The Antitrust Hotch Potch

Competition 2009 Summit in Brussels

I have been asked to speak at the Competition 2009 Summit in December. Here is a brief description of this event:

Premier Cercle, in association with The Wall Street Journal Europe, is organizing the Competition 2009 summit on December 3 & 4, 2009 at the SAS Radisson hotel in Brussels, Belgium. The summit will gather more than 100 high level speakers and 400 participants from 30 countries on essential topics such as antitrust enforcement, merger control, corporate compliance, state aids, the liberalization of network industries, inquiries and dawn raids as well as cases studies at the halfway between IP and Competition law.

For more information and an updated programme, please visit www.competition2009.com

Dynamic Competition in Antitrust Law

Greg Sidak and David Teece have just published a most interesting paper on dynamic competition and antitrust, which I highly recommend to all those interested in the subject.

Abstract: 

The September 2009 announcement that the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice have initiated a review of the Horizontal Merger Guidelines provides a formal process for redefining the proper role of dynamic competition in antitrust law. How would competition policy be shaped if it were explicitly to favor Schumpeterian (dynamic) competition over neoclassical (static) competition? Schumpeterian competition is the kind of competition that is engendered by product and process innovation. Such competition does not merely bring price competition. It tends to overturn the existing order. A “neo-Schumpeterian” framework for antitrust analysis that favors dynamic competition over static competition would put less weight on market share and concentration in the assessment of market power and more weight on assessing potential competition and enterprise-level capabilities. By embedding recent developments in evolutionary economics, the behavioral theory of the firm, and strategic management into antitrust analysis, one can develop a more robust framework for antitrust economics. Such a framework is likely to ease remaining tensions between antitrust and intellectual property. It is also likely to reduce confidence in the standard tools of antitrust economics when the business environment manifests rapid technological change. It appears that the Antitrust Division of the U.S. Department of Justice has attempted to incorporate more dynamic analysis, but the result has been inconsistent across different mergers and different doctrinal areas of antitrust law. Moreover, a complicating factor in the transformation of the law is the fact that the federal courts have, by embracing the reasoning in the Merger Guidelines promulgated several decades ago by the Antitrust Division and the Federal Trade Commission, caused antitrust case law to ossify around a decidedly static view of antitrust. Put differently, in the years since 1980, the Division and the FTC have successfully persuaded the courts to adopt a more explicitly economic approach to merger analysis, yet one that has a static view of competition. The result is not a mere policy preference. It is law. To change that law to have a more dynamic view of competition will therefore require a sustained intellectual effort by the enforcement agencies (as well as by scholars and practitioners) that, once more, engages the courts to reexamine antitrust law, as they did in the late 1970s during the ascendancy of the Chicago School, when antitrust law became infused with its current, static understanding of competition. A necessary but not sufficient condition for that effort is a public process by which the Division and the FTC revisit and restate the Merger Guidelines in a manner that clarifies and defends the role of dynamic competition in antitrust analysis. We therefore applaud the announcement of the antitrust agencies in September 2009 to solicit public comment on the possibility of updating the Merger Guidelines. Assuming that the Division and the FTC decide to revise the existing Merger Guidelines, those revised guidelines (and useful complementary undertakings, such as generalized guidelines on market power and remedies) then will require leadership by the enforcement agencies to persuade the courts that antitrust doctrine should evolve accordingly. That neo-Schumpeterian process may take a decade or longer to accomplish, but it is a path that we believe the Roberts Court is willing to travel.

The Decision of the Commission of 13 May 2009 in the Intel Case: Where is the Foreclosure and Consumer Harm

This new paper challenges the Decision of the European Commission against Intel, which I believe suffers from a number of serious flaws.

Abstract:

Abstract:      
On 21 September 2009, the European Commission published a provisional non-confidential version of its 13 May 2009 Decision in which it condemned Intel to a record fine of € 1.06 billion on the ground that it had granted conditional rebates and payments to a number of OEMs and a large retailer of consumer electronics purchasing its x86 CPUs, and that it had paid OEMs to delay, cancel or in some other way restrict the commercialization of specific AMD-based products. 
This paper shows that the Commission Decision contains a number of flaws. They include the facts that the Decision: (i) relies in substance on a per se prohibition of conditional rebates recognized by the formalistic case-law of the Community courts, notwithstanding that the Commission had clearly indicated in various important policy documents, including its Guidance Paper on Article 82 EC, its intention to move away from this approach for an effects-based analysis; (ii) states, contrary to sound policy, that it need not conduct an “as efficient competitor” test, but conducts a misguided one anyway; (iii) insufficiently supports its speculative theory that the OEMs’ purchasing policy was influenced by their understanding of Intel’s alleged intention to reduce or eliminate their rebates should they buy x86 CPUs from AMD; (iv) fails to demonstrate its contention that Intel’s rebates harm competition and consumers; and (v) conducts an excessively restrictive analysis of the efficiencies created by Intel’s rebates. 
The Intel decision thus stands for the dangerous proposition that any dominant firm is at risk under Article 82 EC if there exists evidence that employees of a customer believe that reducing present purchases from it could have repercussions with regard to the availability and terms of future purchases, even if the belief is ambiguous, equivocal or contrary to written assurances of the firm or its executives, and without any showing of foreclosure. While the foregoing may be considered as an overstatement and that an “agreement” on conditions (not a mere unilateral belief on the part of the customer) is necessary to find a violation, the Commission accords itself so much latitude on how it collects, interprets and weighs evidence that the distinction is illusory. 
The compatibility of the Commission Decision with EC competition law will now be examined by the Court of First Instance of the European Communities to which Intel lodged an appeal. Because of the wide-ranging implications of this Decision, not only for Intel but for all large corporations having to negotiate price incentives with their customers, it is to be hoped that the Court of First Instance of the EC will review this decision carefully and hold the Commission to the same rigorous standards it has applied in the merger control area. 
An important question (that will not be addressed by the Court of First Instance, but which is nevertheless relevant from a policy standpoint) is whether antitrust intervention was at all needed in a market characterized by increasing output, decreasing prices and sustained innovation. These characteristics alone should raise serious doubt about claims of anti-competitive foreclosure and consumer harm, especially when they are made by competitors. These characteristics also question the Commission’s wisdom of investing large enforcement resources in what turned to be a long and protracted investigation. As this paper will demonstrate, the market for x86 CPUs was competitive and there is no convincing evidence that Intel’s conduct was anti-competitive and foreclosed AMD and harmed consumers.

Abuse of Dominance in the Postal Sector – The Contribution of the Guidance Paper on Article 82 Ec

Please find hereafter the link to the paper I have co-author on the potential implications of the Commission's Guidance Paper for the postal sector:

 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1435362

 

Abstract:

 

On 3 December 2008, the Commission published its 'Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings' (“Guidance Paper”), which essentially sets out the Commission’s enforcement priorities with respect to exclusionary abuses. In line with the approach already taken in the fields of Article 81 EC and merger control, the Commission, through its Guidance Paper, has vowed to take a more effects-based approach to exclusionary abuses by dominant undertakings. The Guidance Paper is not intended to be a statement or interpretation of the law, but instead lays out the Commission’s 'enforcement priorities' with respect to Article 82 EC. This raises the issue whether the Commission is bound to apply the principles developed in the Guidance Paper or whether it can apply the more restrictive and formalistic principles contained in the Community courts’ case-law. In the context of the postal sector the advent of the Guidance Paper is particularly propitious in light of the crucial changes that are taking place. The recently promulgated Third Postal Directive ('Postal Directive') provides the legal basis for the full market opening of the postal sector, which is to be accomplished by 31 December 2010. A corollary of the abolition of any remaining, exclusive or special rights is that new possibilities for increased competition in the postal sector will be created. At the same time, however, the removal of the reserved sector is likely to increase the frequency of claims by entrants that incumbent postal operators are engaging in abusive behavior to maintain their market power in liberalized markets. With this in mind, the Guidance Paper provides dominant (postal) undertakings with a set of parameters within which they can assess conduct addressed in it i.e. exclusive dealing, tying and bundling, predatory practices, and refusal to supply.

 

 

Damien

 

Most Downloaded Antitrust Law Professors of the Past Year

Sounds like I have lost my crown as the most downloaded professors. The bulk of Mark Lemley's publications are of course in IP, but he also has some terrific antitrust papers. Here is the new ranking based on SSRN downloads:

 

1. Mark Lemley, Stanford 10,577
2. Damien Geradin, Tilburg 6,020
3. David Evans, UCL, Chicago 5,116
3. Herb Hovenkamp, Iowa 4,377
4. Wouter Wils, Kings College 2,652
5. Josh Wright, George Mason 2,413
6. Spencer Waller, Chicago Loyola 2,377
7. Keith Hylton, BU 2,285
8. Randy Picker, Chicago 2,188
9. Phil Weiser, Colorado 1,876
10 Maurice Stucke, Tennessee, 1683
11. Marc Edelman, Barry University 1,593
12 Bruce Kobayashi, George Mason 1,485
13. Einer Elhague, Harvard 1,379
14. Danny Sokol, Florida 1,301
15. Scott Hemphill, Columbia 1,203
16. Bill Page, Florida 1,154
17. Barak Richman, Duke 1,108
18. Thom Lambert, Missouri 985
19. Dan Crane, Michigan 836
20. Steve Semeraro, Thomas Jefferson

 

Damien