Economists from the Antitrust Division’s Economic Analysis Group (EAG) partner with lawyers on every civil investigation and litigation, and also assist on many of the Division’s criminal matters. Occasionally, their contribution is quite public, such as when EAG’s own Robin Allen submitted testimony in U.S. v. Tribune Publishing Co.
More often though, EAG’s contributions occur behind the scenes—helping attorneys apply economic theory, develop economic evidence and testimony, and evaluate the merits of the economic arguments made by parties and their advisors. Taking a moment to highlight a few of these contributions allows us to acknowledge how EAG staff as a whole advance the Division’s mission both through their individual accomplishments and as members of larger teams.
Sue Majewski Makes Solving Difficult Problems Routine
Sue Majewski joined EAG in 1998, after receiving a Ph.D. in Economics from the University of California at Berkeley. Since joining the Division, Sue has played a leading role in some of the Division’s most important policy and enforcement matters. Her research has primarily focused on intellectual property. And, naturally, many of her cases have involved questions at the nexus between the legitimate exercise of intellectual property rights and behavior that illegally restrains competition. That has led her to study a wide range of industries from cotton seeds (where she looked at the special role certain strains of the plant persistently play in the development of new varieties) to book publishing (where Google’s proposed settlement with rights holders would have jointly set the price even of works not represented in the deal). In 2004, Sue took a Victor Kramer Fellowship to explore IP and competition issues in even greater detail at Harvard Law School.
Recently, Sue has been exploring questions of geographic markets in a global economy. Even when a product may be available from a large number of countries, we often see that suppliers in a few countries are more important to U.S. customers and markets. Potentially, those trading relationships could adjust if a merger increased local concentration and the merged entity attempted to raise prices. But, how realistic is that prediction? Many of the same issues that often make entry difficult could be at play: the need to establish distribution and customer relationships, and the need to divert productive capacity from other uses may all make a timely response unlikely. Evidence in a recent case let Sue examine how international trading flows responded to events that simulated a local increase in prices—the kind of effect that might follow a merger among traditional suppliers to the U.S. Sue found that responses were sufficiently slow and limited that, even in a global economy, local markets are capable of seeing market power effects. This kind of result could dramatically affect what the Division considers when defining geographic markets.
Alex Raskovich, Bob Arons, and Evan Gee Show That a Team Is Greater Than Its Parts
As valuable as the individual contributions of EAG economists are, increasingly complex matters have put new emphasis on the value of working in teams. Economists at the Division are no strangers to the value of teamwork. The best economic analysis is a product of input provided by the entire investigative team. An attorney might uncover a fact in reading documents that will reshape the empirical analysis an economist in another office is doing. And, as the economist is explaining her findings from the data, she may shape how the attorneys conceptualize the case and lead to new avenues to investigate. Good teamwork of this sort has long been highly prized in EAG and in the Division.
In recent years, EAG has increasingly leveraged the power of teamwork to address the complexities of ever larger transactions and the expansion of data related to even simple transactions. Comcast’s proposed acquisition of Time Warner Cable offers an example of how this teamwork among EAG’s economists works. One of the implications of that combination would have been a substantial increase in the largest distributor of television programming. And so the team had to consider whether that increase would significantly harm the market for such programming.
This question had come up before in cable system mergers of the late 90s. At that time, Alex Raskovich discovered that economic theory provided an interesting set of predictions for when and how such an effect would likely be significant. This was a major development in the Division’s approach to these issues. At the time, however, there was little evidence available on which to evaluate how well the theory fit the industry. Nevertheless, Alex continued to look at the economic theory of this issue and, shortly after that wave of cable mergers ended, published his findings in the Journal of Industrial Economics.
When Comcast proposed to acquire Time Warner Cable, the issue needed to be examined once again. Alex resumed his role of applying the economic theory of bargaining to this industry. But now he was joined by two of EAG’s recent additions. Bob Arons, who joined EAG in 2014 after completing his Ph.D. at the University of Rochester, took responsibility for examining data on payments between programmers and their distributors. And Evan Gee, who had joined the Division in 2013 after completing his Ph.D. at Boston University, took responsibility for examining whether data on Internet interconnections suggested the theory might also have implications in a related product—distribution of Internet content. As a result of their teamwork, Alex was able to continue pushing the development of the theory to reflect changes in the industry over the intervening years. Bob was able to establish empirically that the industry was prone to bargaining power effects and to approximate the magnitude of additional harm the proposed combination could generate. And Evan was able to establish that a similar pattern was evident in the sale of access to the cable companies’ Internet subscribers.