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Your Weekly Digest | Issue 235

Valur Thrainsson
6 min read

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Your Weekly Digest
Good morning 600+ CompetitionFeed readers!

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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.

Enjoy :)
EU’s microchip dreams face Anglo-American menace – POLITICO
A mega-merger between Nvidia and Arm is a top priority for the European Commission.Brussels is well aware that this potential Anglo-American powerhouse does more than threaten to wreck its semiconductor dreams, one of the core planks of the EU's industrial strategy. Europe's response — including the nuclear option of blocking the deal through competition rules — will be a broader test of its claims to be a geostrategic big hitter and of its attempts to reassert its crumbling reputation as regulator.
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Facebook probed by UK and EU competition watchdogs - BBC News
Authorities in the UK and EU are concerned the firm is using ad data to gain an unfair advantage over rivals. The Competition and Markets Authority is looking into whether it uses information to benefit its own services, such as Facebook Marketplace.
The European Commission is examining if Facebook violated EU rules by gathering data from advertisers to compete with them in providing classified ads.
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France, Germany, the Netherlands press for tighter rules in DMA – EURACTIV.com

France, Germany and the Netherlands on Thursday (27 May) released a joint statement calling for a reinforcement of the EU's Digital Markets Act (DMA) in a range of areas, from member states involvement to merger control. 

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Following the parties’ decision to abandon their proposed merger, Acting Bureau of Competition Director Maribeth Petrizzi made this statement:“This is great news for cement customers in eastern Pennsylvania and western New Jersey. Read more.
In the context of an investigation opened before the Autorité in the online advertising sector, Facebook proposes commitments. The Autorité de la concurrence is submitting these commitments for public consultation, and is inviting actors from the sector to provide their feedback. The case was opened following a complaint from Criteo, which criticised the lack of clarity and objectivity in accessing Facebook's advertising services. Read more.
The South African Competition Commission (SACC) made headlines with its first prohibition of an intermediate merger that was based solely on public-interest grounds. Emerging Capital Partners (ECP), a private equity firm founded in the US, was to acquire all Burger King assets from South African Grand Parade Investments, a South African majority black owned entity.  Read more.
Not so long ago it seemed like we had arrived to the end of history in competition law. The level of substantive convergence at the international level was remarkable and unique by reference to… Read more.
Back in April 2017, The Times ran a story detailing how a drug giant had a “secret plan” to destroy a cancer medicine unless large price rises were agreed to by national purchasing authorities.  A month later, the European Commission opened an investigation into Aspen.  Almost four years later in February 2021, it accepted commitments... Read more.
MARTIN GAYNOR
The US health care system is based on markets, which do not function as well as they could, or should. Prices are high and rising, there are egregious pricing practices, quality is suboptimal, and the sector is sluggish and unresponsive. Lack of competition has a lot to do with these problems. Read more.
Thomas Vinje, Keti Zukakishvili
The General Court of the EU ruled that, in the absence of objective justification, the partial removal of railway infrastructure by a vertically integrated incumbent is an exclusionary abuse, which is not subject to the legal test applicable to a refusal of access to essential facilities. Read more.
Anna Rita Bennato, Stephen Davies, Franco Mariuzzo, Peter Ormosi
This paper is a retrospective evaluation of how innovation changed following mergers and subsequent policy interventions after the 5-to-3 consolidation of the worldwide hard disk drive industry in 2012. Our firm-level approach confirms that there is important heterogeneity across the players, which we attribute to differences in the severity of remedies required by competition authorities. Read more.
Jan De Loecker, Jan Eeckhout & Simon Mongey
We propose a general equilibrium economy with oligopolistic output markets in which two channels can cause a change in market power: (i) technology, via changes to productivity shocks and the cost of entry, (ii) market structure, via changes to the number of potential competitors. First, we disentangle these narratives by matching time-series on markups, labor reallocation and costs between 1980 and 2016, finding that both channels are necessary to account for the data. Second, we show that changes in technology and market structure over this period yielded positive welfare effects from reallocation and selection, but off-setting negative effects from deadweight loss and overhead. Overall, welfare is 9 percent lower in 2016 than in 1980. Third, the changes we identify replicate cross-sectional patterns in declining business dynamism, declining equilibrium wages and labor force participation, and sales reallocation toward larger, more productive firms. Read more.
We investigate whether there is a link between competition policy and the decline in ‎the labour share observed in many industrialised countries. By using a panel of 22 ‎industries in 12 OECD economies, over the period 1995-2005, we find a positive link ‎between an effective competition policy and the labour share trend. Our findings ‎support the hypothesis that a lax or inactive competition policy has contributed to the ‎decline of the labour share across many developed countries. The main mechanism ‎through which competition policy affects the labour share is through its ability to ‎constrain mark-ups: competition policy is negatively correlated to mark-ups, while ‎mark-ups are negatively correlated to labour share. The results suggest that ‎competition policy could be particularly important in mitigating the decline of the ‎labour share in settings characterised by low levels of labour protection and labour ‎bargaining power. More broadly, by permitting higher mark-ups to be sustained in ‎some industries and jurisdictions, the results suggest that weak competition policy may ‎contribute to higher levels of economic inequality given that labour income is more ‎evenly distributed across households than capital income. ‎
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In theory, partial cross-ownership affects product prices and consumer welfare negatively, but empirical evidence is highly controversial. For competition policy it is important whether such effects are substantial enough to cause action. We report a lab experiment on a homogeneous duopoly market with symmetric passive crossownership in which the degree of cross-ownership varies between treatments (LOW vs HIGH). We argue that the observed negative effects are substantial enough to be considered problematic in real markets.
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