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Showing 9 of 168 Results in Exclusionary Conduct
Amicus Brief INTRODUCTION The district court’s decision is disconnected from the underlying economics of the case. It improperly applied antitrust doctrine to the facts, and the result . . .
The district court’s decision is disconnected from the underlying economics of the case. It improperly applied antitrust doctrine to the facts, and the result subverts the economic rationale guiding monopolization jurisprudence. The decision—if it stands—will undercut the competitive values antitrust law was designed to protect.
Antitrust law should seek to minimize error and decision costs to maximize consumer welfare and reduce the likelihood of self-defeating antitrust interventions. See Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984). The Supreme Court has thoroughly incorporated the economic logic of this “error cost” framework into its antitrust jurisprudence. See Ohio v. Am. Express Co., 138 S. Ct. 2274, 2287 (2018) (“Any other analysis would lead to ‘mistaken inferences’ of the kind that could ‘chill the very conduct the antitrust laws are designed to protect.’ ”) (quoting Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993)); see also Thomas A. Lambert & Alden F. Abbott, Recognizing the Limits of Antitrust: The Roberts Court Versus the Enforcement Agencies, 11 J. Competition L. & Econ. 791 (2015).
In contrast, this case is a prime—and potentially disastrous— example of how the unwarranted reliance on inadequate inferences of anticompetitive effect lead to judicial outcomes utterly at odds with Supreme Court precedent.
The district court’s decision confuses several interrelated theories of harm resting on the central premise that Qualcomm’s business model is purposefully structured to preserve its ability to license its standard essential patents (SEPs) to device makers (OEMs) at “unreasonably high royalty rates,” thus “impos[ing] an artificial surcharge on all sales of its rivals’ modem chips,” which “reduces rivals’ margins, and results in exclusivity.” FTC v. Qualcomm Inc., No. 17-CV-00220-LHK, 2019 WL 2206013, slip op. at 183 (N.D. Cal. May 21, 2019) (hereinafter slip op.).
But, without more, high royalty rates, artificial surcharges, the reduction of rivals’ margins, and even exclusivity do not violate the Sherman Act. Indeed, high prices are as likely the consequence of the lawful exercise of monopoly power or the procompetitive offering of higher quality products, and harm to competitors is a hallmark of vigorous competition. See, e.g., Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system.”). Avoiding the wrongful condemnation of such conduct is precisely the point of the Court’s error cost holdings.
The district court commits several key errors inconsistent with both Supreme Court precedent and its underlying economic framework.
First, the court failed to require proof of the anticompetitive harm allegedly caused by Qualcomm’s conduct. Instead, the court infers both its existence and its cause, see slip op. at 42–43, justifying its approach with reference to a single case: United States v. Microsoft, 253 F.3d 34, 79 (D.C. Cir. 2001) (“We may infer causation when exclusionary conduct is aimed at producers of nascent competitive technologies as well as when it is aimed at producers of established substitutes.”).
But the court misreads Microsoft and disregards contrary Supreme Court precedent. Indeed, both the Court and Microsoft made clear that a finding of illegal monopolization may not rest on an inference of anticompetitive harm.
In Brooke Group, the Court took the unusual step of reviewing an appellate decision for the sufficiency of evidence, prodded by the need to protect against the costs of erroneously condemning procompetitive conduct. See 509 U.S. at 230. It held that only evidence defendant’s conduct injured “competition, not competitors” supports a monopolization claim. Id. at 224 (citation omitted). And because harm to competitors doesn’t necessarily mean harm to competition, inferring anticompetitive harm from such evidence would not suffice: “mistaken inferences are especially costly, because they chill the very conduct the antitrust laws are designed to protect.” Id. at 226 (citation omitted).
In subsequent cases, the Court redoubled its commitment to minimizing error costs arising from erroneous inferences of anticompetitive effect. See Trinko, 540 U.S. at 414 (“The cost of false positives counsels against an undue expansion of § 2 liability.”) (citation omitted); Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438, 451 (2009).
As law and economics scholars, we are concerned that, because the district court’s decision rests on tenuous, unsupported inferences, “[i]f the district court’s holding is not repudiated on appeal, then the obvious consequence will be for companies to be deterred from much innocent and potentially procompetitive business conduct.” Douglas H. Ginsburg, Joshua D. Wright & Lindsey M. Edwards, Section 2 Mangled: FTC v. Qualcomm on the Duty to Deal, Price Squeezes, and Exclusive Dealing 2 (George Mason Univ. Law & Econ. Research Paper Series 19-21, Aug. 19, 2019), http://bit.ly/2z7aZzA.
This concern is not just academic. See FTC v. Qualcomm, No. 19- 16122, Order at 6 (9th Cir. Aug. 23, 2019) (recognizing the DOJ and Departments of Energy and Defense all classified this decision as a costly false positive).
Second, the court erred in finding Qualcomm had an antitrust duty to deal with rivals. The evidence adduced could sustain the district court’s ruling through only one theory: an illegal unilateral refusal to deal.2 See Aspen Skiing Co. v. Aspen Highland Skiing Corp., 472 U.S. 585 (1985)). But this narrow exception—“at or near the outer boundary of § 2 liability,” Trinko, 540 U.S. at 409—is subject to strict limitations.
Finding a duty to deal requires that the company gave up a profitable course of dealing with rivals and adopted a less profitable alternative. The evidence before the district court uniformly shows that Qualcomm’s challenged practices were more profitable, and thus insufficient to support an antitrust duty to deal.
Finally, because the court didn’t perform a competitive effects analysis, it failed to demonstrate the “substantial” foreclosure of competition required to sustain a claim of anticompetitive exclusion. To avoid the costs of mistaken condemnation, the Court placed tight guardrails around finding exclusionary conduct anticompetitive, requiring foreclosure of “a substantial share of the relevant market.” See Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 328 (1961). Without this finding, which also may not be inferred, a claim of anticompetitive foreclosure is unsupportable.
In sum, the district court’s approach extends antitrust law beyond the clear boundaries imposed by the Supreme Court and risks deterring significant pro-competitive conduct. If upheld, amici anticipate significant harm from the district court’s decision.
TOTM Last week the editorial board of the Washington Post penned an excellent editorial responding to the European Commission’s announcement of its decision in its Google . . .
Last week the editorial board of the Washington Post penned an excellent editorial responding to the European Commission’s announcement of its decision in its Google Shopping investigation. Here’s the key language from the editorial…
Read the full piece here.
TOTM Regardless of the merits and soundness (or lack thereof) of this week’s European Commission Decision in the Google Shopping case — one cannot assess this . . .
Regardless of the merits and soundness (or lack thereof) of this week’s European Commission Decision in the Google Shopping case — one cannot assess this until we have the text of the decision — two comments really struck me during the press conference.
TOTM According to Cory Doctorow over at Boing Boing, Tim Wu has written an open letter to W3C Chairman Sir Timothy Berners-Lee, expressing concern about a proposal . . .
According to Cory Doctorow over at Boing Boing, Tim Wu has written an open letter to W3C Chairman Sir Timothy Berners-Lee, expressing concern about a proposal to include Encrypted Media Extensions (EME) as part of the W3C standards.
TOTM Since the European Commission (EC) announced its first inquiry into Google’s business practices in 2010, the company has been the subject of lengthy investigations by . . .
Since the European Commission (EC) announced its first inquiry into Google’s business practices in 2010, the company has been the subject of lengthy investigations by courts and competition agencies around the globe. Regulatory authorities in the United States, France, the United Kingdom, Canada, Brazil, and South Korea have all opened and rejected similar antitrust claims.
And yet the EC marches on, bolstered by Google’s myriad competitors, who continue to agitate for further investigations and enforcement actions, even as we — companies and consumers alike — enjoy the benefits of an increasingly dynamic online marketplace.
TOTM Brand drug manufacturers are no strangers to antitrust accusations when it comes to their complicated relationship with generic competitors — most obviously with respect to . . .
Brand drug manufacturers are no strangers to antitrust accusations when it comes to their complicated relationship with generic competitors — most obviously with respect to reverse payment settlements. But the massive and massively complex regulatory scheme under which drugs are regulated has provided other opportunities for regulatory legerdemain with potentially anticompetitive effect, as well.
TOTM On Friday the the International Center for Law & Economics filed comments with the FCC in response to Chairman Wheeler’s NPRM (proposed rules) to “unlock” . . .
On Friday the the International Center for Law & Economics filed comments with the FCC in response to Chairman Wheeler’s NPRM (proposed rules) to “unlock” the MVPD (i.e., cable and satellite subscription video, essentially) set-top box market. Plenty has been written on the proposed rulemaking—for a few quick hits (among many others) see, e.g., Richard Bennett, Glenn Manishin, Larry Downes, Stuart Brotman, Scott Wallsten, and me—so I’ll dispense with the background and focus on the key points we make in our comments.
Our comments explain that the proposal’s assertion that the MVPD set-top box market isn’t competitive is a product of its failure to appreciate the dynamics of the market (and its disregard for economics). Similarly, the proposal fails to acknowledge the complexity of the markets it intends to regulate, and, in particular, it ignores the harmful effects on content production and distribution the rules would likely bring about.
TOTM It appears that White House’s zeal for progressive-era legal theory has … progressed (or regressed?) further. Late last week President Obama signed an Executive Order . . .
It appears that White House’s zeal for progressive-era legal theory has … progressed (or regressed?) further. Late last week President Obama signed an Executive Order that nominally claims to direct executive agencies (and “strongly encourages” independent agencies) to adopt “pro-competitive” policies. It’s called Steps to Increase Competition and Better Inform Consumers and Workers to Support Continued Growth of the American Economy, and was produced alongside an issue brief from the Council of Economic Advisors titled Benefits of Competition and Indicators of Market Power.
TL;DR version: the Order and its brief do not appear so much aimed at protecting consumers or competition, as they are at providing justification for favored regulatory adventures.
TOTM Today’s Canadian Competition Bureau (CCB) Google decision marks yet another regulator joining the chorus of competition agencies around the world that have already dismissed similar . . .
Today’s Canadian Competition Bureau (CCB) Google decision marks yet another regulator joining the chorus of competition agencies around the world that have already dismissed similar complaints relating to Google’s Search or Android businesses (including the US FTC, the Korea FTC, the Taiwan FTC, and AG offices in Texas and Ohio).
A number of courts around the world have also rejected competition complaints against the company, including courts in the US, France, the UK, Germany, and Brazil.
