Pub Date : 2021-03-10DOI: 10.1177/0003603X21997019
B. Saraswathy
The announcement of New Industrial Policy in July 1991 marked a paradigm shift in the overall macroeconomic policies followed in India from greater control and regulations to the free rein of market forces. Subsequently, there has been a paradigm shift in the competition regulation in India, with the establishment of the Competition Commission of India. The underlying motive behind the regulatory changes has been to increase competition in all spheres of economic activities. Given this background, the present study intends to assess whether the changes in policy regimes could bring out the desired output in terms of heightened competition in various spheres of the manufacturing sector, specifically across various subsectors in the manufacturing sector. These are important not only from a consumer point of view but also to identify the areas of concern for vigilant policy implementation. Using multiple indicators of concentration, we find that despite the increase in competition across various subsectors, concentration levels remain high for many subsectors. We observed high levels of concentration in seven of the twenty-nine subsectors studied and in another three high-moderate concentration levels noticed.
{"title":"Economic Reforms and Market Competition in India: An Assessment","authors":"B. Saraswathy","doi":"10.1177/0003603X21997019","DOIUrl":"https://doi.org/10.1177/0003603X21997019","url":null,"abstract":"The announcement of New Industrial Policy in July 1991 marked a paradigm shift in the overall macroeconomic policies followed in India from greater control and regulations to the free rein of market forces. Subsequently, there has been a paradigm shift in the competition regulation in India, with the establishment of the Competition Commission of India. The underlying motive behind the regulatory changes has been to increase competition in all spheres of economic activities. Given this background, the present study intends to assess whether the changes in policy regimes could bring out the desired output in terms of heightened competition in various spheres of the manufacturing sector, specifically across various subsectors in the manufacturing sector. These are important not only from a consumer point of view but also to identify the areas of concern for vigilant policy implementation. Using multiple indicators of concentration, we find that despite the increase in competition across various subsectors, concentration levels remain high for many subsectors. We observed high levels of concentration in seven of the twenty-nine subsectors studied and in another three high-moderate concentration levels noticed.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"184 - 202"},"PeriodicalIF":0.0,"publicationDate":"2021-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997019","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48717468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-09DOI: 10.1177/0003603X21997027
B. Saraswathy
This article examines the involvement of business groups in consolidation activity. An important component of the Monopolies and Restrictive Trade Practices Act was “the concentration of economic power in the hands of a few” which has been de-emphasized as per the amendment made in 1991. The new Competition Act mainly deals with the case-by-case analysis of market competition rather than ownership concentration. The competition regulation in its current form is mainly focusing on the concept of “economic efficiency” and not addressing the “social fairness” concept. The involvement of business groups in consolidation activities results in multiplier effects as they are already part of a diversified and well-structured umbrella of business with horizontal and vertical linkages. This article observes the active involvement of big business groups in mergers and acquisitions (M&As) activity across various product lines. Further, many such M&As are leading to capacity expansion not only in various overlapping products (i.e., horizontal linkages) but also in the vertical line of business, in which the affiliate firms of the group are engaged. This may be beneficial to the group as a whole since the cost of intermediary inputs supplied to various affiliate firms can be reduced. The study points to consider the “ownership and group effect” and the resulting synergy creation more carefully while assessing competition.
{"title":"M&As by Business Groups and Market Competition: A Study of Tata Steel","authors":"B. Saraswathy","doi":"10.1177/0003603X21997027","DOIUrl":"https://doi.org/10.1177/0003603X21997027","url":null,"abstract":"This article examines the involvement of business groups in consolidation activity. An important component of the Monopolies and Restrictive Trade Practices Act was “the concentration of economic power in the hands of a few” which has been de-emphasized as per the amendment made in 1991. The new Competition Act mainly deals with the case-by-case analysis of market competition rather than ownership concentration. The competition regulation in its current form is mainly focusing on the concept of “economic efficiency” and not addressing the “social fairness” concept. The involvement of business groups in consolidation activities results in multiplier effects as they are already part of a diversified and well-structured umbrella of business with horizontal and vertical linkages. This article observes the active involvement of big business groups in mergers and acquisitions (M&As) activity across various product lines. Further, many such M&As are leading to capacity expansion not only in various overlapping products (i.e., horizontal linkages) but also in the vertical line of business, in which the affiliate firms of the group are engaged. This may be beneficial to the group as a whole since the cost of intermediary inputs supplied to various affiliate firms can be reduced. The study points to consider the “ownership and group effect” and the resulting synergy creation more carefully while assessing competition.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"236 - 251"},"PeriodicalIF":0.0,"publicationDate":"2021-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997027","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48604357","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-09DOI: 10.1177/0003603X21997046
C. Dube
This study applies an econometric approach to estimate the impact of competition reform adoption and tightening on international trade, using Africa’s envisaged Tripartite Free Trade Area (TFTA) as a case study. An index measuring the extent to which competition regimes have been tightened and enforced between 2001 and 2016 in the TFTA countries is constructed. A gravity model of international trade, based on generalized method of moments, is then estimated to establish how exports are influenced by this competition index measure after controlling for other traditional gravity model variables. The results show that increasing competition reforms by 1% is associated with an increase in bilateral exports into the TFTA by 0.16%. However, if competition reforms in the importing country increase by 1%, then an approximate decline in bilateral exports of 0.46% would result. This underlines the role of competition enforcement in enhancing national competitiveness.
{"title":"The Role of Competition Reforms in Unlocking International Trade: Evidence from Africa’s Proposed Tripartite Free Trade Area","authors":"C. Dube","doi":"10.1177/0003603X21997046","DOIUrl":"https://doi.org/10.1177/0003603X21997046","url":null,"abstract":"This study applies an econometric approach to estimate the impact of competition reform adoption and tightening on international trade, using Africa’s envisaged Tripartite Free Trade Area (TFTA) as a case study. An index measuring the extent to which competition regimes have been tightened and enforced between 2001 and 2016 in the TFTA countries is constructed. A gravity model of international trade, based on generalized method of moments, is then estimated to establish how exports are influenced by this competition index measure after controlling for other traditional gravity model variables. The results show that increasing competition reforms by 1% is associated with an increase in bilateral exports into the TFTA by 0.16%. However, if competition reforms in the importing country increase by 1%, then an approximate decline in bilateral exports of 0.46% would result. This underlines the role of competition enforcement in enhancing national competitiveness.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"252 - 275"},"PeriodicalIF":0.0,"publicationDate":"2021-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997046","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42293017","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-09DOI: 10.1177/0003603X21997022
Reji K. Joseph
The use of digital technologies to aid the agronomic decision making of farmers characterizes modern agriculture. Digital farming is expected to enhance the market power of leading innovative firms in the seed industry, which is already having a high level of concentration. The merger of two leading innovative firms—Bayer and Monsanto—is to be seen in this context. This article examines the emerging anticompetitive considerations from the deal and the contribution of the Competition Commission of India in alleviating such considerations while approving the deal. It is found that threats were emerging in three areas—traits and seeds, nonselective herbicides, and digital farming platforms. To eliminate the anticompetitive effects of the deal, both the companies were required to divest their research and development intensive trait, seed, and nonselective herbicide businesses. They were also required to license the proprietary active ingredients of nonselective herbicides, if the use of their seeds was linked to the application of such herbicides, on fair, reasonable, and nondiscriminatory (FRAND) terms. They were also required to license the agronomic data, collected from India, and used in their digital platforms, to potential users on FRAND terms.
{"title":"Innovation, Patents, and Competition in Modern Agriculture: A Case Study of Bayer and Monsanto Merger","authors":"Reji K. Joseph","doi":"10.1177/0003603X21997022","DOIUrl":"https://doi.org/10.1177/0003603X21997022","url":null,"abstract":"The use of digital technologies to aid the agronomic decision making of farmers characterizes modern agriculture. Digital farming is expected to enhance the market power of leading innovative firms in the seed industry, which is already having a high level of concentration. The merger of two leading innovative firms—Bayer and Monsanto—is to be seen in this context. This article examines the emerging anticompetitive considerations from the deal and the contribution of the Competition Commission of India in alleviating such considerations while approving the deal. It is found that threats were emerging in three areas—traits and seeds, nonselective herbicides, and digital farming platforms. To eliminate the anticompetitive effects of the deal, both the companies were required to divest their research and development intensive trait, seed, and nonselective herbicide businesses. They were also required to license the proprietary active ingredients of nonselective herbicides, if the use of their seeds was linked to the application of such herbicides, on fair, reasonable, and nondiscriminatory (FRAND) terms. They were also required to license the agronomic data, collected from India, and used in their digital platforms, to potential users on FRAND terms.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"214 - 224"},"PeriodicalIF":0.0,"publicationDate":"2021-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997022","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43067734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-01DOI: 10.1177/0003603X20985803
E. Elhauge, S. Majumdar, Martin C. Schmalz
Developments in capital markets have fueled a concentration of horizontal ownership across competing firms, and this has been linked to anticompetitive effects and economic underperformance. The debate about such ownership concentration has proven contentious and controversial. This symposium titled “Common Ownership: Illuminating a Great 21st Century Antitrust Debate” brings together key new works on the topic that confirm, extend, and illuminate the prior empirical findings and policy implications. Among other things, these contributions survey the recent empirical literature, provide new important empirical results about the extent and effect of horizontal ownership, offer a methodological critique, highlight concepts that address core capital market and labor market linkages, and articulate ideas for policy development to tackle emerging contingencies.
{"title":"Confronting Horizontal Ownership Concentration","authors":"E. Elhauge, S. Majumdar, Martin C. Schmalz","doi":"10.1177/0003603X20985803","DOIUrl":"https://doi.org/10.1177/0003603X20985803","url":null,"abstract":"Developments in capital markets have fueled a concentration of horizontal ownership across competing firms, and this has been linked to anticompetitive effects and economic underperformance. The debate about such ownership concentration has proven contentious and controversial. This symposium titled “Common Ownership: Illuminating a Great 21st Century Antitrust Debate” brings together key new works on the topic that confirm, extend, and illuminate the prior empirical findings and policy implications. Among other things, these contributions survey the recent empirical literature, provide new important empirical results about the extent and effect of horizontal ownership, offer a methodological critique, highlight concepts that address core capital market and labor market linkages, and articulate ideas for policy development to tackle emerging contingencies.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"3 - 11"},"PeriodicalIF":0.0,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X20985803","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48058959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-02-25DOI: 10.1177/0003603X21997047
B. Saraswathy
India is one of the major developing countries having a long history of competition regulation. The scope for the market competition was very limited under the highly rigid regulatory system that existed in India in the early years of development. The key principle behind the planned industrial development strategy in India was self-reliance and social justice for which the government followed a “control and command” regime in which the public sector was assigned a crucial role. Private investment in crucial sectors, entry, and expansion of the private sector was restricted through various regulations. Foreign investment, import of technology, and trade policy were also regulated. MRTP Act 1969 was dealing with the competition issues in India under this highly regulated scenario. With the paradigm shift in India’s economic policies since the announcement of New Industrial Policy-1991, the country moved to the “market-oriented” scenario, and thereby the role of competition also increased in various economic activities, which necessitated a drastic revision in the then existing competition regulations too, which finally resulted in the adoption of the Competition Act 2002. The enforcement of the new Act started from May 2009 onward for the first two provisions of the Act, namely, (i) anticompetitive agreements and (ii) abuse of dominance. The third component, that is, combination regulations became effective from June 2011. It is to be noted that the provisions relating to the concentration of economic power under the MRTP Act 1969, which also governed mergers and acquisitions (M&As), were deleted following the onset of the new policy regime in 1991. Thus, for two decades, that is, till 2011, when the provisions relating to combinations under the Competition Act 2002 came into force, there were no effective restrictions on M&As. During the last ten years of operation of the new regulator in India, that is, the Competition Commission of India (hereinafter “Commission”) has been focusing on internal capacity building, networking with competition regulators from other countries, and advocacy initiatives within India along with speedy processing of cases. So far, the Commission has received more than 740
{"title":"The New Competition Regime in India: Prospects and Challenges: Introduction","authors":"B. Saraswathy","doi":"10.1177/0003603X21997047","DOIUrl":"https://doi.org/10.1177/0003603X21997047","url":null,"abstract":"India is one of the major developing countries having a long history of competition regulation. The scope for the market competition was very limited under the highly rigid regulatory system that existed in India in the early years of development. The key principle behind the planned industrial development strategy in India was self-reliance and social justice for which the government followed a “control and command” regime in which the public sector was assigned a crucial role. Private investment in crucial sectors, entry, and expansion of the private sector was restricted through various regulations. Foreign investment, import of technology, and trade policy were also regulated. MRTP Act 1969 was dealing with the competition issues in India under this highly regulated scenario. With the paradigm shift in India’s economic policies since the announcement of New Industrial Policy-1991, the country moved to the “market-oriented” scenario, and thereby the role of competition also increased in various economic activities, which necessitated a drastic revision in the then existing competition regulations too, which finally resulted in the adoption of the Competition Act 2002. The enforcement of the new Act started from May 2009 onward for the first two provisions of the Act, namely, (i) anticompetitive agreements and (ii) abuse of dominance. The third component, that is, combination regulations became effective from June 2011. It is to be noted that the provisions relating to the concentration of economic power under the MRTP Act 1969, which also governed mergers and acquisitions (M&As), were deleted following the onset of the new policy regime in 1991. Thus, for two decades, that is, till 2011, when the provisions relating to combinations under the Competition Act 2002 came into force, there were no effective restrictions on M&As. During the last ten years of operation of the new regulator in India, that is, the Competition Commission of India (hereinafter “Commission”) has been focusing on internal capacity building, networking with competition regulators from other countries, and advocacy initiatives within India along with speedy processing of cases. So far, the Commission has received more than 740","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"155 - 157"},"PeriodicalIF":0.0,"publicationDate":"2021-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997047","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45498285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-02-08DOI: 10.1177/0003603X20985796
Albert Banal-Estañol, Melissa Newham, J. Seldeslachts
We investigate patterns in common ownership networks between firms that are active in the U.S. pharmaceutical industry for the period 2004–2014. Our main findings are that “brand firms”—that is, firms that have research and development capabilities and launch new drugs—exhibit relatively dense common ownership networks with each other that further increase significantly in density over time, whereas the network of “generic firms”—that is, firms that primarily specialize in developing and launching generic drugs—is much sparser and stays that way over the span of our sample. Finally, when considering the common ownership links between brands firms, on the one hand, and generic firms, on the other, we find that brand firms have become more connected to generic firms over time. We discuss the potential antitrust implications of these findings.
{"title":"Common Ownership in the U.S. Pharmaceutical Industry: A Network Analysis","authors":"Albert Banal-Estañol, Melissa Newham, J. Seldeslachts","doi":"10.1177/0003603X20985796","DOIUrl":"https://doi.org/10.1177/0003603X20985796","url":null,"abstract":"We investigate patterns in common ownership networks between firms that are active in the U.S. pharmaceutical industry for the period 2004–2014. Our main findings are that “brand firms”—that is, firms that have research and development capabilities and launch new drugs—exhibit relatively dense common ownership networks with each other that further increase significantly in density over time, whereas the network of “generic firms”—that is, firms that primarily specialize in developing and launching generic drugs—is much sparser and stays that way over the span of our sample. Finally, when considering the common ownership links between brands firms, on the one hand, and generic firms, on the other, we find that brand firms have become more connected to generic firms over time. We discuss the potential antitrust implications of these findings.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"68 - 99"},"PeriodicalIF":0.0,"publicationDate":"2021-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X20985796","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41385585","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-19DOI: 10.1177/0003603X20985804
Martin C. Schmalz
The literature on competitive effects of common ownership has grown at a fast rate in the past two years. Anticompetitive effects have been confirmed with alternative reduced-form and structural estimation methods, in different industries, geographies, and jurisdictions. Multiple independent studies have disproven early critiques of the literature. Other papers document the heterogeneity of common ownership effects on competition across markets and industries. Important advances were made on the study of the economic mechanisms and governance channels that implement anti-competitive incentives. New theory refines the interpretation of existing empirical work. Access to high-quality ownership and product-market data remains a bottleneck for meaningful research in the area.
{"title":"Recent Studies on Common Ownership, Firm Behavior, and Market Outcomes","authors":"Martin C. Schmalz","doi":"10.1177/0003603X20985804","DOIUrl":"https://doi.org/10.1177/0003603X20985804","url":null,"abstract":"The literature on competitive effects of common ownership has grown at a fast rate in the past two years. Anticompetitive effects have been confirmed with alternative reduced-form and structural estimation methods, in different industries, geographies, and jurisdictions. Multiple independent studies have disproven early critiques of the literature. Other papers document the heterogeneity of common ownership effects on competition across markets and industries. Important advances were made on the study of the economic mechanisms and governance channels that implement anti-competitive incentives. New theory refines the interpretation of existing empirical work. Access to high-quality ownership and product-market data remains a bottleneck for meaningful research in the area.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"12 - 38"},"PeriodicalIF":0.0,"publicationDate":"2021-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X20985804","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41633030","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-12-03DOI: 10.1177/0003603X21997030
Tirza J. Angerhofer, R. Blair
In Apple, Inc. v. Pepper, the Supreme Court failed to recognize the economic reality at play which sparked considerable confusion and debate about the continued vitality of Illinois Brick. Apple used proprietary technology and threats to both iPhone owners and app developers to compel them to conduct their business in Apple’s App Store. In so doing, Apple created a presumably unlawful bottleneck. This enabled Apple to impose a 30% ad valorem tax on each transaction. The tax, that is, the antitrust damage, is borne by both the iPhone owners and the app developers according to the relative elasticities of the demand and supply. Distributing damages in this way leads to effective antitrust enforcement that does not reward the wrongdoer with ill-gotten gains nor lead to duplicative damages and complex apportioning. Our analysis clarifies the economic reality of the Apple case and provides useful guidance for handling future bottleneck cases.
{"title":"Economic Reality at the Core of Apple","authors":"Tirza J. Angerhofer, R. Blair","doi":"10.1177/0003603X21997030","DOIUrl":"https://doi.org/10.1177/0003603X21997030","url":null,"abstract":"In Apple, Inc. v. Pepper, the Supreme Court failed to recognize the economic reality at play which sparked considerable confusion and debate about the continued vitality of Illinois Brick. Apple used proprietary technology and threats to both iPhone owners and app developers to compel them to conduct their business in Apple’s App Store. In so doing, Apple created a presumably unlawful bottleneck. This enabled Apple to impose a 30% ad valorem tax on each transaction. The tax, that is, the antitrust damage, is borne by both the iPhone owners and the app developers according to the relative elasticities of the demand and supply. Distributing damages in this way leads to effective antitrust enforcement that does not reward the wrongdoer with ill-gotten gains nor lead to duplicative damages and complex apportioning. Our analysis clarifies the economic reality of the Apple case and provides useful guidance for handling future bottleneck cases.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"308 - 321"},"PeriodicalIF":0.0,"publicationDate":"2020-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X21997030","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45800437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-11-05DOI: 10.1177/0003603X20985799
José Azar, Martin C. Schmalz, Isabel Tecu
This article argues that the evidence presented in several critiques of Azar, Schmalz, and Tecu’s (AST) “airlines” paper does often not back the conclusion these studies draw. Specifically, widely circulated studies claiming that there are no anticompetitive effects of common ownership or that there is no evidence of it either do not attempt to refute AST’s findings of anticompetitive effects in the U.S. airlines industry or in fact confirm the evidence by AST and even dispel valid concerns about AST’s methodology. Focusing on Kennedy, O’Brien, Song, and Waehrer (KOSW), we note that their panel regressions using market-share-free indices of common ownership concentration confirm the positive correlation between common ownership concentration and price, which AST showed with a measure containing potentially endogenous market shares. We then examine the alternative empirical methods KOSW propose: (i) Their conclusion that estimates from a structural model show no evidence of anticompetitive effects is based on an estimation that discards 90% of the available data and therefore, at best, is only valid for that subsample; (ii) their structural model makes no economic sense because it produces a negative effect of route distance on marginal cost; and (iii) they construct an alternative version of the widely used BlackRock- Barclays Global Investors instrument that is arguably invalid. Even absent these methodological concerns, KOSW’s structural estimates are so noisy that they do not in fact reject the hypothesis that common ownership concentration has a positive effect on prices. A more recent structural paper by Park and Seo has shown these concerns to be well-founded: using a different and larger subsample of AST’s data and more standard estimation methods compared to KOSW, they estimate a positive effect of common ownership on prices, as well as a positive effect of route distance on cost. A lesson for future research—and readers of the literature—is to critically evaluate the conclusions drawn by studies in this field, including those that advertise themselves as providing evidence against the existence of anticompetitive effects of common ownership.
{"title":"Research on the Competitive Consequences of Common Ownership: A Methodological Critique","authors":"José Azar, Martin C. Schmalz, Isabel Tecu","doi":"10.1177/0003603X20985799","DOIUrl":"https://doi.org/10.1177/0003603X20985799","url":null,"abstract":"This article argues that the evidence presented in several critiques of Azar, Schmalz, and Tecu’s (AST) “airlines” paper does often not back the conclusion these studies draw. Specifically, widely circulated studies claiming that there are no anticompetitive effects of common ownership or that there is no evidence of it either do not attempt to refute AST’s findings of anticompetitive effects in the U.S. airlines industry or in fact confirm the evidence by AST and even dispel valid concerns about AST’s methodology. Focusing on Kennedy, O’Brien, Song, and Waehrer (KOSW), we note that their panel regressions using market-share-free indices of common ownership concentration confirm the positive correlation between common ownership concentration and price, which AST showed with a measure containing potentially endogenous market shares. We then examine the alternative empirical methods KOSW propose: (i) Their conclusion that estimates from a structural model show no evidence of anticompetitive effects is based on an estimation that discards 90% of the available data and therefore, at best, is only valid for that subsample; (ii) their structural model makes no economic sense because it produces a negative effect of route distance on marginal cost; and (iii) they construct an alternative version of the widely used BlackRock- Barclays Global Investors instrument that is arguably invalid. Even absent these methodological concerns, KOSW’s structural estimates are so noisy that they do not in fact reject the hypothesis that common ownership concentration has a positive effect on prices. A more recent structural paper by Park and Seo has shown these concerns to be well-founded: using a different and larger subsample of AST’s data and more standard estimation methods compared to KOSW, they estimate a positive effect of common ownership on prices, as well as a positive effect of route distance on cost. A lesson for future research—and readers of the literature—is to critically evaluate the conclusions drawn by studies in this field, including those that advertise themselves as providing evidence against the existence of anticompetitive effects of common ownership.","PeriodicalId":36832,"journal":{"name":"Antitrust Bulletin","volume":"66 1","pages":"113 - 122"},"PeriodicalIF":0.0,"publicationDate":"2020-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/0003603X20985799","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47663240","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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