The Federal Trade Commission (FTC) recently announced that it would seek to block Amgen’s proposed $27.8 billion acquisition of Horizon Therapeutics. The move was the culmination of several years’ worth of increased scrutiny from both Congress and the FTC into antitrust issues in the biopharmaceutical industry. While the FTC’s move didn’t elicit much public comment, it raised considerable alarm in various corners of the biopharmaceutical industry—specifically, that it would chill beneficial biopharmaceutical M&A activity.

This piece, which aims to shed light on the FTC’s theory of the harm in the case and its consequences for the industry, will be divided into two parts. This first post will discuss the overall biopharmaceutical market and the FTC’s stated theory of harm. In a subsequent post, I will dive more deeply into the economic theories that underpin the case and the risk-benefit tradeoff inherent in the FTCs decision to challenge the merger.

Read the full piece here.

Consistent with the neo-Brandeisian penchant for downplaying (some would say ignoring) consumer-welfare concerns, the Federal Trade Commission (FTC) recently touted its interest in “reinvigorating” enforcement of the Robinson-Patman Act (RPA). This would stand sensible antitrust-enforcement policy on its head, by devoting resources to actions that predictably would tend to diminish consumer welfare.

Read the full piece here.

ICLE Academic Affiliate Keith Hylton appeared as a guest on CGTN America to discuss the growing strikes in the State of California. The full segment is embedded below.

While persistent gridlock continues to bedevil Congress, federal agencies have been busy pushing the boundaries of their authority. The Federal Trade Commission (FTC) is trying to ban noncompete agreements. The Securities and Exchange Commission (SEC) is puzzling over cryptocurrencies. The Environmental Protection Agency (EPA) is pushing regulations to address climate change.

At the same time, the U.S. Supreme Court is telling agencies that they cannot act without clear congressional authority. What’s an agency to do? The answer is disarmingly simple: nothing, until Congress clearly directs them otherwise.

Read the full piece here.

Introduction

Over the last two decades, standard essential patents (SEPs) have been at the centre of a lively debate among scholars, courts and competition authorities, mainly on the competitive implications of the successful adoption of a standard. Indeed, standards are key to ensuring interoperability and technical compatibility across a broad range of modern industries, but at the same time, they come with exclusionary effects for companies precluded from practicing the standard. For these reasons, standards development organisations (SDOs) typically adopt disclosure and licensing rules, requiring firms taking part in a standardisation initiative to disclose the existence of any intellectual property right (IPR) that might cover a technology considered to be implemented into the standard and clarify whether they would be willing to offer a licence to such IPR on fair, reasonable and non-discriminatory (FRAND) terms if the technology is implemented into the standard.

Much of the attention has so far been devoted to the economic and legal meanings of FRAND commitments as a mechanism to avoid hold-up and reverse hold-up problems between licensors and licensees, thus preventing SEPs holders from demanding excessively high royalties when implementers are locked-in to a standard and licensees from engaging in strategic practices to escape the payment of royalties or depress prices, respectively. However, SDOs’ disclosure rules also deserve similar consideration.

In my last roundup, I puzzled over the Federal Trade Commission’s (FTC) suit to block Amgen’s acquisition of Horizon Therapeutics. The deal involved no product overlaps whatsoever (i.e., no horizontal competition), a target firm acknowledged to have no competitors for the orphan drugs at issue, and nobody poised to enter into competition either.

I won’t recapitulate the details of my confusion here, but I will point to a new piece by Bill MacLeod (a past chair of the American Bar Association’s Antitrust Section and a former FTC bureau director) and David Evans, in which they raise an issue I didn’t cover: “The Federal Trade Commission may have filed the first merger complaint in a generation that could be dismissed for failure to state a claim.” Which would not look good.

Read the full piece here.

What should a competition law for 21st century look like? This point is debated across many jurisdictions. The Digital Markets, Competition, and Consumers Bill (DMCC) would change UK competition law’s approach to large platforms. The bill’s core point is to place the UK Competition and Markets Authority’s (CMA) Digital Markets Unit (DMU) on a statutory footing with relaxed evidentiary standards to regulate so-called “Big Tech” firms more easily. This piece considers some areas to watch as debate regarding the bill unfold.

Read the full piece here.

Abstract

Ronald Coase famously exposed the limitations of economic analyses that rely upon assumptions of frictionless markets. He highlighted the importance of including transaction costs in economic analyses and issued a challenge to economists to think seriously about how transaction costs impact economic systems. Harold Demsetz, extended Coase’s analysis to show how these costs alter the way firms price and market their products. Demsetz’ analysis underscored that the costs of providing a market sometimes exceed the benefits of creating one in the first place and examined conditions where transaction costs imply that zero amounts of explicit market pricing will be efficient.

This article focuses upon extending Demsetz’s insights concerning non-linear pricing contracts that seem not to “price” key side effects of the economic exchange. In particular, we analyze the welfare and output effects of two examples of such contracts commonly used by firms that are frequently subject to antitrust scrutiny: metered pricing and loyalty discounts. The analysis demonstrates how a firm’s choice to set prices for its products are influenced by transaction and information costs and examines whether changes in output caused by the use of these non-linear pricing schemes are positively correlated with changes in total and consumer welfare. The article then discusses conditions under which measuring output effects can reliably differentiate between welfare-increasing and welfare-reducing uses of non-linear pricing.

ICLE Director of Competition Policy Dirk Auer testified before the UK House of Lords’ Communications and Digital Committee in a May 23, 2023 hearing reviewing the Digital Markets, Consumer and Competition Bill. Videos of his answers to the Lords’ questions are embedded below.