Click here to read the full letter.

On Feb 12th ICLE President & Founder Geoffrey Manne joined Olivier Blanchard, Senior Analyst at Futurum Research on the Federalist Society Teleforum Podcast. On the podcast, they discussed the pending decision in the FTC’s controversial Section 5 lawsuit against Qualcomm.

Among other things, the FTC is seeking to permanently enjoin Qualcomm from engaging in certain industry-wide patent licensing practices, which the FTC alleges impair competition in violation of the antitrust laws. However, it has been argued that the FTC’s novel theory fails to meet the burden of proof by showing actual evidence of harm, as clarified recently by the US Supreme Court in Ohio v. American Express Co. The consequences of FTC’s legal theory, if upheld by the court, could reach well-beyond patent licensing arrangements.  Indeed, some experts fear that changes to Qualcomm’s business model will undermine U.S. national security interests and cede American leadership in the 5G race to a foreign adversary—the same concerns echoed last year by the Committee on Foreign Investment in the United States (CFIUS) when it recommended that the President permanently prohibit Broadcom from acquiring Qualcomm.

The full episode is embedded below.

This teleforum will investigate the potential impact of the pending decision in the FTC’s controversial Section 5 lawsuit against Qualcomm, brought days before the change in administration two years ago, with the incoming acting chair writing an unusual and biting dissent. Among other things, the FTC is seeking to permanently enjoin Qualcomm from engaging in certain industry-wide patent licensing practices, which the FTC alleges impair competition in violation of the antitrust laws. However, it has been argued that the FTC’s novel theory fails to meet the burden of proof by showing actual evidence of harm, as clarified recently by the US Supreme Court in Ohio v. American Express Co. The consequences of FTC’s legal theory, if upheld by the court, could reach well-beyond patent licensing arrangements.  Indeed, some experts fear that changes to Qualcomm’s business model will undermine U.S. national security interests and cede American leadership in the 5G race to a foreign adversary—the same concerns echoed last year by the Committee on Foreign Investment in the United States (CFIUS) when it recommended that the President permanently prohibit Broadcom from acquiring Qualcomm.

Featuring: 

Olivier Blanchard, Senior Analyst, Futurum Research

Geoffrey A. Manne, President and Founder, International Center for Law & Economics

The German Bundeskartellamt (Federal Cartel Office or FCO) this week reached a decision in its nearly 3-year-old Facebook investigation. The decision appears to be based not on a violation of competition rules per se, but, at root, on alleged violations of European data protection rules. Perhaps unsurprisingly, some commentators — who view the case from a purely idiosyncratic, outcome-driven perspective — are praising the agency. But the reality is that the decision is unsound from either a competition or privacy policy perspective and will only make the fraught privacy/antitrust relationship worse.

Read the full piece here.

In the opening seconds of what was surely one of the worst oral arguments in a high-profile case that I have ever heard, Pantelis Michalopoulos, arguing for petitioners against the FCC’s 2018 Restoring Internet Freedom Order (RIFO) expertly captured both why the side he was representing should lose and the overall absurdity of the entire net neutrality debate: “This order is a stab in the heart of the Communications Act. It would literally write ‘telecommunications’ out of the law. It would end the communications agency’s oversight over the main communications service of our time.”

Read the full piece here.

Introduction

How does a market’s structure affect innovation? This crucial question has occupied the world’s brightest economists for almost a century, from Schumpeter who found that monopoly was optimal, through Arrow who concluded that competitive market structures were key, to the endogenous growth scholars who empirically derived an inverted-U relationship between market concentration and innovation. Despite these pioneering contributions to our understanding of competition and innovation, if the past century of innovation economics has taught us anything it is that no market structure is strictly superior at generating innovation. Just as the SCP paradigm ultimately faltered because structural presumptions were a weak predictor of market outcomes, so too have dreams of divining the optimal market structure for innovation. Instead, in any given case, the right market structure likely depends on a plethora of sector- and firm-specific characteristics that range from the size and riskiness of innovation-related investments to the appropriability mechanisms used by firms, regulatory compliance costs, and the rate of technological change, among many others.

Against this backdrop, it may come as a surprise that the European Commission believes it has cracked the innovation market structure conundrum. Throughout its recent competition decisions, the Commission has almost systematically concluded that more firms in any given market will produce greater choice and more innovation for consumers. I call this the “Structuralist Innovation Presumption.” Notably, this presumption seems to have played a pivotal role in the recent Google Android decision (although the text of the Commission’s decision is not yet publicly available).

In what follows I argue that the Structuralist Innovation Presumption is a misguided heuristic that antitrust authorities around the globe would do well to avoid. Although it has been almost unequivocally endorsed by the European Commission, the presumption is at odds with the mainstream economics of innovation. To make matters worse, structuralist innovation also ignores the complex second-order effects that may arise when antitrust intervention tampers with rapidly evolving markets.

Click here to read the full paper. 

The US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights recently held hearings to see what, if anything, the U.S. might learn from the approaches of other countries regarding antitrust and consumer protection. US lawmakers would do well to be wary of examples from other jurisdictions, however, that are rooted in different legal and cultural traditions. Shortly before the hearing, for example, Australia’s Competition and Consumer Protection Commission (ACCC) announced that it was exploring broad new regulations, predicated on theoretical harms, that would threaten both consumer welfare and individuals’ rights to free expression that are completely at odds with American norms.

Read the full piece here.

A recent working paper by Hashmat Khan and Matthew Strathearn attempts to empirically link anticompetitive collusion to the boom and bust cycles of the economy.

Read the full piece here.