Antitrust and Trade Regulation Commons^™

Cguppi: Scoring Incentives To Engage In Parallel Accommodating Conduct, Serge Moresi, David Reitman, Steven C. Salop, Yianis Sarafidis

Georgetown Law Faculty Publications and Other Works

We propose an index for scoring coordination incentives, which we call the “coordination GUPPI” or cGUPPI. While the cGUPPI can be applied to a wide range of coordinated effects concerns, it is particularly relevant for gauging concerns of parallel accommodating conduct (PAC), a concept that received due prominence in the 2010 U.S. Horizontal Merger Guidelines. PAC is a type of coordinated conduct whereby a firm raises price with the expectation—but without any prior agreement—that one or more other firms will follow and match the price increase. The cGUPPI is the highest uniform price increase that all the would-be coordinating firms …

The Evolution And Vitality Of Merger Presumptions: A Decision-Theoretic Approach, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

This article reviews the formulation and evolution of the Philadelphia National Bank anticompetitive presumption through the lens of decision theory and Bayes Law. It explains how the economic theory, empirical evidence and experience are used to determine a presumption and how that presumption interacts with the reliability of relevant evidence to rationally set the appropriate burden of production and burden of persuasion to rebut the presumption. The article applies this reasoning to merger presumptions. It also sketches out a number of non-market share structural factors that might be used to supplement or replace the current legal and enforcement presumptions for …

Antitrust, Competition Policy, And Inequality, Jonathan B. Baker, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

Economic inequality recently has entered the political discourse in a highly visible way. This political impact is not a surprise. As the U.S. economy has begun to recover from the Great Recession since mid-2009, economic growth has effectively been appropriated by those already well off, leaving the median household less well off. The serious economic, political and moral issues raised by inequality can be addressed through a panoply of public policies including competition policy, the focus of this article. The article describes the channels through which market power contributes to inequality, and sets forth a range of possible antitrust policy …

Potential Competitive Effects Of Vertical Mergers: A How-To Guide For Practitioners, Steven C. Salop, Daniel P. Culley

Georgetown Law Faculty Publications and Other Works

The purpose of this short article is to aid practitioners in analyzing the competitive effects of vertical and complementary product mergers. It is also intended to assist the agencies if and when they undertake revision of the 1984 U.S. Vertical Merger Guidelines. Those Guidelines are out of date and do not reflect current enforcement or economic thinking about the potential competitive effects of vertical mergers. Nor do they provide the tools needed to carry out a modern competitive effects analysis. This article is intended to partially fill the gap by summarizing the various potential competitive harms and benefits that can …

The Appropriate Legal Standard And Sufficient Economic Evidence For Exclusive Dealing Under Section 2: The Ftc’S Mcwane Case, Steven C. Salop, Sharis A. Pozen, John R. Seward

Georgetown Law Faculty Publications and Other Works

The FTC recently found McWane, Inc. liable for unlawful monopoly maintenance by a 3-1 majority. The dispute among the FTC Commissioners raises important and interesting issues regarding the law and economics of exclusive dealing and the proper evaluation of the competitive effects of exclusionary conduct. Commissioner Wright’s Dissent proposes and utilizes a new legal standard that requires the plaintiff to show “clear evidence” of harm to competition before shifting the burden to the defendant to show procompetitive efficiency benefits. This burden of proof and production on the plaintiff is much higher than showing “probable effect” based on a preponderance of …

What Consensus? Ideology, Politics And Elections Still Matter, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

This article, which was prepared for an ABA Antitrust Section Panel, discusses the role of ideology and politics in antitrust enforcement and the impact of elections in the last twenty year on enforcement and policy at the federal antitrust agencies. The article explains the differences in antitrust ideologies and their impact on policy preferences. The article then uses a database of civil non-merger complaints by the DOJ and FTC over the last three Presidential administrations to analyze changes in the number, type and other characteristics of antitrust enforcement. It also discusses change in vertical merger enforcement and other antirust policies …

Guiding Section 5: Comments On The Commissioners, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

FTC Commissioners Joshua Wright and Maureen Ohlhausen have proposed that the Commission adopt Guidelines for the application of Section 5 to Unfair Methods of Competition. This short note comments on the role of Section 5 distinct from the Sherman Act. It suggests that Section 5 be used to attack and deter certain conduct that falls into gaps of the Sherman Act. This includes exclusionary unilateral conduct that likely leads to the achievement, enhancement, or maintenance of market power (as opposed to monopoly power). It also includes unilateral conduct such as invitations to collude and other practices that facilitate conscious …

The Protected Profits Benchmark: Responses To Comments, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

In my earlier article, I proposed the “Protected Profits Benchmark” (PPB) price standard for determining whether or not a vertically integrated monopolist is engaged in a refusal to deal or price squeeze in violation of Section 2 of the Sherman Act. The PPB would be used where market benchmarks do not exist or do not apply. Violating the PPB price involves profit-sacrifice, which suggests anticompetitive animus. When products are homogeneous, a wholesale price that violates this price standard would exclude an equally efficient entrant. As a result, there will be less competition in the downstream (output) market in which the …

Pharmaceutical Patent Litigation Settlements: Implications For Competition And Innovation, John R. Thomas

Georgetown Law Faculty Publications and Other Works

Although brand-name pharmaceutical companies routinely procure patents on their innovative medications, such rights are not self-enforcing. Brand-name firms that wish to enforce their patents against generic competitors must commence litigation in the federal courts. Such litigation ordinarily terminates in either a judgment of infringement, which typically blocks generic competition until such time as the patent expires, or a judgment that the patent is invalid or not infringed, which typically opens the market to generic entry. As with other sorts of commercial litigation, however, the parties to pharmaceutical patent litigation may choose to settle their case. Certain of these settlements have …

Updating The Merger Guidelines: Comments, Steven C. Salop, Serge Moresi

Georgetown Law Faculty Publications and Other Works

These comments (originally submitted to the DOJ and FTC in November 2009) make a number of comments relevant to revising the Merger Guidelines. The comments focus on the use of the GUPPI (gross upward pricing pressure index) in unilateral effects analysis. They also comment on the deterrence and incipiency standard, exclusionary effects of horizontal mergers and market definition when there are multi-product firms or pre-merger coordination, among other issues.

Global Governance: The World Trade Organization's Contribution, Andrew D. Mitchell, Elizabeth Sheargold

Georgetown Law Faculty Publications and Other Works

Democracy and administrative law concern ideas of governance, legitimacy, and accountability. With the growth of bureaucracy and regulation, many democratic theorists would argue that administrative law mechanisms are essential to achieving democratic objectives. This article considers the World Trade Organization’s (WTO) contribution to governance both in terms of global administrative law and democracy. In relation to administrative law, it first explores the extent to which the WTO’s own dispute settlement process contributes to this area. Second, it considers the operation of administrative law principles embedded within the WTO Agreements on Members. For example, the WTO Agreements require that certain laws …

Exclusionary Conduct, Effect On Consumers, And The Flawed Profit-Sacrifice Standard, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

The central thesis of this article is that the use of the profit-sacrifice test as the sole liability standard for exclusionary conduct, or as a required prong of a multi-pronged liability standard is fundamentally flawed. The profit-sacrifice test may be useful, for example, as one type of evidence of anticompetitive purpose. In unilateral refusal to deal cases, it can be useful in determining the non-exclusionary benchmark. However, the test is not generally a reliable indicator of the impact of allegedly exclusionary conduct on consumer welfare - the primary focus of the antitrust laws. The profit-sacrifice test also is prone to …

Past, Present, And Future Of Antitrust Enforcement At The Federal Trade Commission, Robert Pitofsky

Georgetown Law Faculty Publications and Other Works

The period from 1970 to the present - roughly a third of a century - has witnessed profound changes in the quality of regulation at the Federal Trade Commission and a remarkable convergence of antitrust enforcement policy between left and right, and between primarily legal as opposed to primarily economic approaches. With respect to substantive law, areas of intellectual debate and uncertainty remain, but viewpoint differences that existed between the 1960s and the 1980s are today vastly reduced. In the 1960s, emphasis was on populist values, hostility to "Bigness," protection of competitors (especially small business) as opposed to the competitive …

Anticompetitive Overbuying By Power Buyers, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

Two types of single-firm overbuying are analyzed in this article. Predatory overbuying consists of overbuying inputs as a predatory strategy to cause buyer-side competitors in the input market to exit from the market or permanently shrink their capacity in order to gain monopsony power in the input market. Raising Rivals' Costs (RRC) overbuying consists of overbuying inputs as an exclusionary strategy to raise rivals' input costs and thereby gain market power in the output market. In most cases, the additional input purchases are used to produce output. However, in unusual cases a firm may engage in naked overbuying, that is, …

Comments On Warren Grimes: Transparency In Federal Antitrust Enforcement, Robert Pitofsky

Georgetown Law Faculty Publications and Other Works

In this review, I will concentrate on the policies and experiences of the Federal Trade Commission - an agency with which I am more familiar than the Department of Justice. Professor Grimes appreciates that FTC disclosure policies provide more information than the Antitrust Division of the DOJ. I will leave it to others to explain why Department of Justice policies, particularly in the area of criminal enforcement, deserve to be different.

The Essential Facilities Doctrine Under United States Antitrust Law, Robert Pitofsky, Donna Patterson, Jonathan Hooks

Georgetown Law Faculty Publications and Other Works

The issue of essential facilities has attracted renewed attention in Europe in recent years because of the controversy between IMS Health Inc. and NDC Health Corporation, two competitors in pharmaceutical data services in Germany . . . After an extensive investigation, the European Commission (EC) ordered that IMS grant access to the 1860 brick structure on commercially reasonable terms, and the EC decision is now on appeal in the Court of First Instance in Luxembourg. One issue that emerged in that litigation is whether a decision by European authorities to grant access to the alleged essential facility, especially one whose …

Analysis Of Foreclosure In The Ec Guidelines On Vertical Restraints, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

The antitrust treatment of vertical restraints is quite controversial. In the United States, for example, warring vertical restraints guidelines were issued by the Department of Justice and National Association of Attorneys General, a group of antitrust enforcers from the individual states. However, a consensus was never achieved and these guidelines never entered the mainstream. Compare them to the U.S. Horizontal Merger Guidelines, which have become a template for evaluation of horizontal restraints.

The new EC Guidelines on Vertical Restraints Guidelines ("GVRs") represent a significant effort to create and implement a consistent analytic framework for evaluating vertical restraints. The scope of …

Challenges Of The New Economy: Issues At The Intersection Of Antitrust And Intellectual Property, Robert Pitofsky

Georgetown Law Faculty Publications and Other Works

There is wide agreement that the last decade or so has presented an unusually lively and challenging period for antitrust analysis. Among many reasons we can point to are deregulation and problems of transition to a free market (telecommunications and electricity production offer leading examples), developments in procedural cooperation and possible substantive convergence in response to the increasing globalization of competition and enforcement approaches, and priorities in addressing an unprecedented merger wave. An additional challenge involves the application of established antitrust principles to the growing high-tech sector of the economy. It is that application of antitrust law to the new …

Antitrust And Intellectual Property: Unresolved Issues At The Heart Of The New Economy, Robert Pitofsky

Georgetown Law Faculty Publications and Other Works

The New Economy differs in degree rather than kind from the "old" economy. Part II of this discussion examines the key differences that define the New Economy. Part Ill turns to several implications of those differences as they pertain to antitrust enforcement. I argue that the differences do not justify sweeping generalizations that antitrust enforcement has no place in the New Economy, but do require antitrust enforcement to make adjustments and exercise sensitivity towards intellectual property issues on a case-by-case basis. The goal of a coherent overall competition policy, in deciding both what conduct to enforce against and what remedies …

Tribute To Norman Dorsen, Robert Pitofsky

Georgetown Law Faculty Publications and Other Works

It is an enormous delight for me to contribute to this dedication ceremony honoring Norman Dorsen. It did require, however, that I go back and note the fact that I wrote for the Annual Survey thirty-seven years ago. Not only did I discuss antitrust, I made some confident predictions. I noted with alarm that there had been five hundred corporate mergers in the previous year, but pointed out that that would level off as time went on. Well, five hundred would be a quiet month at the Federal Trade Commission these days. I am delighted with the Annual Survey's decision …

The Competitive Effects Of Passive Minority Equity Interests: Reply, Steven C. Salop, Daniel P. O'Brien

Georgetown Law Faculty Publications and Other Works

In a recent article published in this journal, Jon Dubrow examines the acquisitions of passive minority equity interests. The focus of his article is the treatment of these transactions by the courts and the federal antitrust agencies, including their treatment of the investment-only exemption from Section 7 of the Clayton Act. One section of the article discusses the economic foundation for the competitive effects analysis of these acquisitions, focusing mainly on our article recently published in this journal. Dubrow accepts the basic economic framework set out in our earlier article, and the analysis of factors that affect the acquiring firm's …

The First Principles Approach To Antitrust, Kodak, And Antitrust At The Millenium, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

In this essay, I reflect on an important contribution to the development of antitrust reasoning and law that arises out of the Supreme Court's decision in Eastman Kodak Co. v. Technical Services, Inc. In particular, I discuss the decision's relationship to what I have termed the "first principles" approach to market power and antitrust. In my view, one reason that Kodak is important is that it does not take a wooden approach in its economic reasoning. Instead, the opinion nimbly applies the basic principles of competitive analysis to a difficult dynamic context. This enables the majority to avoid rigid adherence …

Competitive Effects Of Partial Ownership: Financial Interest And Corporate Control, Steven C. Salop, Daniel P. O'Brien

Georgetown Law Faculty Publications and Other Works

In this article, we set up an economic framework for analyzing the competitive effects of partial ownership interests. We have three main goals. First, we conceptually derive and explain the competitive effects of partial ownership, explaining its key elements and drawing analogies to the key ideas behind the analysis of horizontal mergers. Second, we present a general framework for evaluating the competitive effects of partial ownership that is analogous to, but at the same time recognizes key differences in the standard analysis for evaluating horizontal mergers. Third, we examine several methods of quantifying these competitive effects.