Michal S. Gal

Monopoly Pricing as an Antitrust Offense in the U.S. and the EC: Two Systems of Belief About Monopoly?

Monopoly pricing per se, that is without need of proof of anti-competitive conduct or intent, is regulated very differently on both sides of the Atlantic, at least in theory. U.S. antitrust law sets a straightforward rule: monopoly pricing, as such, is not regulated. In contrast, under EC law excessive pricing is considered an abuse of dominance and is punishable by fine and subject to a prohibitory order. These approaches fit the divide between the regulation of exclusionary and exploitative conduct: whereas exclusionary conduct is an offense against antitrust law on both sides of the Atlantic, exploitative conduct generally only breaches EU law. This article analyzes these regulatory approaches, their historical and theoretical roots, as well as the differences that exist in practice between the two systems. As will be shown, the divergent legal rules reflect different ideological goals and different assumptions about how markets operate. The U.S. views the unregulated economy as essentially competitive, if the creation of artificial barriers is prohibited. This approach places significant emphasis on the workings of the market and considers monopoly created by means other than artificial barriers to be relatively unimportant. It also reflects the limited role granted to government in regulating markets directly and the social, moral and political values attributed to the process of competition. EC law reflects a lesser belief in the ability of market forces to erode monopoly and a stronger belief in the ability of a regulator to intervene efficiently in setting the business parameters of firms operating in the market. It also reflects a stronger emphasis on distributional justice. The importance of the analysis lies beyond antitrust intervention in monopoly pricing, as it opens a window to much broader themes which underlie the competition policies of both jurisdictions and enables us to exemplify and contrast the foundations of both regulatory systems. The regulation of excessive pricing encapsulates issues such as the goals and underpinning of EC and U.S. antitrust systems; the equilibrium point which was adopted to balance between the forces of Darwinian capitalism and those of social justice; the role of government regulation; the balance between practical problems and theoretical principles; and the assumptions regarding the relative administrability of various types of regulation. Monopoly pricing regulation is thus, in many ways, a microcosm of competition policy.

Regional Competition Law Agreements: An Important Step For Antitrust Enforcement

In the past two decades the number of jurisdictions that adopted a competition law has grown exponentially. Yet many of them, most notably developing jurisdictions and small ones, face significant obstacles to efficient enforcement. Indeed, a World Bank study estimated that competition authorities in advanced countries are 40% more effective than their counterparts in developing ones. Many of these problems result from the unilateral enforcement model which currently dominates competition law.This essay argues the regional competition law agreements on joint enforcement and advocacy (RJCAs) hold an important potential to solve many of the enforcement problems that developing and small jurisdictions face and can provide additional benefits that go beyond such solutions. It also argues that the costs involved in such agreements are not prohibitive and many can be overcome by structuring appropriate solutions. Accordingly, RJCAs hold the potential to create Pareto-superior solutions to enforcement problems relative to unilateral enforcement.The essay then broadens the analysis and focuses on the potential effects of RJCAs on non-member states. It is argued that such agreements create much lower negative externalities on non-member states and on international coordination efforts than do regional trade agreements. On the contrary- they often create positive externalities on non-member jurisdictions. Accordingly, they offer an important potential for strengthening competition law enforcement and should generally be encouraged.Finally, it argues that RJCAs generally further the international efforts for coordination and cooperation in competition law. They might even serve to overcome the main obstacle for including anti-cartel provisions in the WTO or in another supranational enforcement body.The analysis is timely, given that the past few years have experienced a wave of regionalism which is not only characterized by an increased dynamism but is also often characterized by more ambitious and deeper levels of integration, taking steps that go beyond information sharing and comity. Not surprisingly, all of the new regional agreements involve developing or small signatories.

Reducing Rivals Prices: Government-Supported Mavericks as New Solutions for Oligopoly Pricing

One of the most important market imperfections in modern capitalism and surprisingly one of the most under-regulated is oligopoly pricing (conscious parallelism). Only few suggestions have been made over the years to regulate oligopoly pricing. All suggestions pose serious obstacles to their efficient application. Accordingly, oligopoly pricing is not regulated. It is left to the workings of the market (or pure luck), while acknowledging the marketis limited regulatory force. This article proposes a novel method for regulating oligopoly pricing by way of introducing a government-supported maverick into an oligopolistic industry for a limited time. The maverick will price its products at competitive or near-competitive levels, based on considerations of consumer or total welfare. His rivals will follow his pricing strategy, or incur significant losses and possibly exit the market. As will be shown, the proposal may significantly reduce allocative inefficiency by reducing the welfare losses from supra-competitive pricing. The threat of intervention might be sufficient, in itself, to reduce the problem of oligopoly pricing. It may also reduce productive inefficiency by combating the problem of inefficient plant and firm sizes. This article analyzes the market conditions that must exist for this proposal to be operational and points to its benefits as well as its costs and limitations.

Algorithmic Challenges to Autonomous Choice

Human choice is a foundational part of our social, economic and political institutions. This focus is about to be significantly challenged. Technological advances in data collection, data science, artificial intelligence, and communications systems are ushering in a new era in which digital agents, operated through algorithms, replace human choice with regard to many transactions and actions. While algorithms will be given assignments, they will autonomously determine how to carry them out. This game-changing technological development goes to the heart of autonomous human choice. It is therefore time to determine whether and, if so, under which conditions, are we willing to give up our autonomous choice. To do so, this article explores the rationales that stand at the basis of human choice, and how they are affected by autonomous algorithmic assistants; it conscientiously contends with the “choice paradox” which arises from the fact that the decision to turn over one’s choices to an algorithm is, itself, an act of choice. As shown, while some rationales are not harmed – and might even be strengthened – by the use of autonomous algorithmic assistants, others require us to think hard about the meaning and the role that choice plays in our lives. The article then examines whether the existing legal framework is sufficiently potent to deal with this brave new world, or whether we need new regulatory tools. In particular, it identifies and analyzes three main areas which are based on choice: consent, intent and laws protecting negative freedom.

New Powers - New Vulnerabilities? A Critical Analysis of Market Inquiries Performed by Competition Authorities

In the past two decades the number of jurisdictions which have empowered their Competition Authorities to engage in market inquiries (MIs) has grown substantially. Although jurisdictions differ in the scope and procedure adopted for such studies, they all share an important common trait: attempting to allocate the roots of limited competition in the studied market. Market studies differ from traditional competition law tools in their triggers, range, object, and the level of pro-activity of the Competition Authority. They are not triggered by a suspicion of anti-competitive conduct of specific firm(s), but rather allow the Authority to use a broad prism which focuses on a wider set of potential obstacles to competition, including the Authoritys own past conduct, in order to find ways to enhance competition. MIs entail many advantages. Yet, bestowing this power upon a Competition Authority is not self-explanatory. Furthermore, it is far from costless. Beyond the direct costs imposed on both the Authority and market participants, MIs often carry less tangible price tags. They raise a host of constitutional, democratic and practical issues that have not been thoroughly studied as of yet, which are the focus of this paper. In so doing, the paper builds, inter alia, on the recent administrative law literature which focuses on multi-agency interactions. Accordingly, this paper seeks to provide a synergetic analysis of MIs for the benefit of policymakers.

Competition Policy and Regional Integration in Developing Countries

Contents: Introduction Mor Bakhoum PART I: PROMISES AND CHALLENGES IN IMPLEMENTING REGIONAL COMPETITION POLICY REGIMES 1. The Harmonization of ASEAN: Competition Laws and Policy from an Economic Integration Perspective Lawan Thanadsillapakul 2. Competition Law and Policy in the Framework of ASEAN Anthony Amunategui Abad 3. Southern African Development Community (SADC) Regional Competition Policy Gladmore Mamhare 4. Competition Policy in SADC: A South African Perspective Kasturi Moodaliyar PART II: INSTITUTIONAL COHERENCE, REGIONAL INTEGRATION AND COMPETITION POLICY 5. Institutional Coherence and Effectiveness of a Regional Competition Policy: The Case of the West African Economic and Monetary Union (WAEMU) Mor Bakhoum and Julia Molestina 6. Regional Integration and Competition Policy in the Economic Community of West African States (ECOWAS) Region Mbissane Ngom 7. Andean Competition Law: Looking for the Private Sector, or the Quest for the Missing Link in Antitrust Javier Cortazar PART III: ECONOMIC STRUCTURE, REGIONAL INTEGRATION AND COMPETITION LAW ENFORCEMENT 8. Regional Integration in the Caribbean: The Role of Competition Policy Taimoon Stewart 9. Implementing Effective Competition Policy through Regional Trade Agreements: The Case of CARICOM Delroy S. Beckford 10. The COMESA Regional Competition Regulations George K. Lipimile PART IV: THE DEVELOPMENT DIMENSION OF REGIONAL INTEGRATION AND COMPETITION POLICY 11. Economic Integration and Competition Law in Developing Countries Josef Drexl 12. Regionalization, Development and Competition Law: Exploring the Political Dimension David J. Gerber 13. Competition, Development and Regional Integration: In Search of a Competition Law Fit for Developing Countries Eleanor M. Fox 14. Regional Agreements of Developing Jurisdictions: Unleashing the Potential Michal S. Gal and Inbal Faibish Wassmer Index

Viral Open Source: Competition vs. Synergy

The creation of free and open source software (FOSS) through social networks has been celebrated as one of the most interesting and inspiring developments of the information age. The main legal platform selected for facilitating this collaborative creation is the GNU General Public License (GPL). Software released under the GPL enables anyone to use, modify, and distribute the code. Yet, these rights are contingent upon virality: every copy or work based on the original code must also be subject to such terms and conditions. This article analyzes the interesting and intricate effects of virality on welfare: Virality increases motivations for parallel innovation, both in open source and in commercial code, inter alia by facilitating competition among networks and by preventing the appropriability of viral FOSS by commercial firms. At the same time, by almost closing the door on synergies between FOSS and commercial technologies, it limits cumulative innovation based on synergy and interoperability. As shown, FOSS creates an even stronger anti-commons tragedy than the patent regime. Viralitys (non)regulation will thus determine the balance, as well as the connecting bridges, adopted by society between the two modes of production as well as between competition and synergy. While this issue arises in other contexts, the unique features of the software industry and of FOSS raise complex challenges. The article then analyzes market and legal responses to the GPLs virality. Such analysis is timely given that the viral GPL has become standard in many socially-produced FOSS projects.

Is Bounded Rationality in Entry Decisions Necessarily Bad for Social Welfare

In the article Boundedly Rational Entrepreneurs and Antitrust, Professor Tor provides an excellent overview of the effects of bounded rationality on the behavior of entrepreneurs in the marketplace. In this short note, I offer some observations on the article. In particular, it suggests several additional parameters that might be worth exploring before we can reach a conclusion about the role that bounded rationality plays in economically irrational entry decisions. It also suggests some factors that should be weighed before determining whether irrational entry is socially harmful. Finally, the note provides several observations with regard to regulation, including the effects of algorithmic applications on bounded rationality decisions by entrepreneurs.

Access Barriers to Big Data

While data were always valuable in a range of economic activities, the advent of new and improved technologies for the collection, storage, mining, synthesizing, and analysis of data has led to the ability to utilize vast volumes of data in real-time in order to learn new information. Part I explores the four primary characteristics of big data: volume, velocity, variety, and veracity and their effects of the value of data. Part II analyzes the different types of access barriers that limit entry into the different links of the data value chain. In Part III, we tie together the characteristics of big data markets including potential entry barriers, to analyze their competitive effects. The analysis centers on those instances in which the unique characteristics of big data markets lead to variants in the more traditional competitive analysis. Our analysis suggests that the unique characteristics of big data have an important role to play in analyzing competition and in evaluating social welfare.

Regional Agreements of Developing Jurisdictions: Unleashing the Potential

Regional competition agreements (RCAs) hold great potential for overcoming the major enforcement problems of developing jurisdictions. Indeed, it is no coincidence that the past two decades have seen an unprecedented upsurge in the number and scope of such agreements, especially in the developing world. Yet, as the experiences analyzed throughout this book clearly demonstrate, the accumulated experience of almost all of these newly sprung RCAs is that thus far they have not significantly enhanced competition law enforcement in their regions, or have encountered serious difficulties in doing so. This empirical finding applies regardless of the region and the special characteristics of the jurisdictions within it. This creates a paradox: why do so many countries invest in adopting such agreements in the first place, if the obstacles to their successful operation are high. This chapter attempts to offer some answers to this paradox by analyzing the obstacles that stand in the way of realizing the potential benefits of RCAs. Our purpose is to identify and analyze at least some of the variables that affect their adoption and operation in the real world. Such an analysis can hopefully provide better tools to understand and predict when an RCA is likely to succeed or to fail, and what can be done to increase its chances of success. To do so, we combine the empirical observations on how RCAs operate in practice with a theoretical analysis. The analysis builds, inter alia, on studies of the collective action problem, including studies of successful collaborations in environments which face relatively similar obstacles to a successful joint collaboration. Such an analysis can also assist us in determining whether the current failure is mainly rooted in the regional aspect of the RCAs or rather in the fact that they involve competition law, the application of which would have encountered serious difficulties in the relevant jurisdictions regardless of its regional aspect. Accordingly, the chapter is divided into three parts. The first explores the potential benefits that can accrue from a successful RCA. The second, which is the heart of this chapter, analyzes some of the obstacles to realizing such benefits that emerge from the case studies of the different RCAs and places them in a wider theoretical context. The third part offers some potential solutions for overcoming such problems.