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TOTM Geoffrey Manne and Dirk Auer’s defense of Qualcomm’s no license/no chips policy is based on a fundamental misunderstanding of how that policy harms competition. The harm is . . .
Geoffrey Manne and Dirk Auer’s defense of Qualcomm’s no license/no chips policy is based on a fundamental misunderstanding of how that policy harms competition. The harm is straightforward in light of facts proven at trial. In a nutshell, OEMs must buy some chips from Qualcomm or else exit the handset business, even if they would also like to buy additional chips from other suppliers. OEMs must also buy a license to Qualcomm’s standard essential patents, whether they use Qualcomm’s chips or other chips implementing the same industry standards. There is a monopoly price for the package of Qualcomm’s chips plus patent license. Assume that the monopoly price is $20. Assume further that, if Qualcomm’s patents were licensed in a standalone transaction, as they would be if they were owned by a firm that did not also make chips, the market price for the patent license would be $2. In that event, the monopoly price for the chip would be $18, and a chip competitor could undersell Qualcomm if Qualcomm charged the monopoly price of $18 and the competitor could profitably sell chips for a lower price. If the competitor’s cost of producing and selling chips was $11, for example, it could easily undersell Qualcomm and force Qualcomm to lower its chip prices below $18, thereby reducing the price for the package to a level below $20.
Read the full piece here.
ICLE White Paper This paper analyzes the question of market power. Longstanding definitions and analytical tools are inadequate because they conflate conditions under which a firm has unbeneficial control over its markets (market power) with situations where firms are successful because they are superior in how they serve customers (expanding consumer welfare).
This paper analyzes the question of market power. Longstanding definitions and analytical tools are inadequate because they conflate conditions under which a firm has unbeneficial control over its markets (market power) with situations where firms are successful because they are superior in how they serve customers (expanding consumer welfare). Furthermore, today’s fast-changing markets make current antitrust approaches invalid because the information decays as circumstances rapidly change. This paper develops a more rigorous definition of market power and proposes new tests. The proposed definition seeks to isolate damaging market control and the tests examine the extent to which investors, actual rivals, and potential rivals act as if market power is present.
Regulatory Comments We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and . . .
We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and effective protection” to intellectual property as required by the GSP statute and, in particular, profound concerns with draft legislation that will, if enacted, further erode the protection of intellectual property in South Africa for U.S. and South African creators alike.
While we support IIPA’s petition, we note at the outset our reluctance to take such a position: We believe that trade sanctions are harmful to the country imposing them (and on which they are imposed, of course), and, as far as possible, should be avoided. Both the U.S. and South Africa benefit from the GSP that currently affords South African producers unilateral, tariff-free access to U.S. markets for some goods. As such, we caution that the USTR should withdraw South Africa’s GSP designation only as a last resort.
But we also believe that both the United States and South Africa share a strong interest in sustaining creators through adequate and effective protection of intellectual property, thereby promoting economic development and the production of culturally diverse materials. And, unfortunately, removal of GSP is one of the few tools available to the U.S. to protect the interests of U.S. creators of intellectual property in global markets. The USTR is legally obliged to faithfully discharge its congressional mandate by taking action to defend U.S. intellectual property in accordance with various trade laws, including by ensuring that GSP beneficiary countries provide adequate and effective protection within the meaning of the statute.
In submitting this statement, we are mindful that South Africa’s President has not yet signed into law the Bills that motivated the IIPA’s petition. If he does so, South Africa would fail to meet the conditions for GSP eligibility and USTR will be obliged to revoke all or some of its GSP benefits. We note, however, that numerous local actors have voiced concerns regarding the constitutionality of the proposed legislation and the harm that it will to do to the community of creators in South Africa. It is possible that President Ramaphosa will heed these concerns, reject the draft legislation and send it back to Parliament for reconsideration, with directions to adapt or remove its numerous provisions that conflict with South Africa’s Constitution and the country’s international treaty obligations. So doing could result in a text more consistent with South Africa’s (and the U.S.’s) cultural and economic interests. Most importantly from the perspective of this submission, by rejecting the draft legislation President Ramaphosa would at the very least defer any action on the part of USTR to revoke South Africa’s GSP eligibility.
In short, we argue that:
TOTM This is the third in a series of TOTM blog posts discussing the Commission’s recently published Google Android decision. It draws on research from a soon-to-be published ICLE white paper.
For the third in my series of posts about the Google Android decision, I will delve into the theories of harm identified by the Commission.
Scholarship If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), . . .
If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), it would have begun its antitrust inquiry with the observation that the relevant market for the provision of app services is an integrated one, in which the overall effect of Apple’s conduct on both app users and app developers must be evaluated. A crucial implication of the Amex decision is that participants on both sides of a transactional platform are part of the same relevant market, and the terms of their relationship to the platform are inextricably intertwined.
We believe the Amex Court was correct in deciding that effects falling on the “other” side of a tightly integrated, two-sided market from challenged conduct must be addressed by the plaintiff in making its prima facie case. But that outcome entails a market definition that places both sides of such a market in the same relevant market for antitrust analysis.
As a result, the Amex Court’s holding should also have required a finding in Apple that an app user on one side of the platform who transacts with an app developer on the other side of the market, in a transaction made possible and directly intermediated by Apple’s App Store, is similarly deemed to be in the same market for standing purposes.
Under the proper conception of the market, it is difficult to maintain that either side does not have standing to sue the platform for alleged anticompetitive conduct relating to the terms of its overall pricing structure, whether the specific terms at issue apply directly to that side or not. Both end users and app developers are “direct” purchasers from Apple—of superficially different products, but in a single, inextricably interrelated market. Both groups should have standing and should be able to establish antitrust injury—harm to competition—by showing harm to either group, as long as they can establish the requisite interrelatedness of the two sides of the market.
As we discuss, such a result would have been consistent with the way antitrust doctrine has long evolved—in both its substantive and its procedural aspects—to reflect new economic knowledge, particularly with respect to such “nonstandard” business models.
TOTM This symposium discusses the “The Politicization of Antitrust.” As the invite itself stated, this is an umbrella topic that encompasses a wide range of subjects: . . .
This symposium discusses the “The Politicization of Antitrust.” As the invite itself stated, this is an umbrella topic that encompasses a wide range of subjects: from incorporating environmental or labor concerns in antitrust enforcement, to political pressure in enforcement decision-making, to national security laws (CFIUS-type enforcement), protectionism, federalism, and more. This contribution will focus on the challenges of designing a system that protects the open markets and democracy that are the foundation of modern economic and social development.
TOTM The concept of a “good” or “efficient” cartel is generally regarded by competition authorities as an oxymoron. A cartel is seen as the worst type . . .
The concept of a “good” or “efficient” cartel is generally regarded by competition authorities as an oxymoron. A cartel is seen as the worst type of antitrust violation and one that warrants zero tolerance. Agreements between competitors to raise prices and share the market are assumed unambiguously to reduce economic welfare. As such, even if these agreements are ineffective, the law should come down hard on attempts to rig prices. In this post, I argue that this view goes too far and that even ‘hard core’ cartels that lower output and increase prices can be efficient, and pro-competitive. I discuss three examples of where hard core cartels may be efficient.
TOTM An oft-repeated claim of conferences, media, and left-wing think tanks is that lax antitrust enforcement has led to a substantial increase in concentration in the . . .
An oft-repeated claim of conferences, media, and left-wing think tanks is that lax antitrust enforcement has led to a substantial increase in concentration in the US economy of late, strangling the economy, harming workers, and saddling consumers with greater markups in the process. But what if rising concentration (and the current level of antitrust enforcement) were an indication of more competition, not less?
TOTM This is the second in a series of TOTM blog posts discussing the Commission’s recently published Google Android decision. It draws on research from a soon-to-be published ICLE white paper.
In a previous post, I argued that the Commission failed to adequately define the relevant market in its recently published Google Android decision.
