ANTITRUST: ANTITRUST LAW & POLICY eJOURNAL

"Rejected! Antitrust Economists As Expert Witnesses in the Post-Daubert World" Free Download

NICOLA GIOCOLI, University of Pisa - Department of Law
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Economists regularly appear as expert witnesses in antitrust litigations. The paper analyzes how their models and methodologies have performed vis-à-vis the standards of relevance and reliability affirmed by the US Supreme Court in its 1993 Daubert decision. Some tentative explanations for the economists’ troubles when facing a Daubert challenge in antitrust cases are provided.

"Innovative Antitrust and the Patent System" Free Download
Nebraska Law Review, Forthcoming

GREGORY DAY, Oklahoma State University - Stillwater - Spears School of Business
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There are conflicting hypotheses about whether antitrust law promotes innovation. According to the Federal Trade Commission (FTC), the Department of Justice Antitrust Division (DOJ), and many scholars, a firm has little reason to innovate new goods and methods unless its market share is threatened by competition. It follows that, since antitrust law stimulates competition, it should also incentivize innovation. This theory implies complementary roles for antitrust and patent laws in cultivating innovation.

But other commentators and courts view antitrust law as interfering with patent rights to the detriment of invention and discovery. The patent system supports innovation by granting inventors a limited right to charge monopoly prices and exclude competition without incurring antitrust liability. But if firms may become subject to antitrust scrutiny upon exercising monopoly power or excluding competition, then their incentives to innovate could diminish.

Remarkably, the link between antitrust and innovation is not only understudied, but there are few, if any, quantitative analyses that have sought to determine whether antitrust law increases, decreases, or otherwise influences the rate of innovation.

Using an original dataset, quantitative methods, and case studies, this Article explores antitrust’s puzzling relationships with patent law and innovation by probing a number of related questions, including: 1) does antitrust foster incentives to innovate, 2) are certain types of actions—i.e., merger challenges or restraint of trade lawsuits—better equipped to support innovation than others, and, 3) has the rate of invention increased since the DOJ and FTC made innovation an express goal of governmental antitrust policy? Based upon the results, this Article proposes a number of legal and policy reforms intended to improve antitrust and patent law’s capacity to incentivize innovation without the current harms and costs.

"Aggregated Royalties for Top-Down FRAND Determinations: Revisiting 'Joint Negotiation'" Free Download
Antitrust Bulletin, Forthcoming

JORGE L. CONTRERAS, University of Utah - S.J. Quinney College of Law
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In an environment in which widely-adopted technical standards may each be covered by large numbers of patents, there have been increasing calls for courts to determine “fair, reasonable and non-discriminatory? (FRAND) royalties payable to holders of standards-essential patents (SEPs) using “top-down? methodologies. Top-down royalty approaches begin with the aggregate royalty that should be payable with respect to all SEPs covering a particular standard, and then allocate a portion of the total to individual SEPs. Top-down approaches avoid many drawbacks associated with bottom-up approaches in which royalties for individual SEPs are assessed, often in an inconsistent and piecemeal manner, without regard for the other SEPs that cover the standard. Yet despite the potential benefits of top-down methodologies, one of the most promising means for determining aggregate royalty levels – joint agreement by the members of the relevant standards-development organization (SDO) – has gained little traction. The idea of SDO participants jointly negotiating FRAND royalties attracted the attention of commentators and antitrust agencies about a decade ago, when a handful of SDOs began to explore mandatory ex ante rate disclosure requirements. But few SDOs adopted such policies, and joint negotiations were never incorporated into the mainstream standardization process. One of the principal reason that SDOs have been hesitant to endorse joint royalty negotiations is the perceived risk of antitrust liability arising from concerted action among competitors. But as numerous commentators and antitrust officials have reiterated, this fear is largely misplaced in the context of industry standard-setting. Thus, SDOs should follow the lead of patent pools and begin more actively to determine aggregate patent royalty burdens for standards that they develop. In addition, antitrust and competition authorities should assure the market that collective agreement on aggregate royalty rates alone should not give rise to antitrust liability.

"Tech Wars: Return of the Conglomerate - Throwback or Dawn of a New Series for Competition in the Digital Era?" Free Download

YONG LIM, Seoul National University, School of Law
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There was once a time when conglomerates roamed supreme in the realms of the market. These large and colorful beasts were recognized as the dominant species of the corporate form, and were the subject of both praise and fear. Then beginning in the 1980s, their fate suddenly changed for the worse, and under the assault of so-called “bust up takeovers? these creatures receded from the corporate scene. This led commentators to observe by the turn of the century that the once vaunted conglomerate form was under the risk of becoming an “endangered? species. Or so they believed.

The conglomerate model has begun to stage a comeback in a seemingly unlikely place for what many have relegated as an old-fashioned (and even ill-conceived) relic of the past – none other than the high-flying and perennially evolving tech industry. This astonishing return of the conglomerate model has coincided with an intriguing change in the nature of competition for the high-tech industry, particularly where platform businesses that harness network effects are involved. To put it bluntly, competition in the tech industry in the digital era has morphed into a multi-contact war – a war between conglomerate-like businesses, with clashes ensuing on multiple battlefields.

What does this then portend for antitrust law and analysis? Both the change in the competitive nature of the tech industry and the concomitant resurgence of the conglomerate model in today’s digital era have garnered little, if any, substantive attention so far within antitrust circles. This does not mean that the multi-dimensional characteristics of market competition involving the tech industry has been completely overlooked. Much ink has been spilt over the attributes of multi-sided markets, and the network effects that course through platforms straddling such multiple dimensions of the market. Nor is the consideration of multi-contact competition completely novel for antitrust. Antitrust has grappled with aspects of multi-contact competition going back to as far as more than half a century ago, mostly in the context of conglomerate mergers. But, there has not yet been a proper analysis of the recent rise of multi-contact competition waged by conglomerate businesses (either in substance or true form) in today’s tech industry. This essay is a preliminary foray into certain key aspects of multi-contact competition waged by conglomerate businesses in the tech industry, and its implications for antitrust law and analysis. Through the discussion, we will observe how insights from the field of strategic management can prove invaluable for the analysis, and that the careful consideration of the firm’s strategy is a prerequisite to properly analyzing this phenomenon, as it should be for antitrust analysis in general.

"The Internet of Platforms and Two-Sided Markets: Legal and Regulatory Implications for Competition and Consumers" Free Download

ROB FRIEDEN, Pennsylvania State University - College of Communications
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This article examines developments in the Internet marketplace that favor embedded intermediaries that have significant market power and the ability to install a platform that both upstream sources of content and applications as well as downstream consumers need to access. Ventures such as Amazon, Facebook and Google have exploited, “winner take all? networking externalities resulting in the creation of seemingly impenetrable barriers to market entry even by innovative companies. Courts and regulatory agencies recognize the substantial market shares these ventures have acquired, but refrain from imposing sanctions on grounds that consumers accrue ample benefits when platform operators use upstream revenues to subsidize downstream services. Consumers also benefit when platform intermediaries eschew short term profits in the quest for greater product diversity and “shelf space? in the Internet marketplace. Additionally, courts and regulators may over-estimate the opportunities for consumers to migrate to alternatives, but underestimate the harms to competition and consumers occurring on either or both sides of an intermediary’s platform.

The article identifies four types of government responses to price and quality of service discrimination that exploits choke points within the Internet ecosystem where large volume of traffic has to traverse a single digital, broadband carrier’s network, or service provider’s platform. Governments can refrain from regulating access and accept aspects of market concentration as proper rewards to ventures offering desirable content and carriage services. Alternatively, they can impose access sanctions for antitrust violations, unfair trade practices, consumer harms and unreasonable access discrimination to offset market-driven concentration and dominance. Between these poles, governments can apply antitrust/competition policy remedies, or rely on expert regulatory agencies to respond to complaints.

The article examines digital broadband platform operators with an eye toward assessing the aggregate benefits and costs to both upstream firms and downstream consumers. The article notes that in some instances, government-imposed, ex ante safeguards anticipate and attempt to resolve transitory, comparatively insignificant, or possibly nonexistent problems. In other instances, governments have stated an intention to rely on ex post remedies, but they never get around to refining procedures to reduce the potential for false negatives that ignore or underestimate significant marketplace harm.

The article concludes that governments have failed to revise and recalibrate tools that examine potential marketplace distortions and assess the potential for damage to competition and consumers. The article demonstrates how the Justice Department, Federal Trade Commission and the Federal Communications Commission have relied on economic and legal doctrine ill-suited for digital broadband market assessments. These agencies have generated false positives, resulting in market intervention where not major problem exists and false negatives, where undetected major problems cause harm without remedy. Additionally these agencies appear to misallocate their resources and attention on insignificant matters when more compelling problems exists.

The article recommends that courts and government agencies consider both sides of an intermediary’s market when assessing current and prospective harms, commit to more accurate estimates of the potential for consumers to change platform allegiances and consider the overall impact of two-sided market domination instead of simply dismissing market concentration as necessary and harmless.

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About this eJournal

This eJournal distributes working and accepted paper abstracts dealing with all aspects of antitrust and competition policy, including mergers, cartels, monopolies, and price discrimination.

Editor: John Shepard Wiley, Independent

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Directors

ANTITRUST & REGULATED INDUSTRIES EJOURNALS

BERNARD S. BLACK
Northwestern University - Pritzker School of Law, Northwestern University - Kellogg School of Management, European Corporate Governance Institute (ECGI)
Email: bblack@northwestern.edu

RONALD J. GILSON
Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
Email: rgilson@leland.stanford.edu

Please contact us at the above addresses with your comments, questions or suggestions for LSN-Sub.

Advisory Board

Antitrust: Antitrust Law & Policy eJournal

JAMES R. ATWOOD
Covington & Burling

JONATHAN B. BAKER
Professor of Law, American University - Washington College of Law

MAXWELL M. BLECHER
Attorney at Law, Blecher and Collins

DENNIS W. CARLTON
Professor, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

FRANK H. EASTERBROOK
Senior Lecturer, University of Chicago Law School

NICHOLAS ECONOMIDES
Executive Director, Networks, Electronic Commerce, and Telecommunications Institute, Professor of Economics, New York University - Leonard N. Stern School of Business - Department of Economics

EINER R. ELHAUGE
Professor of Law, Harvard Law School

ELEANOR M. FOX
Professor of Law, New York University School of Law

HERBERT J. HOVENKAMP
James G. Dinan University Professor, Univ. of Pennsylvania Law and Wharton Business

LOUIS KAPLOW
Professor of Law, Harvard Law School, National Bureau of Economic Research (NBER)

DANIEL L. RUBINFELD
Professor, University of California at Berkeley - School of Law, National Bureau of Economic Research (NBER), NYU Law School

CARL SHAPIRO
University of California, Berkeley - Haas School of Business