Does the closure of the EU “pay-for-delay” investigations against AstraZeneca and GSK mark the end of pharmaceutical antitrust in Europe?

(by Sven Gallasch) Last month the European Commission closed its antitrust investigations into AstraZeneca/Nycomed and GlaxoSmithKline/Synthon BV. These centred on possible anticompetitive agreements to delay generic entry into the market. The investigations had been launched following the European Commission’s Pharmaceutical sector inquiry in 2009. The decision to end the investigations may come as a surprise given comments made at the time by Commissioner Kroes: “The inquiry has told us what is wrong with the sector, and now it is time to act. […] We will not hesitate to apply the antitrust rules where such delays result from anticompetitive practices”. So why did the investigation run out of steam?

Vertical Integration by Software Giants into Manufacturing

(by Bruce Lyons)  To business strategists and industrial economists, as well as competition practitioners, it is interesting to reflect on a recent trend in vertical integration.  Google, Microsoft and even Amazon have been positioning in manufacturing, at least in part inspired by the success of Apple’s integrated business model.  Could this eventually lead to vertical silos that ossify each group’s dominance in segments of software and web retailing?

No Smoke Without Fire? Was the CAT right to quash the OFT decision on the alleged tobacco price fixing conspiracy?

(by Bruce Lyons) On 16^th April 2010, the OFT imposed a record total fine of £225m on two tobacco companies and ten retailers who they decided had engaged in practices that breached competition law.  The heart of the case was around ‘parity and differential requirements’ (PDR) of the form that, say, Imperial Tobacco requires that the retailer should not price Imperial’s brand A more than 3 pence higher than Gallagher’s brand B.  Rather loosely, I call this ‘price matching’ for ease of exposition but it should be taken to include ‘restoring price differentials’.  Earlier this week, the Competition Appeals Tribunal threw out the case in a decision that will see the OFT repaying the fine and paying huge costs.  Even more importantly, what does it mean for the enforcement of antitrust policy in the UK?

Supermarket Price Guarantees – and then there were three

(by Morten Hviid) Sainsbury’s has now joined its two larger rivals, Tesco and Asda, in offering consumers a price guarantee with an associated possible refund. An interesting aspect of the three guarantees is that they differ on fundamental aspects. Asda promises to beat the rivals by 10% and the guarantee is valid even if Asda has the lower price, so long as this is not 10% below the lowest price rival. Tesco for a short while offered to refund double the difference, though they have now restructured the offer to simply match. Sainsbury’s also promise to match, but their added twist is that rather than the consumer having to do something actively, such as getting onto a website to key in details about their receipt, the refund is printed out at the till when checking out. Sainsbury’s guarantee thus takes the direct hassle out of claiming any refund. The indirect hassle of actually storing and remembering the coupon still remain.  What are the likely effects of the guarantee introduced by Sainsbury’s?

What signal is Tesco giving by withdrawing ‘double the difference’?

(by Morten Hviid) Tesco has yet again rewritten its price guarantee.  In late February 2011, it announced a ‘double the difference’ guarantee , but by early April high take-up led it to cap at £20 the amount it would pay out. Now (end-April) they have further reduced the guarantee to simple price matching.  Price guarantees have many purposes, most of which are anti-competitive (see my summary of the academic literature).   There is, however, one theory known as signalling which can be pro-competitive.  This argues that a motive for firms to adopt a price guarantee is to signal to consumers that they have low prices.   What does Tesco’s action today suggest about this signalling theory?