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Your Weekly Digest | Issue 242

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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Google to appeal ‘disproportionate’ €500 million French fine in copyright row | France24
Google on Wednesday said it is appealing a decision by France’s competition watchdog to hand it a 500-million-euro ($590 million) fine in a row with news outlets over the use of their content under E…

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U.S. antitrust officials are preparing a second monopoly lawsuit against Alphabet Inc.’s Google over the company’s digital advertising business, according to a person familiar with the matter, stepping up the government’s claims that Google is abusing its dominance.
The Justice Department has accelerated its investigation of Google’s digital advertising practices and may file a lawsuit as soon as the end of the year, said the person, who declined to be named because the investigation is ongoing. No final decisions have been made and the timing could be pushed back. Read more.
Facebook's WhatsApp Fined for Breaking E.U. Data Privacy Law | The New York Times
Regulators in Ireland, where many tech giants have their European headquarters, have been criticized for not enforcing Europe’s data-protection law, once heralded as a global standard.
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Thank you to Linda, Jacqueline and the Law Society for the invitation to speak in what must be challenging times for you all. I will speak about my experience at the CMA Panel, which is a feature of the UK competition regime that is not, so far as I know, replicated elsewhere in the world.
I must emphasise that I am speaking in personal capacity, drawing my experience of a specific set of merger cases and other work. Others may have had different experiences. The CMA publishes detailed guidance on how the merger process works in the UK on its website, for those that are interested. Read more.
The Department of Justice announced today that BancorpSouth Bank and Cadence Bank have agreed to sell seven branches in northeastern Mississippi, with more than $446 million in deposits, to resolve antitrust concerns arising from BancorpSouth’s planned acquisition of Cadence Bank. Read more.
Today, the Federal Trade Commission announced that Richard Fairbank, CEO of Capital One Financial Corp., will pay a $637,950 civil penalty to settle charges that his acquisition of Capital One Financial stock violated the Hart-Scott-Rodino (HSR) Act. Fairbank’s recent multi-million dollar compensation package included over 100,000 Capital One Financial shares in 2018, which increased his holdings to $168 million. The complaint alleges that Fairbank failed to report his sizable stock windfall to federal antitrust authorities and illegally finalized the acquisition before the agencies could investigate. While Fairbank is a repeat filing offender with wrongdoing spanning two decades, today’s FTC order is the first time he has been penalized. Read more.
The American Choice and Innovation Online Act (previously called the Platform Anti-Monopoly Act), introduced earlier this summer by U.S. Rep. David Cicilline (D-R.I.), would significantly change the nature of digital platforms and, with them, the internet itself. Taken together, the bill’s provisions would turn platforms into passive intermediaries, undermining many of the features that make […] Read more.
Yesterday, the Korean National Assembly passed a bill that amends the country’s Telecommunications Business Act to prevent app market business operators (i.e., Apple and Google with respect to thei… Read more.
The FTC's narrative is that Mark Zuckerberg isn't very good at developing technology, so he built a monopoly instead. Will that story lead to a break-up? And how long will a trial and appeal take? Read more.
This article analyses Commission Decisions authorising State aid between March and December 2020 in order to explore their possible consequences on the internal market and the level playing field.1 The research is aimed at evaluating whether the relaxation of State aid control due to coronavirus disease 2019 (COVID-19) has produced disparities between the Member States and unfair advantages—or disadvantages—for EU companies. Even though final calculation of aid can only be finalised when undertakings actually receive the specific aid, however, the Commission’s decisions assessing State measures do give a clear indication of at least two phenomena—first, the geographical distribution of aid in the EU and second which policy objectives were favoured by the Member States in the period of time considered. Read more.
We experimentally consider a dynamic multi-period Cournot duopoly with a simultaneous option to manage financial risk and a real option to delay supply. The first option allows players to manage risk before uncertainty is realized, while the second allows managing risk after realization. In our setting, firms face a strategic dilemma: They must weigh the advantages of dealing with risk exposure against the disadvantages of higher competition. In theory, firms make strategic use of the hedging component, enhancing competition. Our experimental results support this theory, suggesting that hedging increases competition and negates duopoly profits even in a simultaneous setting. Read more.
Brett Hollenbeck
It is an open question in antitrust economics whether allowing dominant firms to acquire smaller rivals is ultimately helpful or harmful to the long run rate of innovation and therefore long-term consumer welfare. I develop a framework to study this question in a dynamic oligopoly model where firms endogenously investment, entry, exit and engage in mergers. Firms produce vertically differentiated goods, compete by innovating on product quality, and can acquire rival firms to gain market power. In a benchmark model, mergers are modeled to be exclusively harmful to consumers in the short run by reducing competition and increasing prices. Despite this, under standard industry settings it is possible to show that the prospect of a buyout creates a powerful incentive for firms to preemptively enter the industry and invest to make themselves an attractive merger partner. The result is significantly higher rate of innovation with mergers than without and significantly higher long-run consumer welfare as well. Further results explore the circumstances under which this result is likely to hold. In order for the long run increase in innovation to outweigh the short run harm to consumers caused by mergers, entry costs must be low, entrants and incumbents must both have the ability to innovate rapidly, and the degree of horizontal product differentiation must be low. Alternatively, when dominant firms can directly incorporate the acquired firm’s innovation into their own product, mergers will typically benefit consumers in both the short run and long run. Read more.
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Kind regards, Valur Þráinsson, Founder of CompetitionFeed.com. Email: valur@competitionfeed.com
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