CORRADO MALBERTI, Bocconi University - Institute of Comparative Law (IDC)
Email: corrado.malberti@unibocconi.it

This Article examines the reaction of the Italian legal system to the enactment of the European directive on takeover bids. Taking into account the interaction between the European and the national regulations of financial markets, I provide a description of the current Italian law on tender offers. This analysis is interesting to understand how one important economy of the European Union implemented Directive 2004/25/EC, and to verify if the new principles adopted are still consistent with the goals followed by the Italian law before the European intervention in this field.

The study of the implementation of the directive on takeover bids in Italy also provides indications on the achievements and the limits of the harmonization strategy followed by European authorities.

GIORGIO ZANARONE, CUNEF
Email: gzanarone@cunef.edu

This paper shows that, after a 2002 European regulation prohibited the use of dealer exclusive territories, automobile franchise contracts in Italy introduced price ceilings and standards on verifiable marketing and service inputs, such as advertising and salespeople. The contracts also imposed quantity floors, a practice already in use before the regulatory change. The introduction of standards suggests that, consistent with a view of vertical restraints as coordination mechanisms, manufacturers used exclusive territories to induce desired dealer services and, once prohibited, switched to alternative contractual devices to achieve this goal. The introduction of price ceilings despite free intrabrand competition also suggests car manufacturers tried to prevent some dealers from "gaming" the quantity floors by selling to other dealers' customers, while charging monopolistic prices at their own location.

KATI CSERES, University of Amsterdam - Amsterdam Center for Law & Economics
Email: k.j.cseres@uva.nl

This paper reviews current regulatory approaches designed to correct market failures and distribute the benefits of liberalization to consumers in recently liberalised network industries. Present evaluations of the liberalisation process show that opening up markets to more competition has not yet resulted in either expected levels of competitiveness or in envisaged consumer benefits. Many consumer related failures were little anticipated; legislation to protect and assist consumers was either late coming or inadequate and often lacked effective enforcement. The paper examines market failures primarily related to the demand side; such as information asymmetries, unfair trade practices, unfair standard contract terms, high search and switching costs, and imperfect decision-making processes. It, however, discusses these imperfections in the broader context of market failures related to incoherent regulation and ineffective competition law enforcement and shows how poor coordination between these regulatory fields leads to suboptimal outcomes. The interplay between general consumer protection and specific consumer issues of sector regulation is discussed and elaborates on specific market deficiencies that draw attention to the intersection between consumer protection and competition law. The discussion incorporates theoretical insights from neoclassical and behavioural economics to consumer problems. The paper focuses on what the liberalization process, so far, has done for consumers by looking at and evaluating both the legislative and policy developments and recent proposals at European level as well as actual implementation and enforcement of these legislations at national level. More specifically, it deals with the energy and the telecommunications markets and their recent developments in the EU. Two case studies provide insight on national regulatory approaches: a case study of the liberalization of the Hungarian telecommunications market and a case study of the liberalization of the Dutch electricity market. The paper proposes a new mode of regulation as well as a new mode of coordination among different layers and fields of regulation and enforcement in order to remedy consumer problems and to achieve competitive markets.

PETER WILLIS, Dundas & Wilson LLP
Email: Peter.Willis@dundas-wilson.com
PAUL HUGHES, University of Westminster
Email: hughesp@wmin.ac.uk

Issuing the final report on its energy sector inquiry, the European Commission pointed to a range of competition concerns across the EU energy sector, including a lack of integration and transparency. In particular, however, the Commission identified the high degree of vertical integration in energy markets as an obstacle to competition. The Commission's suggested remedy is the separation of ownership and/or operation of gas and electricity transmission networks from other energy supply activities; the 'unbundling' of transmission and other activities that control market access. While the Commission strongly favours full ownership unbundling, other possible models are under consideration. Unbundling faces considerable political opposition from a number of Member States. Even if the Commission is successful in its objective of securing unbundling, it will be some time before the necessary legislation takes effect. Meanwhile, however, the Commission has been pursuing a number of investigations into individual energy companies. A key theme of those investigations has been the alleged abuse of transmission network activities in order to restrict competition on energy supply markets. Practices under investigation by the Commission include 'strategic under-investment' in network infrastructure. Remedies under consideration include the divestment of network activities. Any such remedy is likely to take effect ahead of legislative unbundling. Ordering unbundling as a remedy in individual competition cases would be a development for which there is little precedent. This raises the question whether the Commission has demanded concessions which it would not have done in the absence of wider concerns about the energy sector, or whether its work on the sector inquiry has simply provided it with a deeper understanding of the issues. There are also questions about the power of the Commission to order such divestment remedies. This article examines the background and the issues.

DAVID S. EVANS, Law and Economics Consulting Group (LECG), LLC - Cambridge, MA Office, University College, London
Email: devans@lecg.com
KEITH N. HYLTON, Boston University - School of Law
Email: KNHYLTON@BU.EDU

The antitrust laws of the United States have, from their inception, allowed firms to acquire significant market power, to charge prices that reflect that market power, and to enjoy supra-competitive returns. This article shows that this policy, which was established by the U.S. Congress and affirmed repeatedly by the U.S. courts, reflects a tradeoff between the dynamic benefits that society realizes from allowing firms to secure significant rewards, including monopoly profits, from making risky investments and engaging in innovation; and the static costs that society incurs when firms with significant market power raise price and curtail output. That tradeoff results in antitrust laws that allow competition in the market and for the market, even if that rivalry results in a single firm emerging as a monopoly, but that prevent firms from engaging in practices that go out of bounds. The antitrust laws ultimately regulate the "boundaries" of the "game of competition." Three implications follow. First, the antitrust laws and intellectual property laws are based on similar policy tradeoffs between static and dynamic effects. Second, the antitrust rules have, all along, been based on this tradeoff and not on the effects of business practices on static consumer welfare in relevant antitrust markets. Third, one unintended consequence of the increased role of economics in antitrust analysis is to overemphasize static considerations which the almost the sole focus of the economics literature that courts and competition authorities consider.

ALESSANDRA CANEPA, affiliation not provided to SSRN
Email: Alessandra.Canepa@brunel.ac.uk
PAUL STONEMAN, University of Warwick - Marketing & Strategic Management (MSM) Subject Group
Email: Paul.Stoneman@wbs.ac.uk

The role of financial factors as constraints to innovation in the UK is explored using data on individual returns to the second and third Community Innovation Surveys. It is found that financial factors do impact upon innovative activity and that impact is more severe in higher tech sectors and for smaller enterprises. These results extend but largely confirm the results in the extant literature by using a different approach to the standard cash flow based method, encompassing a wider class of investment phenomena (innovation rather than just R&D) and exploiting a new data base.

TILL TALAULICAR, Technical University of Berlin
Email: T.Talaulicar@ww.tu-berlin.de
AXEL V. WERDER, Technical University of Berlin, Department of Organization and General Management
Email: A.WERDER@WW.TU-BERLIN.DE

This study provides evidence to practitioners and policy makers that firms can be classified regarding their compliance with the code recommendations. In-depth analyses of the identified patterns of compliance furthermore reveal that some patterns may indicate less well substantiated deviations from the code and partly even decouplings of the declared compliance practices. The identified cluster solution does not merely reflect the number of rejected code recommendations. Rather, companies with very similar rates of overall compliance with the GCGC are assigned to different clusters because they feature, at the same time, different patterns of code conformity. These findings imply that governance prediction and governance performance studies have to overcome overly aggregated measures of code compliance which only incorporate the number of rejected code recommendations. Based on seven dimensions of code compliance, cluster analysis is used to identify discrete groups of companies with similar patterns of code observance. We determine eight patterns of compliance which are characterized by distinct forms of code conformity. This study investigates whether the form of compliance with the recommendations of the German Corporate Governance Code (GCGC) appears to be idiosyncratic to a specific company or features similarities across firms. The major aim of this research is thus to explore the ability of a classification of compliance patterns to account for the similarities and differences between firms regarding their conformity with the GCGC.