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Scholarship On November 14, 2018, the Federal Trade Commission (“Commission”) issued an opinion condemning as an antitrust violation trademark settlement agreements between 1-800 Contacts (“1-800”) and fourteen online sellers of contact lenses.
On November 14, 2018, the Federal Trade Commission (“Commission”) issued an opinion condemning as an antitrust violation trademark settlement agreements between 1-800 Contacts (“1-800”) and fourteen online sellers of contact lenses. The settlement agreements arise from trademark infringement claims brought by 1-800 against these online rivals. FTC Chairman Joseph Simons authored the Commission’s opinion, joined by the two Democratic Commissioners, Rohit Chopra and Rebecca Slaughter. In finding that the settlement agreements violated Section 1 of the Sherman Act, Chairman Simons and the majority commit two critical errors—one legal, the other economic—that render the Commission’s opinion, in our view, highly vulnerable to reversal upon its inevitable appeal. With respect to the legal infirmity, the Commission incorrectly concludes the challenged agreements are “inherently suspect,” and applies a truncated rule of reason analysis to assess whether the agreements harmed competition. As explained in Commissioner Noah Phillips’ dissent, a truncated analysis is not supported in this case either by judicial experience or economic learning, and was thus inappropriately applied. The second error is application of an economic analysis to claim the agreements have caused anticompetitive effects that falls woefully short of evidence of consumer injury. We predict reversal by an appellate court.
Written Testimonies & Filings On December 19, 2018, ICLE President and Founder, Geoffrey A. Manne testified before the US Senate Committee on the Judiciary's Subcommittee on Antitrust, Competition Policy and Consumer Rights to discuss the differences between the antitrust regimes in the US and the EU, and the inadvisability of importing EU policy into the US.
On December 19, 2018, ICLE President and Founder, Geoffrey A. Manne testified before the US Senate Committee on the Judiciary’s Subcommittee on Antitrust, Competition Policy and Consumer Rights to discuss the differences between the antitrust regimes in the US and the EU, and the inadvisability of importing EU policy into the US. Mr. Manne noted:
An increasing number of scholars and advocates have argued recently that US antitrust law should be “reformed” in order to invigorate antitrust enforcement and sidestep the judicially-imposed constraints that have developed over antitrust’s 100 year history. Explicitly or not, these efforts seek to bring about a shift in US antitrust that would make it more closely resemble competition law in Europe. While these scholars and advocates assert that their proposals would improve economic conditions in the US, economic logic and the apparent reality from Europe suggest otherwise. *** Although the differences between US and EU antitrust law can appear minor or superficial at a glance, even small differences can have important consequences, and the cumulative effect of the differences is significant. Although the Commission is often quite careful to couch its decision-making in economic language, in practice, analytical economic administration of antitrust is far from the norm. *** Despite asserting that EU competition law is “better” than that of the US, and that emulating the EU will improve economic conditions in the US, references to the likely outcome — positive or negative — of the expanded antitrust experiment in the EU are not provided. Moreover, as noted below, to the extent the European experience is assessed at all, these assessments are manifestly unreliable.
An increasing number of scholars and advocates have argued recently that US antitrust law should be “reformed” in order to invigorate antitrust enforcement and sidestep the judicially-imposed constraints that have developed over antitrust’s 100 year history. Explicitly or not, these efforts seek to bring about a shift in US antitrust that would make it more closely resemble competition law in Europe. While these scholars and advocates assert that their proposals would improve economic conditions in the US, economic logic and the apparent reality from Europe suggest otherwise.
***
Although the differences between US and EU antitrust law can appear minor or superficial at a glance, even small differences can have important consequences, and the cumulative effect of the differences is significant. Although the Commission is often quite careful to couch its decision-making in economic language, in practice, analytical economic administration of antitrust is far from the norm.
Despite asserting that EU competition law is “better” than that of the US, and that emulating the EU will improve economic conditions in the US, references to the likely outcome — positive or negative — of the expanded antitrust experiment in the EU are not provided. Moreover, as noted below, to the extent the European experience is assessed at all, these assessments are manifestly unreliable.
The full testimony documents the many relevant differences, in particular the way that competition law in the EU and its member states vests enforcers with broad discretion. By comparison, the US standards impose requirements of conducting careful economic analysis in order to prove a competitive harm. The net effect is that the US antitrust approach provides both certainty for firms and consumers, and discipline for enforcers.
The oral testimony is available here.
The full video of the hearing is available here.
The full testimony is available here.
TOTM A recent NBER working paper by Gutiérrez & Philippon has attracted attention from observers who see oligopoly everywhere and activists who want governments to more actively “manage” competition.
A recent NBER working paper by Gutiérrez & Philippon has attracted attention from observers who see oligopoly everywhere and activists who want governments to more actively “manage” competition. The analysis in the paper is fundamentally flawed and should not be relied upon by policymakers, regulators, or anyone else.
Read the full piece here.
Scholarship Abstract We develop a model of inter-temporal and intra-temporal price discrimination by monopoly airlines to study the ability of different discriminatory pricing mechanisms to increase . . .
We develop a model of inter-temporal and intra-temporal price discrimination by monopoly airlines to study the ability of different discriminatory pricing mechanisms to increase e?iciency and the associated distributional implications. To estimate the model, we use unique data from international airline markets with flight-level variation in prices across time, cabins, and markets and information on passengers’ reasons for travel and time of purchase. The current pricing practice yields approximately 77% of the first-best welfare. The source of this ine?iciency arises primarily from private information about passenger valuations, not dynamic uncertainty about demand. We also find that if airlines could discriminate between business and leisure passengers, total welfare would improve at the expense of business passenger surplus. Also, replacing the current pricing that involves screening passengers across cabin classes with offering a single cabin class has minimal effect on total welfare.
TOTM A recent NBER working paper by Gutiérrez & Philippon attempts to link differences in U.S. and EU antitrust enforcement and product market regulation to differences in market concentration and corporate profits. The authors are not clear what they mean by lower.
A recent NBER working paper by Gutiérrez & Philippon attempts to link differences in U.S. and EU antitrust enforcement and product market regulation to differences in market concentration and corporate profits.
Presentations & Interviews ICLE President Geoffrey Manne participated in the FTC’s Hearing #5: Vertical Merger Analysis and the Role of the Consumer Welfare Standard in U.S. Antitrust Law . . .
ICLE President Geoffrey Manne participated in the FTC’s Hearing #5: Vertical Merger Analysis and the Role of the Consumer Welfare Standard in U.S. Antitrust Law on the panel, The Consumer Welfare Standard in Antitrust Law (Session 2). Read full transcript here. Video of the event is embedded below.
Presentations & Interviews Watch ICLE President Geoffrey Manne debate Matt Stoller and Hal Singer at the fifth annual Lincoln Reboot conference. This year’s theme of “innovation under threat” . . .
Watch ICLE President Geoffrey Manne debate Matt Stoller and Hal Singer at the fifth annual Lincoln Reboot conference. This year’s theme of “innovation under threat” focuses on the rising fears over the impact of technology on society. Video of the event is embedded below (Geoff’s panel starts at about the 2:50 mark).
TOTM Last week, the UK Court of Appeal upheld the findings of the High Court in an important case regarding standard essential patents (SEPs).
Last week, the UK Court of Appeal upheld the findings of the High Court in an important case regarding standard essential patents (SEPs). Of particular significance, the Court of Appeal upheld the finding that the defendant, an implementer of SEPs, could have the sale of its products enjoined in the UK unless it enters into a global licensing deal on terms deemed by the court to be fair, reasonable and non-discriminatory (FRAND). The case is noteworthy not least because the threat of an injunction of this sort has become increasingly rare in other jurisdictions, arguably resulting in an imbalance in bargaining power between patent holders and implementers.
