Clara Cardone-Riportella, Myriam García-Olalla, Camilo J Vázquez-Ordás
Abstract This paper aims to evaluate the impact that the application of competition legislation exerts on financial markets. The sanctioning process is classified into three key moments: the announcement of an investigation when a case of corporate misconduct is suspected; the imposition of a fine, if applicable; and, finally, the rectification or ratification of the sanction. The impact of these announcements on share prices between 2013 and 2021 is analyzed using the event study methodology. This research focuses on companies listed on the Spanish stock exchange, yielding 22 firms with 95 observations. The results show a negative and significant market reaction to the series of announcements. While this reaction intensifies if the fine is ratified, the response becomes positive when the sanction is rectified and annulled. In conclusion, the evidence found allows us to state that the market does in effect penalize corporate misconduct. Furthermore, the public sanction imposed by the competent authority is then followed by a private sanction, which manifests itself as a drop in market value. This is consistent with a hypothetical effect of reputational loss, especially in those cases in which the sanction is more significant in relation to the company’s market value.
{"title":"Public and Private Sanctions for Corporate Misconduct: Evidence From Listed Companies","authors":"Clara Cardone-Riportella, Myriam García-Olalla, Camilo J Vázquez-Ordás","doi":"10.1093/joclec/nhad010","DOIUrl":"https://doi.org/10.1093/joclec/nhad010","url":null,"abstract":"Abstract This paper aims to evaluate the impact that the application of competition legislation exerts on financial markets. The sanctioning process is classified into three key moments: the announcement of an investigation when a case of corporate misconduct is suspected; the imposition of a fine, if applicable; and, finally, the rectification or ratification of the sanction. The impact of these announcements on share prices between 2013 and 2021 is analyzed using the event study methodology. This research focuses on companies listed on the Spanish stock exchange, yielding 22 firms with 95 observations. The results show a negative and significant market reaction to the series of announcements. While this reaction intensifies if the fine is ratified, the response becomes positive when the sanction is rectified and annulled. In conclusion, the evidence found allows us to state that the market does in effect penalize corporate misconduct. Furthermore, the public sanction imposed by the competent authority is then followed by a private sanction, which manifests itself as a drop in market value. This is consistent with a hypothetical effect of reputational loss, especially in those cases in which the sanction is more significant in relation to the company’s market value.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135429275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Digital platforms can offer a multiplicity of items in one place. This should, in principle, lower end-users’ search costs and improve their decision-making, and thus enhance competition between suppliers using the platform. But end-users struggle with large choice sets. Recommender systems (RSs) can help by predicting end-users’ preferences and suggesting relevant products. However, this process of prediction can generate systemic biases in the recommendations made, including popularity bias, incumbency bias, homogeneity bias, and conformity bias. The nature and extent of these biases will depend on the choice of RS model design, the data feeding into the RS model, and feedback loops between these two elements. We discuss how these systemic biases might be expected to worsen end-user choices and harm competition between suppliers. They can increase concentration, barriers to entry and expansion, market segmentation, and prices while reducing variety and innovation. This can happen even when a platform’s interests are broadly aligned with those of end-users, and the situation may be worsened where these incentives diverge. We outline these important effects at a high level, with the objective to highlight the competition issues arising, including policy implications, and to motivate future research.
{"title":"Recommender Systems and Supplier Competition on Platforms","authors":"Amelia Fletcher, Peter L Ormosi, Rahul Savani","doi":"10.1093/joclec/nhad009","DOIUrl":"https://doi.org/10.1093/joclec/nhad009","url":null,"abstract":"Abstract Digital platforms can offer a multiplicity of items in one place. This should, in principle, lower end-users’ search costs and improve their decision-making, and thus enhance competition between suppliers using the platform. But end-users struggle with large choice sets. Recommender systems (RSs) can help by predicting end-users’ preferences and suggesting relevant products. However, this process of prediction can generate systemic biases in the recommendations made, including popularity bias, incumbency bias, homogeneity bias, and conformity bias. The nature and extent of these biases will depend on the choice of RS model design, the data feeding into the RS model, and feedback loops between these two elements. We discuss how these systemic biases might be expected to worsen end-user choices and harm competition between suppliers. They can increase concentration, barriers to entry and expansion, market segmentation, and prices while reducing variety and innovation. This can happen even when a platform’s interests are broadly aligned with those of end-users, and the situation may be worsened where these incentives diverge. We outline these important effects at a high level, with the objective to highlight the competition issues arising, including policy implications, and to motivate future research.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135387614","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"CORRECTION TO: ALGORITHMIC PERSONALIZED PRICING WITH THE RIGHT TO EXPLANATION","authors":"","doi":"10.1093/joclec/nhad013","DOIUrl":"https://doi.org/10.1093/joclec/nhad013","url":null,"abstract":"","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135690836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Antitrust enforcement proceedings routinely rely on information provided by positive economics. Recognizing that this information may help the court to decide what happened in the case at bar as well as what substantive rule to apply to the case, this article examines how general the information needs to be to bear relevance to each of these decision-making tasks. The examination is conducted in the context of US law, relies on the conventional distinction between adjudicative and legislative facts, and focuses on competitive effects as the paramount type of antitrust facts. Economic inquiries into the competitive effects of the conduct under scrutiny are then shown to be relevant if they take sufficient account of the specifics of the case. This requirement will rarely be satisfied by inquiries based on generic models. In contrast, when deciding on the content of the applicable antirust rule, the court needs comprehensive information about the competitive effects of the entire conduct class. Economic analyses into the effects of specific conduct will hence be hardly relevant.
{"title":"Relevant Generality of Antitrust Economics: Competitive Effects as Adjudicative and Legislative Facts","authors":"Jan Broulík","doi":"10.1093/joclec/nhad011","DOIUrl":"https://doi.org/10.1093/joclec/nhad011","url":null,"abstract":"Abstract Antitrust enforcement proceedings routinely rely on information provided by positive economics. Recognizing that this information may help the court to decide what happened in the case at bar as well as what substantive rule to apply to the case, this article examines how general the information needs to be to bear relevance to each of these decision-making tasks. The examination is conducted in the context of US law, relies on the conventional distinction between adjudicative and legislative facts, and focuses on competitive effects as the paramount type of antitrust facts. Economic inquiries into the competitive effects of the conduct under scrutiny are then shown to be relevant if they take sufficient account of the specifics of the case. This requirement will rarely be satisfied by inquiries based on generic models. In contrast, when deciding on the content of the applicable antirust rule, the court needs comprehensive information about the competitive effects of the entire conduct class. Economic analyses into the effects of specific conduct will hence be hardly relevant.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135638909","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The paper provides new evidence on proxy indicators of market power for major European countries. The data show moderately increasing average industry concentration over the last two decades, a considerably increasing proportion of high-concentration industries, and an overall tendency toward oligopolistic structure. Estimates of aggregate profitability also show a sustained increase over the recent decades for European economies. Although the academic and policy debate is not settled as to whether the causes of these trends are policy driven or reflect technological improvement, our findings suggest that competition policy is likely to face more challenges as large companies are becoming more common in more and more industries.
{"title":"Concentration and Competition: Evidence From Europe and Implications For Policy","authors":"Gábor Koltay, Szabolcs Lorincz, Tommaso Valletti","doi":"10.1093/joclec/nhad012","DOIUrl":"https://doi.org/10.1093/joclec/nhad012","url":null,"abstract":"Abstract The paper provides new evidence on proxy indicators of market power for major European countries. The data show moderately increasing average industry concentration over the last two decades, a considerably increasing proportion of high-concentration industries, and an overall tendency toward oligopolistic structure. Estimates of aggregate profitability also show a sustained increase over the recent decades for European economies. Although the academic and policy debate is not settled as to whether the causes of these trends are policy driven or reflect technological improvement, our findings suggest that competition policy is likely to face more challenges as large companies are becoming more common in more and more industries.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135687483","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The development of blockchain-based applications, to date mostly virtual currencies, touches many areas of law and economics. The most well-known applications of public blockchains rely on Proof of Work as a consensus mechanism in which miners compete to solve a cryptographic puzzle. We argue that economic tools for market definition may be adapted to delineate relevant cryptocurrency mining markets. Antitrust law can help to prevent network attacks and exclusion of transactions with lower fees by large miners. When multiple blockchains are part of the same market, the role of network effects in securing the leading position of more established cryptocurrencies can potentially lead to exclusionary behaviour.
{"title":"Antitrust Economics of Cryptocurrency Mining","authors":"Florian Deuflhard, C-Philipp Heller","doi":"10.1093/joclec/nhad006","DOIUrl":"https://doi.org/10.1093/joclec/nhad006","url":null,"abstract":"Abstract The development of blockchain-based applications, to date mostly virtual currencies, touches many areas of law and economics. The most well-known applications of public blockchains rely on Proof of Work as a consensus mechanism in which miners compete to solve a cryptographic puzzle. We argue that economic tools for market definition may be adapted to delineate relevant cryptocurrency mining markets. Antitrust law can help to prevent network attacks and exclusion of transactions with lower fees by large miners. When multiple blockchains are part of the same market, the role of network effects in securing the leading position of more established cryptocurrencies can potentially lead to exclusionary behaviour.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-05-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135086232","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The OECD in May 2021 adopted a recommendation that governments “ensure competitive neutrality to the maximum extent practicable and unless overriding Public Policy Objectives require otherwise.” This article discusses practical issues surrounding the formal implementation of competitive neutrality in a jurisdiction, using the well-established Australian framework as an exemplar. It illustrates the strengths and weaknesses of the Australian system and provides guidance to other jurisdictions in formulating their approaches to implementing the Recommendation. It demonstrates that implementation of competitive neutrality at a practical level is a complex exercise, which demands both strategic vision and detailed planning.
{"title":"Competitive Neutrality: OECD Recommendations and the Australian Experience","authors":"Rhonda L Smith, Deborah Healey, Xue Bai","doi":"10.1093/joclec/nhad003","DOIUrl":"https://doi.org/10.1093/joclec/nhad003","url":null,"abstract":"Abstract The OECD in May 2021 adopted a recommendation that governments “ensure competitive neutrality to the maximum extent practicable and unless overriding Public Policy Objectives require otherwise.” This article discusses practical issues surrounding the formal implementation of competitive neutrality in a jurisdiction, using the well-established Australian framework as an exemplar. It illustrates the strengths and weaknesses of the Australian system and provides guidance to other jurisdictions in formulating their approaches to implementing the Recommendation. It demonstrates that implementation of competitive neutrality at a practical level is a complex exercise, which demands both strategic vision and detailed planning.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135423688","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Billions of users worldwide utilize digital zero-price services every day. This study proposes a market definition method for digital zero-price services, using the messenger service as an example. We employ the small but significant nontransitory increase in cost test, which is an improved version of the small but significant nontransitory increase in price test, and conduct conjoint analysis while considering the network effect, a characteristic of digital services. Our results show that the price elasticity of demand is 0.628 and the critical markup ratio is 1.492–1.542 when only the price effect is considered. When the direct network effect is considered, the price elasticity of demand is 1.728 and the critical markup ratio is 0.479–0.529. Furthermore, when considering a two-sided market with indirect network effects, the price elasticity of demand is 2.162 and the critical markup ratio is 0.363–0.413. Thus, the price elasticity of demand for free messenger services is higher when the network effects and two-sided markets are considered.
{"title":"DELINEATING ZERO-PRICE MARKETS WITH NETWORK EFFECTS: AN ANALYSIS OF FREE MESSENGER SERVICES","authors":"Akihiro Nakamura, Takanori Ida","doi":"10.1093/joclec/nhac014","DOIUrl":"https://doi.org/10.1093/joclec/nhac014","url":null,"abstract":"Billions of users worldwide utilize digital zero-price services every day. This study proposes a market definition method for digital zero-price services, using the messenger service as an example. We employ the small but significant nontransitory increase in cost test, which is an improved version of the small but significant nontransitory increase in price test, and conduct conjoint analysis while considering the network effect, a characteristic of digital services. Our results show that the price elasticity of demand is 0.628 and the critical markup ratio is 1.492–1.542 when only the price effect is considered. When the direct network effect is considered, the price elasticity of demand is 1.728 and the critical markup ratio is 0.479–0.529. Furthermore, when considering a two-sided market with indirect network effects, the price elasticity of demand is 2.162 and the critical markup ratio is 0.363–0.413. Thus, the price elasticity of demand for free messenger services is higher when the network effects and two-sided markets are considered.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2022-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138513977","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Equity concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of certain disadvantaged groups more heavily. A simple example of an equity-justified agreement illustrates how seeking distributive justice through relaxed antitrust enforcement is ineffective and inefficient. Permitting competitors to jointly set prices gives them the power to price discriminate, which they could use to redistribute wealth by overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a ‘Robin Hood cartel’ is profitable, despite losing money on the poor and creating deadweight losses. Yet the poor will be given only what is minimally required in return for permission to take from the rich. Without conditions, the joint-profit maximizing wealth redistribution is nothing more than alms for the poor. They receive more under a full-payout plan, but total deadweight losses remain high. In essence, assigning a larger relative consumer welfare weight to the poor discounts the inefficiencies on the rich.
{"title":"On Distributive Justice by Antitrust: The Robin Hood Cartel","authors":"Maarten Pieter Schinkel","doi":"10.1093/joclec/nhab031","DOIUrl":"https://doi.org/10.1093/joclec/nhab031","url":null,"abstract":"Equity concerns in antitrust could justify market power in return for a fairer allocation by weighing the consumer welfare of certain disadvantaged groups more heavily. A simple example of an equity-justified agreement illustrates how seeking distributive justice through relaxed antitrust enforcement is ineffective and inefficient. Permitting competitors to jointly set prices gives them the power to price discriminate, which they could use to redistribute wealth by overcharging the rich and giving lower than competitive prices to the poor. Provided society values redistribution enough, such a ‘Robin Hood cartel’ is profitable, despite losing money on the poor and creating deadweight losses. Yet the poor will be given only what is minimally required in return for permission to take from the rich. Without conditions, the joint-profit maximizing wealth redistribution is nothing more than alms for the poor. They receive more under a full-payout plan, but total deadweight losses remain high. In essence, assigning a larger relative consumer welfare weight to the poor discounts the inefficiencies on the rich.","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2022-02-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138513979","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"OUP accepted manuscript","authors":"","doi":"10.1093/joclec/nhab029","DOIUrl":"https://doi.org/10.1093/joclec/nhab029","url":null,"abstract":"","PeriodicalId":45547,"journal":{"name":"Journal of Competition Law & Economics","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"61532591","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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