International Antitrust Law and Policy

Hanno F. Kaiser · University of California, Berkeley, School of Law · Spring 2009

Class 1: Competition law in the context of economic globalization: Recurring themes and a roadmap January 16, 2009

Topics for discussion

• "All politics is local, and all trade is global." Is that right? Just how global are markets? And just how local is the law?
• Who should regulate conduct with transnational effects? The state in which the conduct takes place or where the protagonists are located? Or all nations in which the effect of the conduct is felt? (GE/Honeywell)
• As a result of the "effects doctrine," multiple nations have jurisdiction over conduct with transnational effects. How should the unavoidable conflicts be resolved? Deference, bilateral agreements, multilateral agreements, WTO? Can conflicts be avoided through convergence?
• Antitrust doctrine developed under the assumption of a "closed economy" where all producers and consumers affected by anticompetitive conduct are domestic and have some measure of influence over their government. An "open economy" changes these assumptions. Should national or global welfare be maximized?
• Why have a market economy in the first place? And if one chooses a market economy, what other choices follow (private property in non-rivalrous goods, freedom of contract, competition)
• The role of competition law: limited intervention or active "marketplace design"?
• Efficiency effects of competitive markets: Allocative efficiency, productive efficiency, dynamic efficiency
• Non-efficiency effects of competitive markets: Market integration, employment, providing the tax base to promote social justice and protect the environment, protecting the democratic process from concentrated economic power, preserving conditions of relative bargaining equality under which contracts can reasonably be trusted to produce fair results

Required reading

• Fox, World Competition Law: Conflicts, Convergence, Cooperation (2007) (Excellent introduction to the themes of our course.) (on bspace)
• Kroes, Foreword, Report on Competition Policy (2006)
• Handout, Goals of Competition, Class 1
• Slides: World GDP over time
• US antitrust laws (excerpts)

Optional

• Elhauge/Geradin, Global Antitrust ("E&G"), Preface (pp. iii–iv)
• Barnett, U.S. DOJ, Global Antitrust Enforcement (2007) (Statement of the DOJ's policy position)
• Lowe, Europe, DG Competition, International Cooperation (2006) (Statement of DG COMP's policy position)
• "A Global Economy?" in Held & McGrew, Globalization / Anti-Globalization (2002) (excerpt) (Basic facts about economic globalization.) (on bspace)
• Friedman, Free to Choose (excerpt) (A clear, influential statement of free market libertarianism) (on bspace)

Classes 2 and 3: Horizontal agreements under U.S. and EU competition law January 23 and 30, 2009

Topics for discussion

• Horizontal agreements: price fixing and market sharing compared to joint ventures
• The statutory basis: Sherman Act, Clayton Act, FTC Act and Art. 81/82 of the Treaty
• The institutional basis: DOJ, FTC, States, private plaintiffs; European Commission, etc.
• Substance: horizontal "agreements in restraint of trade"
  • Standards of review: per se illegality and rule of reason
• Cartels have been described both as the "supreme evil" and as "children of despair." Why are cartels so bad? Are they, in fact, always bad? After the Great Depression, cartels were seen as necessary to stabilize the economy. Should there be "crisis cartel" exemptions?
• A first look at export cartels and how national welfare trumps global welfare considerations

Required reading

• Kaiser, A Primer in Antitrust Law and Policy (2009) pp. 1–10, 18–21, 23–24, 29.
• E&G, Chapter 2 (pp. 60–71) (Overview of Section 1 and Art. 81)
• U.S. v. Socony Vacuum Oil, 310 U.S. 150 (1940) (price fixing, great post-depression case, very apropos) (excerpt from Gavil, Kovacic, Baker, Antitrust Law in Perspective, 2d. Ed. (2008) ("GKB") on bspace)
• Commission Decision of 23 April 1986 No 86/398/EEC, Polypropylene, O.J. 1986, L 230/1 in E&G, pp. 97–100; also Commission press release 07/27/1994.
• Palmer v. BRG of Georgia, 498 U.S. 46 (1990) in E&G, pp. 125–28 (market division)
• Commission Decision 91/227 of 19 December 1990, Soda-Ash-Solvay, ICI, O.J. 1991, L 152/1 in E&G, pp. 132–37

Optional

• E&G, Global Antitrust, Chapter 1, The Remedial Structure (pp. 4–59) (Outline of key institutional and procedural elements of U.S. and EU competition law.)
• Commission Decision, Case IV/34.456 O.J. L 131/15, May 26, 1994, Stichting Baksteen (Crisis cartels?) (excerpt from GKB on bspace)
• BMI v. CBS, 441 U.S. 1 (1979) in E&G, pp. 74–84 (modern, rational approach to joint ventures)
• Commission Decision 85/77/EEC of 10 December 1984, Uniform Eurocheques, O.J. 1985, L 35/43, in E&G, 101–105

Class 4: Guest Lecture: The Honorable J. Thomas Rosch, Commissioner of the Federal Trade Commission — On Behavioral Economics February 6, 2009

Required reading

• Rosch, Concurring statement in FTC v. Ovation Pharmaceuticals (2008)
• Stucke, New Antitrust Realism (2009)
• Wright, No Ovation for FTC's Latest Enforcement Theory (2009)

Optional

• Anderson, The End of Theory (2009)
• Stucke, Behavioral Economists at the Gate (2008)
• Tor, A Behavioral Approach to Antitrust Law and Economics (2004)

Class 5: The fight against international cartels and the global success of leniency programs February 13, 2009

Topics for discussion

• A close look at two of the most notorious international cartels: Lysine and Vitamins.
• On keeping your "friends" in and everyone else out: scorecards, audits, compensation schemes.
• The reality of international cartel investigations (complete with grainy DOJ/FBI video footage)
• A special problem: Cartels aimed at exploiting developing nations
• The Prisoners' Dilemma in action. Leniency programs.

Required reading

• U.S. v. Andreas, 216 F.3d 645 (7th Cir. 2000) (excerpts on bspace).
• James Griffin, Caught in the Act: Inside an International Cartel (2005) (We will watch and discuss the FBI videotapes of the Lysine cartel. This speech provides a roadmap.)
• Kaiser, Mergers, Slides 65–66
• DOJ Corporate Leniency Program
• DOJ up-to-date List of Major Antitrust Fines

Optional

• Lysine cartel:
  • Connor, Global Cartels Redux: The Amino Acid Lysine Antitrust Litigation (1996)
  • Kurt Eichenwald, The Informant (2001) (The story of the people behind the Lysine cartel.)
  • James Lieber, Rats in the Grain (2000) (More focused on the legal aspects of the Lysine cartel. Despite the weird title, a solid work of journalism.)
• Vitamins cartel:
  • Case COMP/E-1/37.512 — Vitamins. (Read ¶¶ 1–21, 76–97, 160–226, 551, 568–69, 588–89, 652, 655, 659, 712, 718, 738–42, 755.)
  • Connor, Extraterritoriality of the Sherman Act and Deterrence of Private International Cartels, AAI Working Paper (2005) (Background on the Vitamins cartel and its economic impact)
  • Connor, The Great Global Vitamins Cartels (2008) (An exhaustive treatment of the Vitamins cartel.)
• General information about cartels:
  • Scott Hammond, Recent Developments, Trends, and Milestones In The Antitrust Division's Criminal Enforcement Program (2008)
  • Levenstein & Suslow, Contemporary International Cartels and Developing Countries: Economic Effects and Implications for Competition Policy, 73 Antitrust L.J. 801 (2004) (on bspace)
  • DOJ FAQ on the Leniency Program (2008)
  • DOJ Individual Leniency Program
  • OECD, Recommendation against Hard Core Cartels (1998)

Classes 6 and 7: Jurisdiction, extraterritoriality, sovereignty February 20 and 27, 2009

Topics for discussion

• The public and private international law dimension of extraterritoriality: Prescriptive jurisdiction and conflict of laws
• The rise of the regulatory state and the need to regulate foreign conduct with domestic effects
• Sharpening our analytical toolkit: Conduct, Effect, and the two core constituencies of national competition laws: consumers and producers
• Should foreign private plaintiffs be allowed to sue foreign defendants for harm suffered abroad in U.S. courts?

Required reading

• Class 6 — U.S.:
  • E&G, Chapter 8, Markets that Span Multiple Antitrust Regimes, Intro, pp. 1100–09
  • American Banana Company v. United Fruit Company, 213 U.S. 347 (1909) (excerpt on bspace)
  • U.S. v. Alcoa, 148 F.2d 416, 443 (2d Cir. 1945) (excerpt on bspace)
  • Hartford Fire Insur. v. California, 509 U.S. 764 (1993) in E&G, 1109–17
  • F. Hoffmann-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155 (2004), in E&G, 1124–34
  • Fox, Testimony before Antitrust Modernization Commission (2006)
• Class 7 — EU:
  • Dyestuffs, ECR 1972 [619] (ECJ), in E&G, 1137–50
  • Wood Pulp, 27 September 1988, ECR [1988] 5193 (ECJ)
  • Gencor v. Commission, T-102/96 ECR [1999] II-753 (CFI)

Optional

• Swan & Murphy, Cases and Materials on the Regulation of International Business and Economic Relations, 515–24 (1991) (excerpt on bspace)
• Anthony D'Amato, Is International Law Really "Law?", International Law: Process and Prospect 1–27 (1987) (on bspace)
• Kaiser, Blog Posts on Empagran, Antitrust Review (view posts tagged with "extraterritorial")

Class 8: Pricing offenses by dominant firms: Predatory pricing, excessive pricing, and price squeezes March 6, 2009

Topics for discussion

• The U.S. and the EU approach to unilateral conduct is very different. For the U.S., dominant firms are the winners in a competitive struggle and are entitled to the spoils of monopoly. In the EU, dominant firms are viewed with greater unease for their ability to "opt out" of having to pursue their self-interest through the competitive market, which aligns the private profit motive with consumer welfare.
• Should powerful firms have "special obligations" to protect the competitive process? (Peter Parker principle: "With great power comes great responsibility.")
• If we impose special obligations on a dominant firm, are we not punishing the winners? How is this different from progressive taxation? (Is it?)
• Should courts really second-guess unilateral pricing decisions by dominant firms?
• What — if anything — does the "recoupment" requirement in Brooke Group add?
• What role should "intent to drive a competitor from the field" have in predatory pricing cases? Isn't that what every firm wants?

Required reading

• E&G, Global Antitrust, Chapter 3, A, B(1) and B(2) (pp. 248–276) (basic structure of monopolization and abuse of dominance)
• E&G, 327–43 (the conduct element in a monopolization/abuse of dominance claim)
• Below-cost predatory pricing:
  • Brooke Group v. Brown & Williamson, 509 U.S. 209 (1993), in E&G, 343–56
  • C-62/86, Akzo Chemie BV v. Commission, [1991] E.C.R. I-3359; and Case C-333/94P, Tetra Pak International SA v. Commission, [1996] E.C.R. I-5951 (Tetra Pak II), in E&G, 358–60
• Above-cost predatory pricing:
  • Joined Cases T-24/93, T-25/93, T-26/93 & T-28/93, Compagnie Maritime Belge Transps. SA v. Commission, 1996 E.C.R. II (CFI); and Joined Cases C-395/96P & C-396/96P, Compagnie Maritime Belge Transps. SA v. Commission, 2000 E.C.R. I-1365 (ECJ).
  • Case T-228/97, Irish Sugar PLC v. Commission, 1999 E.C.R. II-2969 (CFI), in E&G, 376–84
• Price squeeze:
  • Pacific Bell v. LinkLine, U.S. Supreme Court Slip Opinion, decided February 25, 2009
  • E&G, pp. 468–74, which includes excerpts from: (a) Case No IV/30.178 Napier Brown-British Sugar, O.J. L.284/41 (1988); and (b) Case T-5/97, Industries Des Poudres Spheriques SA v. Commission, [2000] E.C.R. II-3755 (CFI); E&G, pp. 470–74
• Excessive pricing:
  • Verizon v. Trinko, 540 U.S. 398 (2004); and Case 27/76, United Brands Co. v. Commission, [1978] E.C.R. 207, in E&G, 393–401.

Optional

• Fox, What is Harm to Competition?, 70 Antitrust L.J. 371 (2002) (Is exclusion an independent offense or derivative of exploitation? Read only I, II, and IV.)
• DOJ, Single-Firm Conduct Report (2008)
• EC, Art. 82 Guidance (2009)
• Statement of FTC Commissioners Leibowitz, Harbor, and Rosch to the DOJ Single-Firm Conduct Report (2008)
• Kaiser, Blog post on LinkLine (2009)

Classes 9, 10, and 11: Unilateral duties to deal, IP and innovation: A special focus on the EU Microsoft Decision March 20, March 31, and April 3, 2009

Topics for discussion

• Under what circumstances does a dominant firm have a "duty to deal" with a competitor? Do different standards apply to:
  • Duties not to stop dealing (i.e., abusive termination)
  • Duties to start supplying (i.e., de novo supply)
  • Duties to start supplying intellectual property
• "If successful firms have to share their property with competitors, we destroy their incentives to innovate." What (if anything) is wrong with this statement? Think about the similar line of argument in the IP context: "Unless we increase IP protection, artists will have no incentives to create music anymore." Consider how the diamond/water paradox might help us in framing the issue.
• Should essential infrastructure be governed only by exclusive property rights or should there also be a public commons overlay once a dominant firm controls essential infrastructure?
• Should we encourage radical innovation at the expense of incremental innovation?
• Should consumer welfare be the guiding principle for justifying duties to deal? Or is the "open market" principle, which focuses primarily on a competitor's freedom to compete, the more appropriate normative foundation?

Required reading

• Classes 9 and 10 — Duties to deal in the EU:
  • EC, Art. 82 Guidance (2009), focus on paras. 75–90
  • Abusive termination:
    • Cases 6 and 7/73, Commercial Solvents and Others v. Commission, [1974] E.C.R. 223, in E&G, p. 435
  • The Magill, Bronner, IMS Health "de novo access" trifecta:
    • Joined Cases C-241/91P & C-242/91P, RTE v. Commission (Magill), [1995] E.C.R. I-743 (ECJ), in E&G, 436–37
    • Case 7/97, Oscar Bronner GmbH & Co. KG v. Mediaprint GmbH & Co. KG, 1998 ECR I-7791, in E&G, 439–42
    • Case C-418/01, IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG, [2004] 4 CMLR 28, in E&G, 443–46
  • Microsoft:
    • Case COMP/C-3/37.792 Microsoft (2004) (Focus on the refusal to provide interconnection information)
    • Case T-201/04, Microsoft Corp. v. Commission, CFI 2007 (excerpts on bspace)
    • Kaiser, Antitrust and Innovation, Slides 108–114
    • T. Barnett, DOJ Press Release on the CFI's Microsoft decision (2007)
    • Larouche, The European Microsoft case at the crossroads of competition policy and innovation (2008)
• Classes 10 and 11 — Duties to deal in the U.S.:
  • DOJ, Single-Firm Conduct Report (2008), focus on pp. 119–129
  • Essential facilities (or not?):
    • Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), in E&G, 411–18
    • Verizon v. Trinko, 540 U.S. 398 (2004), in E&G, 424–29
  • Who owns aftermarkets?:
    • Image Technical Services v. Eastman Kodak, 125 F.3d 1195 (9th Cir. 1997) ("Kodak II") (excerpts on bspace)
    • Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994) (excerpts on bspace)
    • CSU v. Xerox Corp., 203 F.3d 1322 (Fed. Cir. 2000) (excerpts on bspace)
  • Kaiser, Antitrust and Innovation, Slides 69–86
  • Kaiser, Summary of the U.S. Microsoft Case (Graphical overview of the various claims in the Microsoft case)

Optional

• Commission summary of the Microsoft proceedings with links
• Frischmann & Weber-Waller, Revitalizing Essential Facilities, Antitrust L.J., Vol. 75, 1–66 (2008)
• Kaiser, Infrastructure Theory and Essential Facilities (2009). Print version and screen version.
• Benkler, The Wealth of Networks (excerpts)

Classes 12 and 13: International mergers & acquisitions April 10 and 17, 2009

Topics for discussion

• The great international oligopolies — has the world become more or less competitive since 1945?
• Are large multi-national firms as competitive as smaller firms?
• Should there be a maximum absolute size for firms?
• Should there be a common substantive merger standard for the world? A common procedure?
• Do we (still) need industrial policy that includes values other than efficiency?

Required reading

• Kaiser, A Primer in Antitrust Law and Policy (2009) pp. 30–39
• Introduction to Mergers, E&G, Chapter 7, pp. 871–881
  • Excerpt from the U.S. 1992 Merger Guidelines (pp. 881–86)
  • Excerpt from the EC Guidelines on the assessment of horizontal mergers (pp. 886–91)
• FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997) (excerpts in E&G, pp. 892–99)
• The attempted Coke/Huiyuan merger under China's new Anti-Monopoly Law (AML):
  • Kaiser & Lipsky, Key Features of China's New Merger Law (2008)
  • Wang, Harris, Cohen, Coca-Cola is First Acquisition Blocked by China Antitrust Review (2009)
  • MOFCOM decision on Coke/Huiyuan, WSJ translation (2009)
• E. Fox, GE/Honeywell: The U.S. Merger that Europe Stopped, in: Fox/Crane, Antitrust Stories (2007) (on bspace)

Optional

• Google's acquisition of DoubleClick (2007):
  • FTC Closing Statement
  • Dissenting Statement of Commissioner Harbour
  • European Commission Press Release (2008)
  • Case M. 4731, Google/DoubleClick (2008)

Class 14: Putting it all together: The rise of the multinational corporation and institutions of international antitrust enforcement April 24, 2009

Topics for discussion

• The US (DOJ, FTC, and the States) and the EU enforcement systems (DG COMP and the Member States)
• The third stop on the Grand Tour: China's new Anti-Monopoly Law; a study in distributed enforcement
• Institutional choices: WTO, OECD, ICN
• Bilateral and multilateral cooperation agreements
• Does harmonization work where it increases the power, prestige, and budget of national competition agencies and fail where it doesn't? Is such a public choice analysis of agency behavior appropriate?

Required reading

• Sokol, Monopolists without Borders (2007) (Read parts 2 and 5 only; WTO, OECD, and ICN)
• Rosch, The Three C's: Convergence, Comity, and Coordination (2007) (Concise reality check.)
• E&G, Global Antitrust, Chapter 1, The Remedial Structure (pp. 4–59) (Outline of key institutional and procedural elements of U.S. and EU competition law.)

Optional

• Makan Delrahim, Coordination and Cooperation (2004) (The nuts and bolts of DOJ coordination with other regulators)
• EC Treaty 5, 10, 28–30, 31, 81–89
• Regulation 1/2003
• DG COMP Homepage
• DG COMP Orgchart
• Export cartel exemptions:
  • DOJ & FTC International Operations Guidelines, excerpt in E&G, 1151–56
  • Javico v. Yves Saint Laurent, C-306/96, ECR [1998] I-1983 (ECJ), in E&G, 1156–59

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