Research Programs
More
What are you looking for?
Showing Latest Publications
Regulatory Comments Emission trading programs have the potential dramatically to reduce the costs of abating pollution. When such programs are well designed, they can reduce abatement costs . . .
Emission trading programs have the potential dramatically to reduce the costs of abating pollution. When such programs are well designed, they can reduce abatement costs by as much as 50%.
Most emission trading programs address local ambient air pollution. As such, problems associated with the harmful redistribution of pollution from one place to another are relatively easy to address through the application of simple rules, such as an absolute cap on emissions in a certain location. Some greenhouse gases (GHGs), such as carbon dioxide (CO2), are not local pollutants and so do not justify such local restrictions. However, there is at present no global system in place that would cap GHG emissions. As a result, jurisdictions that impose local caps on GHG emissions may experience a shift in economic activity, as large emitters of GHGs choose to relocate their activities to jurisdictions with less onerous restrictions on GHG emissions. This is called “carbon leakage”. While carbon leakage may potentially lead to increased CO2 emissions, excessive measures to prevent its occurrence may be worse than the disease they are intended to cure
State aid rules are designed to promote competition within the EU. Historically, the EU has granted exemptions to state aid rules for certain measures that are intended to mitigate the potential for carbon leakage. Unfortunately, previous exemptions have contributed to a weakening of the functioning of the EU Emission Trading System (ETS) and likely contributed to its near-collapse on at least two occasions.
The current exemptions terminate at the end of December 2020. This comment evaluates the proposal to establish new exemptions to state aid rules after the current exemptions terminate. We find that, in their current form, the proposed new guidelines would permit Member States to grant state aid (in the form of free ETS allowances) that would ultimately be deleterious to its stated goals of reducing European CO2 emissions. Furthermore, the draft guidelines leave too much room for protectionist subsidies and the distortion of competition between electricity producers.
ICLE White Paper The European Commission’s recent Google Android decision will go down as one of the most important competition proceedings of the past decade. Yet, in-depth reading . . .
The European Commission’s recent Google Android decision will go down as one of the most important competition proceedings of the past decade. Yet, in-depth reading of the 328-page decision leaves attentive readers with a bitter taste. The problem is simple: while the facts adduced by the Commission are arguably true, the normative implications it draws—and thus the bases for its action—are largely conjecture.
This paper argues that the Commission’s decision is undermined by unsubstantiated claims and non sequiturs, the upshot of which is that the Commission did not establish that Google had a “dominant position” in an accurately defined market, or that it infringed competition and harmed consumers. The paper analyzes the Commission’s reasoning on questions of market definition, barriers to entry, dominance, theories of harm, and the economic evidence adduced to support the decision.
Section I discusses the Commission’s market definition It argues that the Commission produced insufficient evidence to support its conclusion that Google’s products were in a different market than Apple’s alternatives.
Section II looks at the competitive constraints that Google faced. It finds that the Commission wrongly ignored the strong competitive pressure that rivals, particularly Apple, exerted on Google. As a result, it failed to adequately establish that Google was dominant – a precondition for competition liability under article 102 TFEU.
Section III focuses on Google’s purported infringements. It argues that Commission failed to convincingly establish that Google’s behavior prevented its rivals from effectively reaching users of Android smartphones. This is all the more troubling when one acknowledges that Google’s contested behavior essentially sought to transpose features of its rivals’ closed platforms within the more open Android ecosystem.
Section IV reviews the main economic arguments that underpin the Commission’s decision. It finds that the economic models cited by the Commission poorly matched the underlying fact patterns. Moreover, the Commission’s arguments on innovation harms were out of touch with the empirical literature on the topic.
In short, the Commission failed to adequately prove that Google infringed European competition law. Its decision thus sets a bad precedent for future competition intervention in the digital sphere.
Regulatory Comments Although it is doubtless correct that the 1984 Nonhorizontal Merger Guidelines require updates in light of the last three decades of legal and economic developments, . . .
Although it is doubtless correct that the 1984 Nonhorizontal Merger Guidelines require updates in light of the last three decades of legal and economic developments, it is by no means clear that errors in judicial decisions or enforcement practices have led to widespread problems that are ad- dressed by the proposed changes. Indeed, harms could actually arise because there is ambiguity in the proposed guidelines that may lead either to uncertainty as to how the agencies will exercise their discretion, or, more troublingly, could lead courts to take seriously speculative theories of harm.
The purpose of this comment is to draw attention to an implicit underpinning of the draft guidelines that we believe the agencies should clearly disavow (or at least explain more clearly the complexity surrounding): the extent and implications of the presumed functional equivalence of vertical integration by contract and by merger.
Despite the fact that, among law and economics scholars, it has long been an essentially settled matter that vertical integration — whether partial integration by contract or full integration by merger — is typically procompetitive (or, at the very least, competitively ambiguous, and problematic in only very limited, stylized, and theoretical circumstances), vertical conduct of all sorts has come under increased scrutiny. Much of the new opprobrium for vertical conduct has come from the likes of presidential hopefuls, journalists, political pundits, and activists. But, more concerning, a fair amount of the resurgence in opposition to vertical restraints and mergers has come from academic economic quarters. Surprisingly, this criticism of vertical conduct also misunderstands or ignores fundamental economic concepts.
One prominent line of criticism of vertical mergers, for example, equates vertical mergers with vertical contracts, and proposes to prohibit or significantly deter vertical integration by merger because it inherently leads to competitive problems that either don’t exist or can more easily be corrected in vertical contracts. But the choice between merger and contract for firms is not so simple, especially in highly dynamic industries in which effective competition often demands both process and product innovation. In particular, the management of intangible, information assets — often the crucial in- puts in dynamic, high-tech firms — may not be as readily (or at all) accomplished by contract as by internal coordination. In the face of extreme informational uncertainties and the need for the inherently uncertain exercise of entrepreneurial judgment and dynamic capabilities (which reside in a firm’s individual decisionmakers, corporate culture, and collective ability to implement novel business processes), contracts cannot always replicate the competitive advantages of integration through merger.
This narrow view of vertical integration thus ignores and threatens to undermine dynamic competition and innovation. Indeed, if we take the organization theory and business strategy literature on the organization of firms in dynamic industries seriously, the status quo might even be over-enforcing, and leading to the deterrence of innovative, procompetitive mergers. It is insufficient merely to advert to potential price effects or innovation effects on foreclosed competitors or input providers, and there truncate the analysis. A proper evaluation of the competitive effects of vertical conduct requires an assessment of industrywide increases in innovation and of quality improvements that may accompany superficial price increases or localized constraints on innovation. Without this it is impossible to conclude that such conduct is anticompetitive.
We recently contributed two pieces to a symposium on Truth on the Market that explore the position set out above. We have attached these pieces to this comment for your convenience. We also explore all of these and related points more fully in a forthcoming article that will be published this spring by the Kansas Law Review. A draft of that article has likewise been attached.
We thank the agencies for the opportunity to comment on this important set of guidelines. We certainly advocate for clarity in the agencies’ enforcement practice with respect to vertical integration, but caution that the agencies carefully consider whether the status quo — as out of date as it may be — is truly inferior to updates that introduce more ambiguity.
Regulatory Comments In response to the Draft Vertical Merger Guidelines released by DOJ and the FTC on January 10, 2020,1 the International Center for Law & Economics . . .
In response to the Draft Vertical Merger Guidelines released by DOJ and the FTC on January 10, 2020,1 the International Center for Law & Economics convened a blog symposium to discuss the legal and economic implications of the proposed changes. Published on Thursday, February 6, 2020 and Friday, February 7, 2020 on TruthOnTheMarket.com, that symposium included contributions from twenty-six well respected legal academics, economists, and seasoned practitioners. This Comment collects those posts together so that they can form part of the record as DOJ and the FTC consider the final form of the Vertical Merger Guidelines.
Please note, inclusion of the posts in this comment should not be interpreted as indicating that any particular author supports any post that is not his or her own — this was a broad effort that included many different viewpoints.
TOTM In an area where it may seem that agreement is rare, there is near universal agreement on the benefits of withdrawing the DOJ’s 1984 Non-Horizontal . . .
In an area where it may seem that agreement is rare, there is near universal agreement on the benefits of withdrawing the DOJ’s 1984 Non-Horizontal Merger Guidelines. The 1984 Guidelines do not reflect current agency thinking on vertical mergers and are not relied upon by businesses or practitioners to anticipate how the agencies may review a vertical transaction. The more difficult question is whether the agencies should now replace the 1984 Guidelines and, if so, what the modern guidelines should say.
Read the full piece here.
TOTM The proposed Vertical Merger Guidelines provide little practical guidance, especially on the key issue of what would lead one of the Agencies to determine that . . .
The proposed Vertical Merger Guidelines provide little practical guidance, especially on the key issue of what would lead one of the Agencies to determine that it will not challenge a vertical merger. Although they list the theories on which the Agencies focus and factors the Agencies “may consider,” the proposed Guidelines do not set out conditions necessary or sufficient for the Agencies to conclude that a merger likely would substantially lessen competition. Nor do the Guidelines communicate generally how the Agencies analyze the nature of a competitive process and how it is apt to change with a proposed merger.
TOTM After much anticipation, the Department of Justice Antitrust Division and the Federal Trade Commission released a draft of the Vertical Merger Guidelines (VMGs) on January . . .
After much anticipation, the Department of Justice Antitrust Division and the Federal Trade Commission released a draft of the Vertical Merger Guidelines (VMGs) on January 10, 2020. The Global Antitrust Institute (GAI) will be submitting formal comments to the agencies regarding the VMGs and this post summarizes our main points.
TOTM In its 2019 AT&T/Time-Warner merger decision the D.C. Circuit Court of Appeals mentioned something that antitrust enforcers have known for years: We need a new . . .
In its 2019 AT&T/Time-Warner merger decision the D.C. Circuit Court of Appeals mentioned something that antitrust enforcers have known for years: We need a new set of Agency Guidelines for vertical mergers. The vertical merger Guidelines were last revised in 1984 at the height of Chicago School hostility toward harsh antitrust treatment of vertical restraints. In January, 2020, the Agencies issued a set of draft vertical merger Guidelines for comment. At this writing the Guidelines are not final, and the Agencies are soliciting comments on the draft and will be holding at least two workshops to discuss them before they are finalized.
TOTM In their original post, Manne and Auer argued that the antitrust argument against Qualcomm’s no license/no chips policy was based on bad economics and bad . . .
In their original post, Manne and Auer argued that the antitrust argument against Qualcomm’s no license/no chips policy was based on bad economics and bad law. They now seem to have abandoned that argument and claim instead – contrary to the extensive factual findings of the district court – that, while Qualcomm threatened to cut off chips, it was a paper tiger that OEMs could, and knew they could, ignore. The implication is that the Ninth Circuit should affirm the district court on the no license/ no chips issue unless it sets aside the court’s fact findings. That seems like agreement with the position of our amicus brief.
