Is Furman right to propose ex ante platform regulation as the best way to address competition concerns in the digital economy?

April 24, 2019

(by Elias Deutscher) Last month, the Digital Competition Expert Panel, chaired by Professor Jason Furman, published its report ‘Unlocking digital competition’ (the ‘Furman report’). The report had been jointly commissioned by the Chancellor of the Exchequer and Business Secretary due to concerns about prevailing high levels in industry concentration, the accumulation of data in the hands of a handful of players and the rise of a few vertically integrated super-platforms. The same concerns have fuelled a European-wide policy debate about the challenges of competition law enforcement in the digital economy (e.g. by the German Federal Ministry for Economic Affairs and Energy and the European Commission).

The Furman report singles out the strategic importance of data and the gatekeeper function of intermediary platforms as central features of digital competition and the most important challenges for competition policy. These features make digital markets more prone to tipping in favour of a few powerful incumbents. Amongst other recommendations, the report proposes to address these concerns through the creation of a specific ex ante regulatory regime for digital platforms. While it outlines some of the basic features of the proposed new regulation, the report omits to clearly set out the underlying rationale and implications of such a regime. It also gives little guidance on its exact scope and implementation. Most importantly, it remains unclear whether the proposed framework will apply only to large, dominant firms, or also to smaller, non-dominant platforms. Read the rest of this entry »


The Norwich Monopoly Monopoly

August 16, 2018

(by Paul Dobson in the spirit of summer)  This post is a reminder to all our readers to be vigilant in spotting monopoly practices on your own doorsteps. I report on my quick investigation into a potential abuse of local monopoly power. The case involves the independent Norwich toy retailer Langley’s, which has been trading since 1883 and has achieved a monopoly of specialist city centre toyshops. It is now openly boasting in its shop window that the board game Norwich Monopoly is exclusive to them, and charging £34.99, as the following photo shows: Read the rest of this entry »


The deterrent effect of competition authorities’ work

September 15, 2017

(by Mike Walker^) In his post last month, Steve Davies bemoaned the lack of evidence on the magnitude of harm deterred by the activities of the Competition Agencies. He presented some estimates from research in CCP on cartel deterrence, concluding most strikingly: “On the most conservative of our estimates, more than half of all potential cartel harm never occurs, because it is deterred. This is very much a lower bound, and the proportion could be as high as 90%.” Read the rest of this entry »


Competition law is an appropriate tool to prevent exploitative price hikes in Pharma

May 26, 2017

(by Sven Gallasch) On 15 May the European Commission formally opened an investigation into Aspen Pharma’s pricing practices concerning five life-saving cancer drugs. This European investigation represents the latest enforcement effort in a string of cases emerging across Europe, including in the United Kingdom and Italy. All investigations are focussed on pharmaceutical pricing practices and allege that their pricing strategies may be exploitative[1] and amount to an abuse of a dominant position.  The surge in these previously rare exploitative pricing cases, has set off alarm bells in the pharmaceutical sector, among legal counsel of big pharma and some academic commentators. Read the rest of this entry »


Pfizer and Flynn: How are ‘excessive’ prices for generic drugs possible and should competition authorities do more about exploitative pricing?

December 16, 2016

(by Farasat Bokhari & Bruce Lyons) Last week the UK Competition and Markets Authority (CMA) imposed a fine of approximately £90 million on Pfizer and a generic manufacturer Flynn Pharma, on the grounds that each abused a dominant position by charging excessive and unfair prices for phenytoin sodium capsules, an anti-epilepsy drug (brand name Epanutin). The price of a pack of 84 capsules of 100MG increased from £2.83 to £67.50 in October 2012.   This came about as part of a deal where Pfizer sold the distribution rights in the UK to Flynn Pharma, who in turn ‘de-branded’ the drug, and sold the generic at an inflated price.   The drug in question is not protected by any patents, so other generics are available and further generic entry is possible, yet the branded original drug was replaced by a higher priced generic.  The CMA’s case is a rare example of an abuse of dominance finding (under Art. 102 and/or Ch.2 of CA98) in relation to exploitative pricing. While we await the full published decision, it is worth looking at industry price and quantity data to contextualise the CMA’s case. We also try to understand how this price hike was possible and ask whether the CMA should pursue more exploitative pricing cases. Read the rest of this entry »


Why have Mylan launched a generic EpiPen?

August 30, 2016

(by Farasat Bokhari) In a new development surrounding the controversy of price hikes of Mylan’s lifesaving drug EpiPen, the manufacturer announced that it will introduce a generic version, and sell the new drug at half the price of its branded version. Mylan has increased the price of its EpiPen injections from about $100 in 2009 to over $600 this year and will sell the generic at $300, and has come under scrutiny and strong criticism from public and government officials alike.  Mylan are not alone in increasing drug prices in recent times. For instance, Martin Shkreli increased the price of Daraprim by 5000 percent in 2015. However, that was to do with a hit-and-run opportunity that arose out of its orphan drug status, and the speed with which a rival generic could gain approval to enter the market (see my earlier post, ‘The Economics of a $750 Pill’).

Leaving aside the issue that the generic is still three times more expensive than the original 2009 price, this announcement has left some puzzling over why, or rather how, such a move makes any sense.  To paraphrase the incredulity expressed by Richard Quest of CNN, why would anyone pay $600 for a drug when the exact same product by the same company is also available for $300?  How does Mylan stand to gain anything from this move? Read the rest of this entry »


The dangerously distorted incentives created by the CMA’s performance target

August 5, 2016

(by Bruce Lyons)[1]  The CMA has recently published its annual report and associated impact assessment.  Its performance management framework commits the CMA “to achieving direct financial benefit to consumers of at least ten times our cost to the taxpayer.” [Annual Report 2015-16, p.66].  Target setting and performance measurement are an important part of performance management.  However, the precise way that the government requires the CMA to justify its funding is dangerously distortionary. Read the rest of this entry »