Keith N. Hylton ‘Oligopoly Pricing and Richard Posner’ (2018) Antitrust Source

Oligopoly pricing cases are sometimes called “circumstantial-evidence conspiracies”, because they typically involve a charge of conspiracy and an absence of direct evidence of agreement.  What makes these cases special, however, is the type of circumstantial evidence brought to court, such as that of parallel behaviour, and the difficulty of determining whether the evidence justifies a finding of conspiracy. Over nearly 50 years, Richard Posner’s ideas have loomed large over the subject of oligopoly pricing and antitrust. However, by 2015 his approach seemed to have little to do with his ideas in 1969. This paper, , available here, explores this evolution, and how it reflects changes in how we think about oligopoly and collusion. Section I discusses the text messaging litigation and the reasoning behind Posner’s changing approach to oligopoly pricing. In 2015, judge Posner wrote the opinion In re Text Messaging. The case arose from the consolidation of several class actions accusing major wireless network providers (T-Mobile USA Inc., Sprint…

Howard Shelanski ‘Antitrust and Deregulation’ (2019) Yale Law Journal 127 1922

The relationship between antitrust enforcement and regulation depends on policy choices which must answer a question: how should antitrust enforcement and regulation relate to each other? This paper, which is available here, looks at this question in the context of deregulated industries. It argues that antitrust enforcement should run countercyclical to regulation, especially during strongly deregulatory cycles. The comparative importance of countering deregulatory shifts arises because, while increased regulation can keep antitrust enforcement out of regulated markets, reduced regulation triggers no such mechanism for pushing antitrust back into deregulated markets. It is argued that good reasons for antitrust enforcement to run counter to deregulation can be found in economics, legal doctrine, and current debates over competition policy. Part I discusses why deregulation can lead to enforcement gaps. A variety of institutions can govern economic competition. Decentralised, capitalist economies generally rely on markets to provide the incentives and discipline necessary to keep prices low, output high, and innovation moving forward. When…

Einer Elhauge ‘How Horizontal Shareholding Harms Our Economy—And Why Antitrust Law Can Fix It’ (2020) 10 Harvard Business Law Review 10(2) 207

This article, available here, argues that new economic proofs and empirical evidence show that horizontal shareholding in concentrated markets often has anticompetitive effect. The piece also develops new legal theories for tackling the problem of horizontal shareholding. When horizontal shareholding has anticompetitive effects, it is illegal not only under Clayton Act §7, but also under Sherman Act §1. Anticompetitive horizontal shareholding also constitutes an illegal agreement or concerted practice under EU Treaty Article 101, as well as an abuse of collective dominance under Article 102. Part I describes how new proofs and empirical evidence have confirmed that high levels of horizontal shareholding in concentrated product markets can have anticompetitive effects, even when each individual horizontal shareholder has a minority stake. The last few years have seen a deluge of studies – involving economic modelling and empirical research – demonstrating how overlapping horizontal shareholding can lead to anticompetitive effect, even when each individual horizontal shareholder has a minority stake and without…

Anna Tzanaki ‘Varieties and Mechanisms of Common Ownership: A Calibration Exercise for Competition Policy’ (forthcoming)

Minority shareholdings have been on the regulatory agenda of competition authorities for some time. Recent empirical studies, however, draw attention to a new, thought provoking theory of harm: common ownership by institutional investors holding small, parallel equity positions in several competing firms within concentrated industries. The European Commission has already made use of the common ownership theory in its merger enforcement practice, while the US antitrust agencies have proposed amending their merger control reporting thresholds to account for aggregate institutional holdings. This paper, available here, reviews common ownership from the perspective of merger control. It starts with a novel distinction between two types of common ownership – ‘concentrated’, which broadly fits within existing concepts in merger control; and ‘diffuse’, which broadly encompasses the instances of common ownership that avoid merger scrutiny in jurisdictions that rely on control-based thresholds. It is this latter form of common ownership that preoccupies the contemporary debate, and falls through the gaps of competition law. The…

Bill Kovacic ‘Competition Policy Retrospective: The Formation of the United Launch Alliance and the Ascent of SpaceX’ (2020) George Mason Law Review

In May 2005, Boeing and Lockheed Martin announced plans to form the United Launch Alliance (ULA), a joint venture which combined the only two suppliers of medium-to-heavy national security related launch services to the U.S. government. With input from the US Department of Defence (DOD), the FTC cleared the transaction. The FTC’s approval rested on two assumptions: that the efficiencies claimed by the merging parties were significant, and that the DOD and the NASA would use best efforts to facilitate entry into the launch services sector. This article, available here, examines the merger clearance decision and assesses the assumptions supporting this 2006 decision in light of subsequent experience. In short, those assumptions proved justified. ULA thus far has met the reliability expectations that guided the analysis of the DOD and the FTC. From its first days of operation through July 30 2020, ULA has made 140 launches without a failure. The venture has achieved and surpassed the reliability goals that…

Mark Glick, Catherine Ruetschlin and Darren Bush ‘Big Tech’s Buying Spree and The Failed Ideology Of Competition Law’ (forthcoming, Hastings Law Journal)

Big Tech is on a buying spree. Companies like Apple, Google, Facebook, and Amazon are gobbling up smaller companies at an unprecedented pace. Google has acquired 270 companies since 2001, including Android, YouTube, and Waze. Microsoft has made over 100 acquisitions in the last ten years, including acquisitions of Skype, Nokia Devices, LinkedIn and GitHub. Amazon has made a similar number of acquisitions. Facebook has acquired ninety companies. The law of competition is not ready for Big Tech’s endless appetite. This article, available here, shows how the extraordinary burden of proof required to prohibit a merger under the potential competition doctrine hobbles antitrust law and policy. It illustrates this problem with a close study of Facebook. The article assembles a database of Facebook’s completed acquisitions—ninety in all—and shows how the “potential competition” doctrine renders competition law entirely impotent to protect the consumer interest in this space. It further argues that, with à simple structural presumption, the Federal Trade Commission (FTC)…

Russel Pittman ‘An Economist’s Thoughts on Behavioural Remedies in Merger Enforcement’ (2020) CPI Chronicle April

This paper, available here, argues that, not only does the current consensus favour structural over behavioural remedies, but that the reasons supporting such a trend are stronger than we may have anticipated. Behavioural remedies may be even more complex and raise more complicated economic issues than has been previously appreciated. As such, competition agencies would do well to approach behavioural remedies with great care. The paper begins by outlining the consensus on merger remedies. There is by now a substantial literature examining US and EU experience in imposing merger remedies. A number of “lessons” seem to have become broadly accepted in recent years: (i) structural remedies are generally to be preferred over behavioural remedies; (ii) structural remedies should where possible include the divestiture of complete existing “business units”; (iii) structural remedies may sometimes need to be supported by behavioural measures, if only as a transition mechanism; (iv) the merging firms have clear incentives to seek buyers and/or to package assets…

John Kwoka ‘Conduct Remedies, with 2020 Hindsight: Have We Learned Anything in the Last Decade?’ (2020) CPI Chronicle April

A decade ago, U.S. antitrust policy embarked on an experiment in expansive use of conduct remedies for mergers. Several major cases were settled with commitments that the merged firm – as a condition for approval of their mergers – would not engage in specific anticompetitive actions. However, a growing body of experience and research has found that conduct remedies are hard to write, even more difficult to enforce, and often simply ineffective. Despite this, over the past decade the agencies have not only failed to limit reliance on conduct remedies: they have continued to use them and even extended their use in more problematic directions. This essay, available here, discusses the flaws inherent in conduct remedies, before describing three recent cases that raise the question of whether anything has been learned from recent experience with such remedies Section II looks at the limitations of conduct remedies. Conduct remedies represent an effort to allow a merger to proceed while preventing anticompetitive…

Mark A. Lemley and Andrew McCreary on ‘Exit Strategy’ 101 B.U. L. Rev. (forthcoming, 2021)

The venture capital funding model that dominates the tech industry is focused on the “exit strategy”— the ways funders and founders can cash out their investment. While in common lore the exit strategy is an initial public offering (IPO), in practice IPOs are increasingly rare – they now account for fewer than 1 in 10 exits for start-ups, and happen later in a company’s life than they used to. Instead, most companies that succeed exit the market by merging with an existing firm. Innovative start-ups are especially likely to be acquired by the dominant firm in the market, particularly when they are venture funded, for a variety of reasons – because the dominant firms value the target’s technology, because they have lots and lots of money, or to eliminate a potential competitor who might leapfrog them in Schumpeterian competition. This paper argues that this focus on exit, particularly exit by acquisition, is pathological and one of the main reasons for…

C. Scott Hemphill and Tim Wu on ‘Nascent Competitors’ (2020) University of Pennsylvania Law Review (forthcoming)

A nascent competitor is a firm whose prospective innovation represents a serious future threat to an incumbent. Nascent rivals play an important role in both the competitive process and in developing innovation. New firms with new technologies can challenge and even displace existing firms; sometimes, innovation by an unproven outsider may be the only way to provide new competition to an entrenched incumbent. For competition enforcers, nascent competitors pose a dilemma. While nascent competitors often pose a uniquely potent threat to an entrenched incumbent, the firm’s eventual significance is uncertain, given the environment of rapid technological change in which such threats tend to arise. That uncertainty, along with a lack of present, direct competition, may make enforcers and courts hesitant or unwilling to prevent an incumbent from acquiring or excluding a nascent threat. This essay, available here, identifies nascent competition as a distinct category and outlines a program of antitrust enforcement to protect it. It favours an enforcement policy that…