Seth B. Sacher

Housing Demand and Property Tax Incidence in a Life-Cycle Framework

Studies of tax incidence usually present estimates based on annual data and then simply note that estimates based on lifetime information would be preferable but are precluded by data limitations. This article presents estimates of property tax incidence in both an annual and a life-cycle framework. Under various shifting assumptions, the property tax appears less regressive in a lifetime sense than an annual one. It also appears that transitory influences on measured income may be more important than life-cycle issues in causing annual and lifetime tax incidence profiles to differ .

No Shortage of Theories: The Role of Capacity in Antitrust Analysis

Issues of productive capacity can play a role in nearly every aspect of competition analysis. This paper provides an overview of the economic literature on capacity and the role that capacity has played in actual antitrust and competition law enforcement. The goal is to aid practitioners in matters where capacity issues potentially play a significant role. For the most part, the theoretical role of capacity in various aspects of competition analysis is ambiguous and the empirical literature is similarly inconclusive. Moreover, in many situations, measuring excess capacity may be quite difficult. Given the theoretical and empirical ambiguity regarding the role of excess capacity, or the lack thereof, the overall theme of our analysis is that practitioners should not presume any particular impact in the absence of strong case-specific evidence regarding capacity’s effects.

The Role Of Capacity In Antitrust Analysis

Issues of productive capacity can play a role in nearly every aspect of competition analysis. This article provides an overview of the economic literature on capacity and the role that capacity has played in actual antitrust and competition law enforcement. The goal is to aid the analysis in matters where capacity issues potentially play a significant role. For the most part, the theoretical role of capacity in various aspects of competition analysis is ambiguous and the empirical literature is similarly inconclusive. Moreover, in many situations, measuring excess capacity may be quite difficult. Given the theoretical and empirical ambiguity regarding the role of excess capacity, or the lack thereof, the overall conclusion is that capacity issues should play a role in competition analysis only when there is strong case-specific evidence regarding their effects.

How Big Is Big? A Caveat Regarding Difference-in-Differences Analysis

Difference-in-differences, or “D-in-D,” is perhaps the most broadly applied econometric technique in retrospective analyses of competition matters. We discuss a possible pitfall regarding this procedure. We argue that a positive and significant event variable coefficient is not a sufficient condition for concluding there have been anticompetitive price effects. We use simulations to demonstrate that even in cases where the alleged anticompetitive activity had no anticompetitive effect, the D-in-D procedure can still produce positive and significant event variables. This paper does not take issue with D-in-D in principle but rather as it is often practiced. Our results imply that while D-in-D is an important tool, the researcher must conduct additional analyses to put the D-in-D result into context before concluding a significant event variable is indicative of anticompetitive effects. We suggest a specific approach. We note that our results may have important implications for the current state of the academic literature regarding retrospectives in antitrust as well as for practitioners.

Dominance Thresholds: A Cautionary Note

As a threshold matter, high market shares are considered informative of potential underlying competitive dynamics, especially issues of market power and dominance. However, as is well known, high shares may not tell the entire story. Beyond issues related to market definition, entry, and efficiencies, this article notes an additional reason why caution may be warranted before drawing conclusions about dominance or market power from share evidence. Specifically, such conclusions can be statistically unsupportable in the presence of small sample issues. In markets with relatively few transactions (that is, “thinly” traded markets), the implications of observed high market shares are much less clear than in more thickly traded markets. It is entirely possible that situations that appear to implicate a dominant firm actually reflect pure random chance in a competitive process involving equally matched or nondominant firms. This article discusses theories and methods for distinguishing between outcomes that exhibit strong statistical evidence of dominance as opposed to those that merely reflect the random distribution of winnings among nondominant firms.

The Economics of Motions to Dismiss: An Economists View of the Twombly/Iqbal Standard

The Bell Atlantic v Twombly and Ashcroft v Iqbal Supreme Court opinions refined the threshold for motions to dismiss claims. In elaborating on these thresholds, the Court discussed the legal interplay of “possibility,” “plausibility,” and “probability.” The Court emphasized that claims must go beyond a recitation of theories or legal standards and rely on some level of factual allegations. Since the Iqbal decision, numerous lower courts have applied the newly articulated Twombly/Iqbal standards. Legal practitioners have argued that there are inconsistencies between courts when evaluating the scope and application of these standards. In order to help resolve this murkiness, this paper suggests a structured methodology that can be employed when arguing a motion to dismiss. A number of tools that can be used to evaluate the likelihood of success are proposed. We posit “strong” and “weak” conditions for meeting the Twombly/Iqbal standards. The “strong” conditions for surviving a motion to dismiss are satisfied if well articulated conditions that meet the logical concept of sufficiency along with supporting facts are presented. If these strong criteria are not met, claims can still survive a motion to dismiss, but will be more likely to survive the closer the claims are to the logical concept of “sufficiency.” Under the “weak criteria,” the more “unlikely” are the claims (and supporting facts) to exist in the absence of a violation, the greater the probability of survival. In other words, the more strongly linked are the underlying claims with the alleged violations, and not other possible explanations, the more likely the claims are to survive the motion being adjudicated.

Trade is Good for Competition, but Competition is Great for Trade

A competitive domestic economy, as enhanced by appropriate competition policies, can be a good defense against protectionist sentiments. Seth Sacher (FTC)

For a Rigorous 'Effects Based' Analysis of Vertical Restraints Adopted by Dominant Firms: An Analysis of the EU and Brazilian Competition Laws: Comment

This study concerns the way agreements between a dominant supplier and its customers that restrict the ability of those customers to buy from the dominant firm’s rivals, including exclusive dealing, conditional rebates and tying and bundling (hereafter, “vertical restraints”) have been assessed by the EU and Brazilian competition authorities and courts.For several decades, vertical restraints have been a subject of debate among lawyers and economists, and views as to how such restraints should be assessed have fluctuated. In recent years, however, a consensus has emerged that per se rules of illegality (or of legality) should not be applied to vertical restraints. Instead, such restraints should be assessed pursuant to an effects-based analysis balancing their pro- and anti-competitive effects. The difficulty, however, is to devise legal tests that allow this balancing to take place in a coherent and rigorous manner.Following an analysis of the economics of vertical restraints, this paper shows that the European Commission, which has the power to enforce EU competition rules, has recently opted for an effects-based approach to vertical restraints, and has developed a Guidance Paper that offers a legal and economic methodology describing how it intends to analyse such restraints. This paper shows, however, that the EU courts are still reluctant to follow such a methodology preferring instead to continue to apply formalistic rules. The situation is different in Brazil where, at least since the enactment of Law 8.884 in 1994, there has been a consensus that vertical restraints had to be analysed under an effects-based approach. However, such an approach has been pursued through balancing tests relying on qualitative criteria and intuitive reasoning, rather than and a rigorous and structured assessment, including quantitative elements, hence leading to inconsistency and uncertainty. The Brazilian competition law system would thus benefit from the adoption of guidelines, which as in the case of the EU Guidance Paper, provides a clear legal and economic methodology as to how an effects-based approach should be implemented.This paper also analyses the extent to which the legal and institutional framework in place in the EU and in Brazil is well suited to the implementation of a rigorous effects-based approach relying on economic analysis. There is no doubt that the mature EU system possesses the legal and institutional framework to apply such a rigorous approach, the problem being however that the EU courts, which are composed of generalist judges, are still reluctant to pursue it. The European Commission, which is a sophisticated institution, can however pursue an economic based approach.Although the Brazilian competition law system is not yet fully mature, it has gone a long way, and the entry into force of the new Brazilian Competition Act 12.529/2011 and the setting up of the New CADE will further contribute to its development. The paper argues that the Brazilian system would greatly benefit from the adoption of guidelines, which, like the European Commission Guidance Paper, would offer a clear legal and economic methodology to implement an effects-based approach to vertical restraints.

Antitrust Issues in Defining Markets in the Newspaper Industry

A variety of antitrust market definition questions arise in the newspaper industry. One crucial factor affecting this industry with respect to market definition is that it involves two-sided platforms, with the two key groups being advertisers and readers. For the most part antitrust cases in the newspaper industry have focused on the impact of practices or transactions on advertisers. Despite the growth of so-called new media and its likely role in the continued decline in newspaper circulation rates both the DOJ and the courts continue to view the product market for newspapers fairly narrowly and to argue that various media operate in separate product markets. Geographic markets also tend to be viewed locally, such as a single city or MSA. A key factor leading to such findings is that price discrimination can be exercised with respect to those advertisers that are less able to substitute across media or geographic areas.