John Thomas Rosch

“ A fourth challenge I have heard is that we should stay out of high-tech markets because, as a matter of policy, we should not be in the business of challenging an inventor’s conduct. Or, to put it differently, we don’t want to deter inventors from innovating, so their conduct should be per se legal. In the alternative, conduct by innovators in the high-tech sphere – regardless of its horizontal nature – should be subject to the rule of reason. ”

“ These multi-sided markets differ only in that the business models of firms trying to attract consumers differ; for example, Google offers information search capabilities, Apple offers “Apps” (among other things, games) , and Facebook offers communication with “friends.”
The second argument I have heard is that the transactions or practices involved in high-tech cases are too dynamic to effectively challenge. There is certainly some validity to this critique. For one, the constant innovation in fast-moving markets means the market at issue in a case or investigation can literally change. ”

“ For one thing, consideration of consumer choice enables consideration of all dimensions of competition, including non-price factors, that may be less measurable. Moreover, consideration of consumer opportunity enables one to take into account consumer preference that may be irrational (as behavioral economics suggests) as well as rational consumer preferences (which the Chicago and post-Chicago Schools assume) . If one truly believes in the market, producers will gravitate toward producing goods/choice that most consumers want, whether their preferences are rational or irrational. ”

“ But the sixth and biggest stumbling block to the agencies challenging innovation markets is that, in my mind, the long-standing threshold question debated by Schumpeter, Arrow, and others—i.e., whether it is better to keep the scientists separate and in competition or put them together at the same place—has not been resolved. If it is the case that having all of the world’s experts meet together leads to better innovation, then we should allow consolidation and coordination. ”

“ One moment we may be claiming Intel is a monopolist in the market for the x86 processor (the only major processor that most of us use for daily computing) and is seeking to take control of the entire computing platform, but the advent of tablets and smartphones may mean that the market tips such that ARM or some other processor is the dominant processor. ”

“ A fifth challenge I have heard concerns innovation more generally. In the 30 years since the consent in Xerox, [16] the agencies have never litigated to conclusion a challenge to a transaction or conduct that threatens innovation alone. In fact, the best case on this point to my knowledge is the Second Circuit’s 1981 decision in SCM Corp. v. Xerox Corp. [17] There, the Second Circuit held that a defined product market is a prerequisite to an antitrust claim. ”

“ I’ve already alluded to the Commission’s expertise in analyzing conduct by a firm with “incipient” monopoly power, which may not amount to the market power required by the “attempt to monopolize” case law. The conduct may also, however, involve deception (as it did in N-Data and Intel) and hence trigger the agency’s consumer protection expertise and Section 5’s consumer protection prong. Indeed, the federal courts have recognized the Commission’s special expertise in this respect. ”

“ This may mean that consumer data is handled more loosely than some would like, but it also means that there is competition along many different axes that we might not otherwise see. In contrast, there are firms like Apple that pride themselves on a closed platform not only because it allows them to control the quality of the operating system and content better, but also because it gives them much greater control over users’ privacy. ”

“ The alleged problem is that looking at the effects in both of these markets (to say nothing of defining them, given that they are sometimes in a nascent state) is too hard for the agencies. I half agree.
First, let me be clear about a legal point. While I have said that in merger cases, market definition is not a “gating” or threshold issue in the sense that the agencies have to prove a relevant market before it can look at a merger’s competitive effects, [2] I do not believe that the agencies in merger or conduct cases can avoid defining a relevant market altogether. ”

“ But to put it bluntly, I worry that the Supreme Court is not only modifying procedural rules to cabin the private plaintiff’s bar, but that it is curbing the substantive rules as well. Since 2004, the Supreme Court has decided ten antitrust cases – not one of those cases was brought by the government. [37] This means that the vast majority of substantive antitrust law is being made in cases involving private plaintiffs. ”

“ Far too often, however, I think we all get caught up in putting cases in perfect economic and legal boxes and lose sight of the fact that while the law and economics matter, the big picture matters too. ”

“ That is to say, in these cases, the Commission is not looking at a conduct or transaction’s effect on just one market (such as whether consumers will pay more for a product) , but at how the conduct or transaction will affect at least two interrelated markets. In the online advertising cases, for example, those two markets are typically the market for advertisers and the market for consumers of those ads. As a firm’s control over one increases, it inherently enjoys benefits in the others ”

“ Moreover, on the merger side, the Supreme Court has not reviewed a Section 7 case for decades and, as Potter Stewart remarked in Von’s Grocery, the only thing settled in Supreme Court merger jurisprudence is that that “the government always wins.” ”

“ The FTC’s recent loss in the Ovation litigation proves this point: there, the court viewed price elasticity as the trump card. This meant the court could neither account for the transaction’s non-price effects on things like quality, safety, and innovation, or hold (as other courts have done) that functional interchangeability trumped price elasticity. [22]
Additionally, as James Langenfeld has observed, simulation studies inevitably include assumptions that may or may not be accurate. [23] If they are inaccurate, the result of the study will be inaccurate. ”

“ The Commission settled the Xerox suit in 1975 with a consent decree that required Xerox to permit the use of any three of its dry paper copier patents on a royalty-free basis and to desist in pursuing certain of its infringement suits. ”

“ Hence, Crane concludes, in the predatory pricing context and even in the Section 5 context, “the predominance of private antitrust litigation has stymied public antitrust enforcement by precipitating the creation of restrictive liability norms that are then applied to public lawsuits as well.” Id. ↑ Commissioner J. Thomas Rosch, Promoting Innovation: Just How “Dynamic” Should Antitrust Law Be?, Remarks before the USC Gould School of Law 2010 Intellectual Property Institute (March 23, 2010) , available at http://www.ftc.gov/speeches/rosch/100323uscremarks.pdf ”