Showing 9 of 268 Publications in Monopolization

Section 2 Symposium: Bill Kolasky on Proving Market Power

TOTM The market power section of the Department’s Single Firm Conduct report is one of the strongest sections of the report.  It provides an exceptionally clear discussion of . . .

The market power section of the Department’s Single Firm Conduct report is one of the strongest sections of the report.  It provides an exceptionally clear discussion of the market power element under Section 2.  It recognizes, in particular, that a violation of Section 2 requires more than mere market power, but rather a finding of substantial and durable market power – “an extreme degree of market power” as the Fifth Circuit expressed it in Beauville v. Federated Dep’t Stores.

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Antitrust & Consumer Protection

Section 2 Symposium: Herbert Hovenkamp on Patents and Exclusionary Practices

TOTM One interesting aspect of the DOJ Report on Section 2 is the scant, episodic treatment of IP issues. The Report rejects the presumption of market power for . . .

One interesting aspect of the DOJ Report on Section 2 is the scant, episodic treatment of IP issues. The Report rejects the presumption of market power for patent ties (p. 81); has a very brief discussion of refusal to license patented parts in which it properly rejects the reasoning of the Ninth Circuit’s Kodak decision and aligns itself with the Federal Circuit’s Xerox decision (p. 121-122). The Walker Process case, which held that an infringement action based on an improperly acquired and unenforceable patent could violate §2, is cited in a footnote, and only for the proposition that market power is required in a §2 case (p. 25 n. 53). Finally, the Report contains a brief discussion of the presence of intellectual property in measuring incremental cost for purposes of analyzing predatory pricing (p. 63).

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Intellectual Property & Licensing

Section 2 Symposium: Howard Marvel on Safe Harbors for Short Term Exclusive Dealing Contracts

TOTM Exclusive dealing prevents the bait-and-switch behavior by dealers who convert customers drawn by one brand to the products of its rivals. Despite the red flag . . .

Exclusive dealing prevents the bait-and-switch behavior by dealers who convert customers drawn by one brand to the products of its rivals. Despite the red flag of “exclusive” in its title, the practice is ordinarily uncontroversial, indeed innocuous. Automobile manufacturers often pay incentives to encourage dealers to deal exclusively in their vehicles. Business format franchising ensures that large swathes of distribution are exclusive. And when exclusive dealing is denied to suppliers, the results can be catastrophic, as when the FTC massacred those manufacturers of hearing instruments that relied on exclusive dealers. The FTC sued five such firms for exclusive dealing, four of which agreed to drop it, and promptly died.

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Antitrust & Consumer Protection

Section 2 Symposium: Alden Abbott on the International Perspective

TOTM As I indicated in my prior blog entry, U.S. competition policy vis-à-vis single firm conduct (“SFC”) is best viewed not in isolation, but, rather, in the . . .

As I indicated in my prior blog entry, U.S. competition policy vis-à-vis single firm conduct (“SFC”) is best viewed not in isolation, but, rather, in the context of other jurisdictions’ SFC enforcement philosophies, and efforts to promote greater SFC policy convergence worldwide.  Given the proliferation of competition law regimes, firms that do business in multiple jurisdictions either may have to:  (1) tailor their business plans (marketing and distributional arrangements, joint ventures, pricing policies, etc.) nation-by-nation to satisfy differences in national competition laws (an approach rife with transactions costs); or (2) adopt a single set of policies that meets the competition law requirements of the “most restrictive” jurisdiction (an approach that could yield selection of a “less than optimally efficient” business plan).  A further complication is caused by transactions whose effects spill across jurisdictional boundaries; a transaction that found favor in one jurisdiction may not find favor in other jurisdictions.  To add to the policy complexity, as private rights of action proliferate around the globe, difficult jurisdictional questions and conflict of law issues may be posed in the future; the greater the divergence among antitrust regimes, the higher will be the costs imposed on businesses associated with (ideally) avoiding and (if necessary) ironing out such complications.  Thus, even though there may be good policy justifications (associated with differences among nations in procedure, private enforcement, and other local factors) for some continued differentiation among national competition regimes – reasons that David Evans (see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1342797) and others have ably expounded upon – there is a sound basis for efforts (rooted in business efficiency and transactions cost avoidance) to promote gradual convergence and thereby avoid the greatest burdens arising from multinational disharmony in this field.

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Antitrust & Consumer Protection

Section 2 Symposium: Herbert Hovenkamp on Predatory Pricing and Bundled Discounts

TOTM The baseline for testing predatory pricing in the Section 2 Report is average avoidable cost (AAC), together with recoupment as a structural test (Report, p. . . .

The baseline for testing predatory pricing in the Section 2 Report is average avoidable cost (AAC), together with recoupment as a structural test (Report, p. 65). The AAC test or reasonably close variations, such as average variable cost or short-run marginal cost, seems about right. However, differences among them can become very technical and fine. The Report correctly includes in AAC those fixed costs that “were incurred only because of the predatory strategy, for example, as a result of expanding capacity to enable the predatory sales.” (Report, pp. xiv, 64-65) Such a strategy would make some sense for a predator if the fixed costs in question are easily re-deployed once the predation has succeeded – for example, in the case of an airline whose planes can be shifted to a different route. The test virtually guarantees that in industries that require heavy investment in production capacity that cannot be redployed the test will approach strict average variable cost. In cases where fixed costs are relatively high, an investment of this nature that lasted only through the predatory period and became excess capacity thereafter would not be worth it. Further, if fixed costs are low the market is almost certainly not prone to monopoly to begin with. AVC is probably underdeterrent, but it is also probably the best we can do without chilling procompetitive behavior.

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Antitrust & Consumer Protection

Section 2 Symposium: Michael Salinger on Error Costs and the Case for Conduct-Specific Standards

TOTM The source of much of the disagreement between the Antitrust Division and the FTC is based on chapter 3, which discusses general standards for Section . . .

The source of much of the disagreement between the Antitrust Division and the FTC is based on chapter 3, which discusses general standards for Section 2 liability.

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Antitrust & Consumer Protection

Section 2 Symposium: Bruce Kobayashi on Are Administrable Bright Line Rules Underutilized in Section 2 Analyses?

TOTM One of the most important changes in the antitrust laws over the past 40 years has been the diminished reliance of rules of per se . . .

One of the most important changes in the antitrust laws over the past 40 years has been the diminished reliance of rules of per se illegality in favor of a rule of reason analysis. With the Court’s recent rulings in Leegin (eliminating per se rule for minimum RPM) and Independent Ink (eliminating the per se rule against intellectual property tying), the evolution of the antitrust laws has left only tying (under a “modified” per se rule) and horizontal price fixing under per se rules of illegality. This movement reflects advances in law and economics that recognize that vertical restraints, once condemned as per se illegal when used by firms with antitrust market power, can be procompetitive. It also reflects the judgment that declaring such practices pre se illegal produced high type I error costs (the false condemnation and deterrence of pro competitive practices).

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Intellectual Property & Licensing

Section 2 Symposium: Bill Kolasky on a Stepwise Rule of Reason for Exclusionary Conduct

TOTM The most controversial part of the Justice Department’s Single Firm Conduct Report is the Department’s proposed use of what it terms a “substantial disproportionality” test for exclusionary . . .

The most controversial part of the Justice Department’s Single Firm Conduct Report is the Department’s proposed use of what it terms a “substantial disproportionality” test for exclusionary conduct. Under this test, the Justice Department would bring a case only if the harm to consumers and competition caused by a dominant or near-dominant firm’s conduct is “substantially disproportionate” to any legitimate benefits the firm might realize. The Department argues that this test is superior to the three alternative tests it considers—an effects-balancing test, a no-economic-sense test, and an equally-efficient-competitor test—because it is more administrable and because it reduces the risk of false positives (i.e., finding conduct unlawful that does not harm competition ), which the Department views as more serious than that of false negatives (i.e., finding conduct lawful that does harm competition).

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Antitrust & Consumer Protection

Section 2 Symposium: Bill Page on Microsoft and the DOJ’s General Standards of Exclusion

TOTM The DOJ’s § 2 Report offers two recommendations under the heading of “General Standards for Exclusionary Conduct.” First, for evaluating alleged acts of exclusion, the . . .

The DOJ’s § 2 Report offers two recommendations under the heading of “General Standards for Exclusionary Conduct.” First, for evaluating alleged acts of exclusion, the Report endorses the burden-shifting framework of the D.C. Circuit’s 2001 Microsoft decision. Second, after canvassing various standards of anticompetitive effect, the Report settles on the “disproportionality test,” under which “conduct that potentially has both procompetitive and anticompetitive effects is anticompetitive under section 2 if its likely anticompetitive harms substantially outweigh its likely procompetitive benefits.”

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Antitrust & Consumer Protection