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Holding Innovation to an Antitrust Standard

Richard Gilbert

University of California, Berkeley - Department of Economics

Competition Policy International, Vol. 3, No. 1, Spring 2007

Several antitrust cases have involved allegations of anticompetitive innovation or product design and some plaintiffs and antitrust scholars have argued that investment in research and development that excludes competition can have predatory effects similar to predatory pricing. This article analyzes several tests for predatory innovation, including the rule of reason based on total and consumer welfare and profit sacrifice tests. All of these tests are likely to produce false positives that chill incentives for beneficial investments in research and development. Most courts that have considered allegations of anticompetitive innovation, including the appellate court in U.S. v. Microsoft, have concluded that innovation is not anticompetitive if it has plausible efficiencies. This is close to a test of whether innovation is a sham. While a sham test may fail to identify innovations that harm competition, that risk is acceptable given the high cost of penalizing beneficial innovation.

Number of Pages in PDF File: 32

Keywords: intellectual property, innovation, antitrust, predatory innovation, anticompetitive innovation, competition law

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Date posted: May 18, 2007  

Suggested Citation

Gilbert, Richard, Holding Innovation to an Antitrust Standard. Competition Policy International, Vol. 3, No. 1, Spring 2007. Available at SSRN: http://ssrn.com/abstract=987322

Contact Information

Richard J. Gilbert (Contact Author)
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
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