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Amicus Brief In this brief for the 9th U.S. Circuit Court of Appeals, ICLE and 26 distinguished scholars of law & economics argue that the district court in a suit brought by Epic Games rightly found that Apple’s procompetitive justifications outweigh any purported anticompetitive effects in the market for mobile-gaming transactions.
The International Center for Law & Economics (“ICLE”) is a nonprofit, non- partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law & economics methodologies to inform public policy debates and has longstanding expertise in the evaluation of antitrust law and policy.
Amici also include 26 scholars of antitrust, law, and economics at leading universities and research institutions around the world. Their names, titles, and academic affiliations are listed in Addendum A. All have longstanding expertise in, and copious research on, antitrust law and economics.
Amici have an interest in ensuring that antitrust promotes the public interest by remaining grounded in sensible legal rules informed by sound economic analysis. Amici believe that Epic’s arguments deviate from that standard and promote the private interests of slighted competitors at the expense of the public welfare.
Epic challenges Apple’s prohibition of third-party app stores and in-app payments (“IAP”) systems from operating on its proprietary, iOS platform as a violation of the antitrust laws. But, as the district court concluded, Epic’s real concern is its own business interests in the face of Apple’s business model—in particular, the commission charged for the use of Apple’s IAP system. See Order at 1-ER22, Epic Games, Inc. v. Apple Inc., No. 4:20-CV-05640 (N.D. Cal. Sept. 10, 2021), ECF No. 812 (1-ER3–183). In essence, Epic is trying to recast its objection to Apple’s 30% commission for use of Apple’s optional IAP system as a harm to consumers and competition more broadly.
Epic takes issue with the district court’s proper consideration of Apple’s procompetitive justifications and its finding that those justifications outweigh any anticompetitive effects of Apple’s business model. But Epic’s case fails at step one of the rule of reason analysis. Indeed, Epic did not demonstrate that Apple’s app distribution and IAP practices caused the significant market-wide effects that the Supreme Court in Ohio v. Am. Express Co. (“Amex”) deemed necessary to show anticompetitive harm in cases involving two-sided transaction markets. 138 S. Ct. 2274, 2285–86 (2018). While the district court found that Epic demonstrated some anticompetitive effects, Epic’s arguments below focused only on the effects that Apple’s conduct had on certain app developers and failed to appropriately examine whether consumers were harmed overall. This is fatal. Without further evidence of the effect of Apple’s app distribution and IAP practices on consumers, no conclusions can be reached about the competitive effects of Apple’s conduct.
Nor can an appropriate examination of anticompetitive effects ignore output. It is critical to consider whether the challenged app distribution and IAP practices reduce output of market-wide app transactions. Yet Epic did not seriously challenge that output increased by every measure, and Epic’s Amici ignore output altogether.
Moreover, the district court examined the one-sided anticompetitive harms presented by Epic, but rightly found that Apple’s procompetitive justifications outweigh any purported anticompetitive effects in the market for mobile gaming transactions. The court recognized that the development and maintenance of a closed iOS system and Apple’s control over IAP confers enormous benefits on users and app developers.
Finally, Epic’s reliance on the theoretical existence of less restrictive alternatives (“LRA”) to Apple’s business model is misplaced. Forcing Apple to adopt the “open” platform that Epic champions would reduce interbrand competition, and improperly permit antitrust plaintiffs to commandeer the judiciary to modify routine business conduct any time a plaintiff’s attorney or district court can imagine a less restrictive version of a challenged practice, irrespective of whether the practice promotes consumer welfare. See NCAA v. Alston, 141 S. Ct. 2141, 2161 (2021) (“[C]ourts should not second-guess ‘degrees of reasonable necessity’ so that ‘the lawfulness of conduct turn[s] upon judgments of degrees of e?ciency.’”). Particularly in the context of two-sided platform businesses, such an approach would sacrifice interbrand, systems-level competition for the sake of a superficial increase in competition among a small subset of platform users.
Read the full brief here.
Written Testimonies & Filings The signatories of this letter, active or emeritus professors employed at public or private universities in the United States, come from across the political spectrum, and have a wide variety of views on regulation, environmental and consumer protection, and free enterprise as a general matter, but find common ground on the important issue of automotive direct sales.
We, the signatories of this letter, are active or emeritus professors employed at public or private universities in the United States. We specialize in economics, competition policy, market regulation, industrial organization, or other disciplines bearing on the questions presented in this letter. We come from across the political spectrum, and have a wide variety of views on regulation, environmental and consumer protection, and free enterprise as a general matter, but find common ground on the important issue of automotive direct sales.
Amicus Brief ICLE President Geoffrey A. Manne and amici, scholars of economics and antitrust, submitted this brief to address the broad consensus in the academic literature disfavoring the theory underlying plaintiff’s case—so-called “unilateral refusal to deal” doctrine.
Amici, scholars of economics and antitrust, submit this brief to address the broad consensus in the academic literature disfavoring the theory underlying plaintiff’s case—so-called “unilateral refusal to deal” doctrine. In antitrust parlance, a unilateral refusal to deal describes an allegation that a monopolist refuses to enter into a business relationship with a rival. Plaintiff Viamedia alleges that Comcast refused to allow it to access, on reasonable terms, an important input (Comcast’s Interconnect) for competition in advertising representation services.
Mainstream economists and competition law scholars are skeptical of imposing liability on a monopolist based solely on its choice of business partners. Because the free choice of business dealings is both a fundamental tenet of a free market economy and the mechanism by which markets produce the greatest welfare gains, cases compelling business dealings—even if one of the parties to the deal is a monopolist—should be confined to particularly delineated circumstances. The Seventh Circuit’s analysis, which embraces Viamedia’s theory of liability at face value, is thus out of step with the generally accepted academic view of efficient antitrust enforcement.
In Part A below, amici describe why it is generally inefficient for courts to compel economic actors to deal with one another against their will. Such “solutions” are generally unsound in theory and unworkable in practice, in that they ask judges to operate as public utility regulators over the defendant’s business. Courts should be guarded about taking on such a role.
In Part B, amici describe how scholars have roundly criticized Aspen Skiing, this Court’s most prominent precedent permitting liability for a monopolist’s unilateral refusal to deal. This Court has backed away from Aspen Skiing’s core theory, calling it “at or near the outer boundary of § 2 liability.” The Seventh Circuit erred in failing to take this Court’s cues and confine Aspen Skiing to its unusual facts.
In Part C, amici make clear that, even if delimited situations might warrant antitrust scrutiny of a monopolist’s refusal to deal with a competitor, this case is not one of them. A unilateral refusal to deal should trigger antitrust liability only where a monopolist turns down more profitable dealings with a competitor in an effort to drive a competitor’s exit or to disable its ability to compete, thereby allowing the monopolist to recoup its losses by increasing prices. But Viamedia’s allegations come nowhere near that scenario.
Written Testimonies & Filings Pursuant to the House Judiciary Committee’s request for information to aid its inquiry concerning the state of existing antitrust laws, Antitrust Economists, Legal Scholars, and Practitioners offer the following joint submission.
Pursuant to the Committee’s request for information to aid its inquiry concerning the state of existing antitrust laws, we offer the following joint submission:
We are economists, legal scholars, and practitioners—focused on antitrust law, economics, and policy—who believe in maintaining healthy markets and well-functioning antitrust institutions. We value the important role of antitrust as the “Magna Carta of free enterprise,” which sets the rules that govern how firms compete against one another in our modern economy. Many of us have served in antitrust enforcement agencies. Each of us believes it is vital that the antitrust laws promote competitive markets, innovation, and productivity by deterring anticompetitive conduct throughout our economy, including in digital markets.
We write because the modern antitrust debate has become characterized by sustained attacks on the integrity of antitrust institutions and by unsubstantiated dismissals of debate. This atmosphere has led to a variety of proposals for radical changes to the antitrust laws and their enforcement that we believe are unsupported by the evidence, counterproductive to promoting competition and consumer welfare, and offered with an unwarranted degree of certainty.
Vigorous debate and disagreement have long been a hallmark of antitrust scholarship and policy. Competition policy has been formed through an iterative process echoed in the courts’evolving doctrine over more than a century. Today, however, efforts to sidestep the discussion, or to declare it over, and to force hasty and far-reaching changes have come to the fore. These proposals are numerous and include: (1) abandoning the consumer welfare standard; (2) overturning unanimous and supermajority judicial precedents, which are foundational to modern antitrust law; (3) imposing obsolete and arbitrary market share tests to determine the legality of mergers; (4) shifting the burden of proof from plaintiffs to defendants to render large swaths of business behavior presumptively unlawful; (5) creating another federal regulator to oversee competition in digital markets; (6) breaking up major tech companies or their products without evidence of antitrust harm or that the remedy would make consumers better off; and (7) imposing a general prohibition on all mergers either involving specific firms or during the current health crisis.
Such proposals would abandon the legal and political traditions that helped transform antitrust from an unprincipled and incoherent body of law, marred by internal contradictions, into a workable system that contributes positively to American competitiveness and consumer welfare. It should be noted that we use the term “consumer welfare” throughout this letter, consistent with modern parlance about competition policy, to include the benefits of competition to the welfare of workers and other input suppliers, as well as consumers. Thus, the consumer welfare standard is not a narrowly circumscribed objective, but rather a prescription for the general social wellbeing generated by the competitive process. By contrast, many of the current proposals would (1) undermine the rule of law; (2) undo the healthy evolution of antitrust law in the courts over time; (3) require antitrust agencies to micromanage the economy by picking winners and losers; (4) abandon a focus on consumer welfare in favor of vague and politically-oriented goals; and (5) undermine successful American businesses and their competitiveness in the global economy at the worst-imaginable time.
The assertions about the state of antitrust law and policy that purportedly justify these radical changes are not supported by the evidence. A more accurate reading of the evidence supports the following view of the American economy and the role of antitrust law:
We believe open discussion of existing evidence is necessary to advance contemporary debates about the performance of antitrust institutions in the digital economy. We welcome that discussion. We discuss below various dimensions of antitrust law, economics, and institutions that have been the targets of radical reform proposals. The signatories to this letter hold a steadfast belief that antitrust institutions, including the courts, are up to the task of protecting competition, and that the federal antitrust laws as written are effective in accomplishing that goal. While many signatories have offered diverse proposals to improve the functioning of those institutions—a few of which we share in this letter—we hold the common view that the proposed radical reforms would make consumers worse off in the short run and over the long haul by chilling efficient behavior and stymieing innovation.
Read the full submission here.
