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Your Weekly Digest | Issue 239

Valur Thrainsson
6 min read

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Here below, you find the most recent and relevant competition and anti-trust news, blogs and journal publications over the last week.

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US Bill introduced to curb 'big tech bullying' in the app store space | ZDNet

The Open App Markets Act is aiming to tear down coercive anticompetitive walls in the app economy, with three US senators hoping it will set fair, clear, and enforceable rules that protect competition and strengthen consumer protections.

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‘They should be worried’: how FTC chair Lina Khan plans to tackle big tech | US politics | The Guardian

Within weeks of her appointment to the commission, Facebook and Amazon asked that she be recused from antitrust investigations

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The CMA has provisionally found Facebook’s merger with Giphy will harm competition between social media platforms and remove a potential challenger in the display advertising market. Read more.
The Federal Trade Commission announced that staff have submitted a comment urging the Board of Governors of the Federal Reserve System (the Fed) to clarify and strengthen the implementation of debit card fee and routing reforms to the Electronic Fund Transfer Act (EFTA) made under the Dodd-Frank Wall Street Reform Act of 2010 (Dodd-Frank). Read more.
The President of UOKiK Tomasz Chróstny has issued objections concerning takeover of Lecznice Citomed in Toruń by Lux Med. The transaction may lead to a restriction of competition on the local markets for private medical services and diagnostic imaging services in Toruń and the surrounding area. Read more.
 U.S. and European competition laws diverge in numerous ways that have important real-world effects. Understanding these differences is vital, particularly as lawmakers in the United States, and the rest of the... Read more.
ver recent decades, stock markets and corporate profits have soared while economic growth has been modest. These stylized facts have generated much media interest and academic debate on their implications and drivers. Without long-run data, however, we simply do not know whether these developments are part of the latest stock market cycle, or represent a broader shift in the relationship between the stock market, the corporate sector and the macroeconomy. Read more.
The new U.S. Department of Justice and Federal Trade Commission Vertical Merger Guidelines focus on how vertical mergers are likely to affect static pricing incentives. While vertical mergers can create incentives to increase prices, they can also provide incentives to decrease prices. Which of the possible outcomes is likely to occur depends on details that are generally difficult to measure. Potential competition between dominant firms, the theory of potential harm to competition that the 1984 Department of Justice Merger Guidelines stressed, remains a more compelling rationale for blocking vertical mergers than the likely effect on static pricing incentives. Read more.
In theory, vertical mergers can have both procompetitive and anticompetitive effects. Many early empirical studies found benefits for vertical relationships; but the seminal surveys of this literature are now over a decade old. We review the empirical evidence from the last decade on vertical integration—as well as that in two frequently cited surveys from the mid-2000s. Taken as a whole, the empirical evidence as to the change in welfare that is due to vertical mergers is decidedly mixed, and should certainly not be used as a basis for a presumption that most vertical mergers are procompetitive or harmless. Read more.
We examine the role of private information on the impact of vertical mergers. A vertical merger can improve the information that is available to an upstream monopolist because, after the merger, the monopolist can observe the cost of its downstream merger partner. In the pre-merger world, because the costs of the downstream firms are private information, the monopolist has incomplete information and cannot implement the monopoly outcome: The expected pre-merger equilibrium price of the downstream product is lower than the monopoly price. After a vertical merger, the equilibrium input price that is charged to the downstream rival can either increase or decrease—depending on whether the downstream merger partner’s cost is low or high, respectively. However, in all cases the equilibrium price of the downstream product increases to the monopoly price. Therefore, the merger leads to consumer harm even when it leads to a reduction in the input price. The merged firm, however, cannot extract all of the monopoly profit: The merger causes production inefficiency (when the downstream rival has a relatively small cost advantage) and the downstream rival still earns an information rent (when it has a relatively large cost advantage). These results also have implications for vertical merger policy. Read more.
Éric Barbier de La Serre, Eileen Lagathu
In Brussels, the number of decisions imposing fines for a breach of Article 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) is decreasing. This year the Commission issued only six decisions, whereas it had imposed fines in 10 decisions in 2019 and 12 in 2018. Obviously, this decrease may be explained in part by the pandemic.

The Commission did not issue any decision imposing a fine for a declared breach of Article 102 TFEU, which bears testimony to the continued success of the commitment procedure in abuse of dominance cases,1 despite the Commission’s readiness in 2019 to explore new options (in the form of fine... Read more.
Federico Ghezzi, Chiara Picciau
In 2011, Italy introduced a ban on interlocking directorates in the financial sector, prohibiting members of the boards of directors and of the internal control bodies, as well as top managers of banking, insurance, and financial companies, from holding any such office in a competing company or group. Empirical studies have demonstrated conflicting results concerning the effectiveness of the Italian anti-interlocking provision. Some studies claim that interlocking directorates have decreased but have not been completely eliminated, which suggests possible persisting limits to competition. Other studies instead show the ban to have a procompetitive effect, at least in the banking sector, which would be at odds with a slight reduction in personal ties. Our article addresses this inconsistency by mapping the interlocking directorates among the 25 largest banking groups and the 25 largest insurance groups operating in Italy before and after the introduction of the ban. We show that although interlocking directorates were widespread at the end of 2010, the interlocking ban reached its goal in the banking and insurance sectors. Anticompetitive effects may, however, still exist, especially considering that the anti-interlocking provision does not affect ownership connections among competing financial companies and groups. Read more.
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Kind regards, Valur Þráinsson, Founder of CompetitionFeed.com. Email: valur@competitionfeed.com
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