BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 1 of 8
Competitive Tactics & Antitrust Policy
2 Credits
BU.230.680.XX
[Day & Time / ex: Monday, 6pm-9pm]
[Start & End Date / ex: 3/24/15-5/12/15]
Spring 2016
Harbor East
Instructor
Professor Valerie Y. Suslow
Contact Information
(410) 234-9258
[email protected]
Office Hours
[Day(s)/Times]
Texts & Learning Materials
Coursepack (required): Select text pages, Readings, & Cases
Text (optional): Besanko, Dranove, Shanley, and Schaefer, Economics of Strategy, 6th edition, John
Wiley and Sons, Inc. 2013. Selected pages of the textbook are included in the Coursepack. If you are
interested in the entire book, Wiley publishing (www.wiley.com) offers it as an e-text.
Course Description
This course focuses on two main questions: How do firms develop and maintain profits in the face of
competition, and how do governments use antitrust and competition laws to set limits on the degree to
which firms exercise market power? This course applies analytical tools of economics and basic game
theory to understand the effects of firm tactics and strategies on the firm’s customers and rivals, and their
likely reactions. The dimensions of competitive strategy covered include horizontal mergers, cooperative
pricing, product differentiation, strategies to deter entry, predatory practices, and strategic commitment.
We also discuss how policies designed to promote competition affect the feasibility of various actions
firms might want to take. Antitrust laws are spreading globally: this course compares the U.S. approach
to antitrust policy with that of other countries, particularly the European Union, and draws implications for
business. The concepts in the course will be developed using a mix of lectures, business cases, and
antitrust case material.
Prerequisite(s)
Economics for Decision Making (BU.220.620), or permission of the instructor.
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 2 of 8
Learning Objectives
By the end of this course, students will be able to:
1. Understand the nature of imperfect competition, including monopolistic competition, as well as
non-cooperative and cooperative oligopoly.
2. Apply and adapt economics tools and frameworks to different firm and industry contexts.
3. Think critically about the implications of managerial decisions on competitive dynamics.
4. Understand the basics of antitrust law from an economics and managerial perspective.
5. Recognize the implications of different antitrust policy responses on stakeholders, including
consumers, firms (as buyers of inputs and sellers of products/services), and society as a whole.
To view the complete list of Carey Business School’s general learning goals and objectives, visit the
Teaching & Learning@Carey website.
Class Attendance, Participation, and Protocol
To create the best classroom learning experience requires commitment to the learning process. Regular
attendance and active participation are required for students to successfully complete the course.
Attendance and class participation are part of each student’s course grade. Students are expected to
attend all scheduled class sessions, arrive on time, and be prepared to contribute to class discussions
and group work. Failure to attend class will result in an inability to achieve the objectives of the course.
Excessive absences will result in a reduction in your class participation points.
Attendance first week of class: Any enrolled student who does not attend the first class session will be
dropped from the course. This policy is necessary given that team deliverables will come due quickly,
and out of consideration for students on the waitlist who may be given permission to enroll through the
first week if seats become available.
Please note that this class is entirely “unplugged.” Hard copies of the lecture slides will be distributed at
the beginning of each class (and will be posted after class on Blackboard).
Assignments
Deliverable
Class Participation (individual & team)
Quiz (individual)
Key Competitor Memo (team)
Final Paper (team)
Learning Objectives
1-5
1-3
1-3
1-5
Percentage
20%*
20%
15%
45%
Due Date
TBD
TBD
TBD
*Class contribution & pre-class prep assignments: 10% individual & 10% team
Team Assignments
Teams of four will be formed at the beginning of the course. All members of a team will receive the same
grade for team assignments. For all team assignments, please work with your team. Consultation with
other teams within the class is not permitted.
Team assignments are part of a shared learning experience. As such, conscientious contributions to
group work are expected. At the end of the course, I will ask for feedback from each of you about the
contributions of your team members to group work.
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 3 of 8
Assignment Descriptions:
All assignments are due at the dates/times listed here. Late papers or late exams will not be accepted.
1. Quiz (individual assignment)
The in-class quiz is designed to test your knowledge from the first half of the class and to give
you early feedback. You must work on the quiz individually. A self-assessment practice problem
set will be posted in advance of the quiz.
2. OFF!® Clip-On™ Key Competitor Assignment (team assignment)
SC Johnson company executives will be visiting class on April XX (pending SCJ Guest Speaker’s
Schedule) for a presentation on their OFF!® Clip-On™ Mosquito Repellent product. The
presentation and class discussion will focus on aspects of the 2009 product introduction and
competition since that time, including demand, pricing, positioning, and barriers to entry. Your
team’s task will be to take on the role of a “key competitor” and write a memo recommending
what strategies a key competitor should undertake to compete most effectively with the OFF!®
Clip-On™ product. Selected memos will be sent to the SCJ executives prior to their visit. Further
details on the assignment will be distributed in advance.
The memo should be maximum two pages, single-spaced, 12-font.
This assignment will be graded based on accuracy of the economic and strategic analysis, as
well as the logic of your arguments and clarity of exposition. There are many ways a key
competitor could approach this market, and you are encouraged to be creative. What is most
important is the clarity of your analysis in support of your recommendations, using concepts and
frameworks discussed in class (as well as integrating concepts and frameworks from other
courses, if you wish).
3. Final Paper: Business & Policy Report (team assignment)
Each team should select a recent (within the past 12 months, i.e., March 2015 to present)
episode in which a company has been subject to antitrust scrutiny for its competitive tactics
anywhere in the world. This could be a merger review or a dominant firm case.
Guidelines for choosing a business/antitrust episode:

You can choose any company and merger or dominant firm antitrust case, except those
covered in detail in class. The antitrust case could be brought by the government or a private
party. If you choose a dominant firm case, the main issue must relate to a topic covered in
class.

Do not choose an explicit cartel case. If you wish to choose a tacit collusion case, please
see me in advance.

The case must be decided, i.e., do not choose an antitrust case that is still in process.
There should be five components to your paper:
1.
Introduction: Identify the company and product. What is the business practice being
questioned? Why is the government (or private party) challenging or questioning this
business practice? Was the company found guilty or not guilty, or did the case settle? (The
introduction should be brief, giving a few sentences each in answer to these questions.)
2.
Market Structure and Market Definition: Briefly describe the industry you have selected and
the major firms in this industry. Is this a fragmented or concentrated market? Highlight other
major aspects of the market/industry, e.g., demand elasticity, cost structure, barriers to entry.
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 4 of 8
Identify the other major firms in the market. How would you define the product and
geographic market, and why?
3.
Business Motivation: What is the company’s stated motivation for the merger or the specific
dominant firm business tactic being questioned? Discuss how the tactic (or tactics) would
function to raise profits, keeping in mind the economics of the relevant market and the
strategies of key competitors. Also keep in mind the direct effect and strategic effect of the
tactic being utilized.
4.
Antitrust Challenge: Describe what the government (or private party) is challenging and why.
Include a description of the government’s market definition. Describe the outcome of the
case.
5.
Antitrust Policy Evaluation: Offer an opinion and analysis of whether you think the firm’s
action under question should be legal or illegal. Use your own reasoning (supported by
references to other analyses or commentaries) regarding whether you think the merger would
“substantially lessen competition” or whether the dominant firm is engaging in an “abuse of
dominance” by foreclosing competitors from the market.
The first learning goal of this team project is for you to find connections between class material
and reports in the business press of strategic decisions by firms that trigger antitrust review and
possible antitrust action. The second goal is for you to do a concise, insightful analysis of your
selected antitrust case. This means that you need to choose a subject matter where you can find
substantive information on the company, the industry, and the antitrust case.
As noted below, this is a maximum 12-page paper. The first two sections should be relatively
short (up to 4 pages for both sections combined). Tables and charts can be attached at the end of
the paper and do not count toward the page limit. Only include such charts/tables relevant to
your analysis and be sure to reference them in the text.
For the documents you rely upon for background information (e.g., business press or academic
articles, Department of Justice or European Commission decisions, press releases, etc.), be sure
to use footnotes or endnotes for any facts used in your report, providing a full citation. Quotation
marks must be used for quoted text, and citations provided. It is not enough to include a
bibliography of sources consulted. If you quote from a source or refer to facts and figures from a
source, you must also include a footnote/endnote giving the source details and page number
where you found the specific information. If the documents you use are available on the web,
please provide the web address in the footnote.
The paper is limited to 12 pages maximum, and it should be divided into the five sections
outlined above. It must be typed using 12 pt. font, with 1.5 line spacing and 1-inch
margins.
Grading
The grade of A is reserved for those who demonstrate extraordinarily excellent performance. The grade
of A- is awarded only for excellent performance. The grade for good performance in this course is a
B+/B. The grades of D+, D, and D- are not awarded at the graduate level.
Please refer to the Carey Business School’s Student Handbook for grade appeal information.
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 5 of 8
Tentative Course Calendar*
*The instructors reserve the right to alter course content and/or adjust the pace to accommodate class
progress. Students are responsible for keeping up with all adjustments to the course calendar.
Articles and cases in the Coursepack are designated “Cpk”; Text pages (designated “BDS”) are
included as a set at the beginning of the Coursepack, with particular selections referred to below;
“Link” designates one or more links to websites that provide optional additional background reading.
**Note: Some “current events” articles listed below will be updated before the syllabus is published,
to reflect timely business and antitrust policy issues in the news in Spring 2016.
Week
Topic & Readings
MODULE 1: ANTITRUST OVERVIEW & MERGER REVIEW
Introduction & Antitrust Overview
Cpk:
1
Cpk:
Link:
Economics Primer: Basic Principles, pp. 24-37 (Besanko, et al.,
Economics of Strategy, background reference). Note: Additional text
pages (165-195, 196-220, and 236-247) are included at the beginning of
the Coursepack, with specific pages referred to below on select topics.
“A Note on Antitrust and Competitive Tactics” (HBS, 2011)
http://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws
(FTC Guide to Antitrust Laws)
Merger Review – Competitor Identification & Market Definition
BDS:
Link:
Ch. 5, Competitors and Competition, pp. 165 – 172
http://www.ftc.gov/sites/default/files/attachments/mergerreview/100819hmg.pdf (Horizontal Merger Guidelines, revised 2010)
Merger Review: U.S. and Global
Cpk:
1-2
American Airlines – US Airways
“AA, US Airways Fire Back At DOJ In Court Filings” (Jay Boehmer,
Business Travel News, Oct. 11, 2013) (Airlines’ view)
“Interview with David Cush, CEO, Virgin America” (Adam Johnson, Host
Bloomberg News, Transcript, Analyst Wire, Nov. 13, 2013) (Airlines’ view)
“Big Airline Merger is Cleared to Fly; AMR, US Airways Agree to Limited
Concessions in Settlement with U.S.” (Jack Nicas, Wall Street Journal
(Online), Nov. 13, 2013) (settlement, Dept. of Justice view)
“Justice Set to Approve Merger of American Airlines, US Airways” (Ashley
Halsey III, The Washington Post, Nov. 12, 2013) (settlement, Dept. of
Justice view)
Politics, Policy, and Strategy
“For Mergers, A Shadow of Antitrust Challenges” (James B. Stewart, NY
Times, Aug. 8, 2014)
“For Deal Makers, China Is a Drag; Major Mergers Are Being Held Up for
Months” (Tom Fairless, WSJ, March 31, 2014)
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 6 of 8
MODULE 2: IMPERFECT COMPETITION
Differentiated Products Competition – Strategic Positioning
3
Pre-work
Online
(viewed
prior to
class 4)
BDS:
Cpk:
Ch. 5, Competitors and Competition, pp. 172 – 180
“United States of America, et al. v. Oracle Corporation” Findings of Fact,
2004 (excerpt)
“The Ready-to-Eat Breakfast Cereal Industry in 1994 (A)” (HBS, 1997)
“Corporate sardines: How incumbent firms pack markets to deter entry”
(The Economist, May 3, 2014)
Online Lecture Modules


Economies of Scale as a Source of Barriers to Entry
Non-Cooperative Oligopoly:
o Bertrand (Price) Competition
o Cournot (Quantity) Competition
In-class Quiz
4
Barriers to Entry & Non-Cooperative Oligopoly
BDS: Ch. 5, Competitors and Competition, pp. 180 – 195
BDS: Ch. 6, Entry and Exit (Basic Concepts), pp. 196 – 206
Cpk: “Networks of ‘Super Regional’ Shippers Handle More Packages for ERetailers,” (Laura Stevens, WSJ, Dec. 18, 2013)
“Why Is Delta Afraid of This Tiny Airport?”(Susan Carey and Cameron
McWhirter, WSJ, Dec. 17, 2013)
“Gogo Faces In-Flight Wireless Challenge From AT&T” (Jack Nicas, WSJ,
Apr. 29, 2014)
MODULE 3: ENTRY DETERRENCE & STRATEGIC COMMITMENT
Raising Rivals’ Costs, Limit Pricing & Tying
BDS:
Cpk:
5
Ch. 6, Entry and Exit (Entry-Deterring Strategies), pp. 206 – 211
“A Framework for Entry Deterrence Strategy: The Competitive
Environment, Choices, and Consequences” (Thomas Gruca and D.
Sudharshan, Journal of Marketing, July 1995, pp. 44 – 55)
“How Do Incumbents Respond to the Threat of Entry? Evidence from the
Major Airlines” (Austan Goolsbee & Chad Syverson, Quarterly Journal of
Economics, Nov. 2008: pp. 1611 – 1633; note that Coursepack includes
excerpt only, pp. 1611 – 1616)
“Europe Likely to Be Harder on Google Over Search” (David Jolly, NYT,
Jan. 4, 2013)
“U.S. Expresses Concern Over EU Antitrust Debate on Google” (Tom
Fairless, WSJ, Nov. 25, 2014)
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 7 of 8
Guest Lecture: Daniel Saper, SC Johnson
OFF! Clip-On Key Competitor Assignment
6
(Includes select student team presentations)
**Note: Placement of this class in the syllabus depends on Mr. Saper’s schedule.
Price Wars and Predatory Pricing
BDS:
Cpk:
6-7
Ch. 6, Entry and Exit (Predatory Pricing), pp. 211 – 220
“Strategies to Fight Low-Cost Rivals” (Nirmalya Kumar, Harvard Business
Review, Dec. 2006)
“Predatory Pricing in China: In Line with International Practice?” (Adrian
Emch and Gregory Leonard, Legal Issues of Economic Integration, 37: 4,
2010, pp. 305 – 316)
Leader-Follower Behavior (Stackelberg Competition)
Cpk:
“First will be last; Economics focus” (Economist, Sept. 28, 2002)
“How Far Can a Drug Firm Go in Protecting Its Profits?” (Ed Silverman,
WSJ, Jan. 15, 2015)
MODULE 4: COORDINATION STRATEGIES
Risks of Price Leadership & Sustainability of Cooperative Pricing
BDS:
Cpk:
7
Link:
Ch. 7, Dynamics: Competing Across Time, pp. 236 – 247
“Retail Frenzy, Prices on the Web Change Hourly” (Stephanie Clifford, NY
Times, Nov. 30, 2012)
“FTC Consent Order Protects Competition in the Market for Free-Standing
Newspaper Inserts” (FTC, March 14, 2006)
“FTC Challenges to ‘Invitations to Collude’” (Larry Fullerton, Antitrust, vol.
25, no. 2, spring 2011, pp. 30 – 35)
“Two Barcode Resellers Settle FTC Charges That Principals Invited
Competitors to Collude” (FTC Press Release, July 21, 2014)
http://www.ftc.gov/enforcement/cases-proceedings/0510008/valassiscommunications-inc-matter (Valassis case documents)
Legal Limits on Cooperative Behavior
Cpk:
Link:
“Cartels: Just One More Fix” (Economist, Mar. 29, 2014)
“Chinese Authorities Fine LCD Cartel Members in NDRC’s First Global
Cartel Decision” (Veronica Lockyer, Orrick, Herrington & Sutcliffe LLP,
Newsletter, Jan. 8, 2013)
http://www.justice.gov/atr/public/guidelines/211578.htm
(Department of Justice antitrust primer on anticompetitive price fixing, bid
rigging, and market allocation schemes)
Student Team Presentations: Final Paper (Business & Policy Report)
8
(Submit Final Paper and Peer Evaluation)
BU.230.680.XX – Competitive Tactics & Antitrust Policy – Suslow – Page 8 of 8
Carey Business School
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