice of the EU’ (2018) Journal of Antitrust Enforcement 6(2) 173–188

The author of this paper, available here, was for a long time the President of the Court of First Instance (now the ECJ’s General Court). More importantly for our purposes here, he was also the CJEU judge responsible for drafting the Intel judgment. The paper is structured as follows: A first section reviews how EU courts approach judicial review in complex matters, and how this approach has evolved over time. For a number of years, the Court of Justice (ECJ) has taken a careful approach to the scope and intensity of review of Commission decisions as regards complex economic matters. From the outset, the Court conceived its role in competition matters as being limited to reviewing legality, and not as involving unlimited jurisdiction or full merits review (except as regards the imposition of fines). Since Consten & Grunding in 1966, the ECJ has acknowledged that the Commission must engage in complex evaluations of economic matters. The judicial review of these evaluations…

The OECD Report on International Private Enforcement

Officially known as ‘Individual and Collective Private Enforcement of Competition Law: Insights for Mexico in 2018’, this Report was prepared with a view to advise Mexico on how to reform its private enforcement regime. The Report can be found here. Advising Mexico in this regard required the pursuit of a comprehensive overview of international experiences with private competition enforcement – with a focus on Europe and North America, but also looking beyond these regions. This project also required the identification of the various elements that comprise private enforcement regimes around the world, the various forms that each of these elements may take, and how these elements relate to one another. I may of course be mistaken, but I think there is no other work like this in the market. As such, I circulate the Report here because I think it can provide a useful reference for anyone working or interested in private enforcement.

David Bailey ‘The New Frontiers of Article 102 TFEU: antitrust imperialism or judicious intervention?’ (2018) Journal of Antitrust Enforcement 6(1) 25-53

This paper – which can be found here – addresses the way in which EU competition law cuts across and interferes with other legal regimes such as pharmaceutical regulations (Astra Zeneca and patent settlement cases), energy rules (Gazprom) and data protection (Facebook). This has led to a debate about whether EU competition law and policy should be able to trespass on turf that is properly subject to other areas of law, and whether it is appropriate for it to act as a “repair service” for other fields of economic law that lack sanctioning mechanisms. The article is structured as follows: The second section examines four situations in which Article 102 TFEU controversially overlapped with a different area of law. Competition law applies to unilateral business conduct whenever there is an act (or omission) of a dominant undertaking that distorts the competitive process or is directly exploitative of consumers. On the other hand, the application of competition law is usually precluded by…

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…

Carl Shapiro and Herbert Hovenkamp ‘Horizontal Mergers, Market Structure, and Burdens of Proof’ (2018) Yale Law Journal 127(7) 1996

This paper, which can be found here, deals with the ‘structural presumption’ for merger control set out in US law by the Philadelphia National Bank case in 1963. In this case, the Supreme Court stated: “That ‘competition is likely to be greatest when there are many sellers, none of which has any significant market share,’ is common ground among most economists, and was undoubtedly a premise of congressional reasoning about the antimerger statute.’ The Supreme Court held that a merger producing a firm that controls an “undue percentage share” of the market and that “results in a significant increase in the concentration of firms in that market” is “inherently likely to lessen competition substantially.” As a result, the merger should be prohibited, at least “in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects” The merging parties can then rebut this structural presumption by showing that the market shares do not accurately…