Applying the Neo-Chicago School’s framework to high-tech markets

Neo-Chicago School

The « antitrust law community » loves to argue over which school of thoughts is the best suited to the New Economy. And indeed, it’s a lot of fun. But more than that, determining which school of thoughts provides the best framework is a subject of particular importance because it implies to determine which objectives antitrust law should pursue.

Few academic authors have actually revealed from which school they feel the closer to. Some have raised how out-dated it is. We believe, to the contrary, that it is a necessary step. Here are some insights about the Neo-Chicago School.

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U.S. cases: « product redesign » as anti-competitive strategy

This post is from our series dedicated to statistical analyses of antitrust law.
We called it: « Let’s Stat ».

US cases

Methodology:

We entered the keyword « product redesign » AND « antitrust » AND « section 2 » AND « Sherman Act » on WestLawNext search engine.

Comments:

  • Product redesign can be anti-competitive. Courts have long used the notion of « tying » to address it, but the trend is changing (although we can legitimately think that many more cases are concerned with this issue than those using these specific terms). High-tech markets are especially concerned by this kind of practices, the reason why judges are now considering it under its own legal regime. Work is now to be done on its judicial contours.
  • Here is the list of the cases for 2015:

– Vesta Corp. v. Amdocs Management Ltd.United States District Court, D. Oregon. September 03, 2015 — F.Supp.3d —-

– Duty Free Americas, Inc. v. Estee Lauder Companies, Inc.United States Court of Appeals, Eleventh Circuit. August 07, 2015 797 F.3d 1248 2015

– New York ex rel. Schneiderman v. Actavis PLCUnited States Court of Appeals, Second Circuit. May 22, 2015 787 F.3d 638 2015

– Collegenet, Inc. v. Common Application, Inc.United States District Court, D. Oregon. May 15, 2015 104 F.Supp.3d 1137 2015

– Superior Production Partnership v. Gordon Auto Body Parts Co., Ltd.United States Court of Appeals, Sixth Circuit. April 22, 2015 784 F.3d 311 2015Mylan Pharmaceuticals, Inc. v. Warner Chilcott Public Ltd. Co.United States District Court, E.D. Pennsylvania. April 16, 2015 Slip Copy 2015

– Mylan Pharmaceuticals, Inc. v. Warner Chilcott Public Ltd. Co.United States District Court, E.D. Pennsylvania. April 16, 2015 Slip Copy 2015

by Thibault Schrepel

Top 10 most downloaded antitrust articles in 2015

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Le Concurrentialiste is pleased to present you the top 10 most downloaded antitrust articles in 2015. We based this ranking on all English articles published on SSRN for the first time during the year of 2015. We considered those published in academic law reviews and colloquiums.

Good reading to all.

1. « Horizontal Shareholding » by Einer Elhauge, Harvard Law Review, Vol. 109, No. 5, 2016

Horizontal shareholdings exist when a common set of investors own significant shares in corporations that are horizontal competitors in a product market. Economic models show that substantial horizontal shareholdings are likely to anticompetitively raise prices when the owned businesses compete in a concentrated market. Recent empirical work not only confirms the prediction of these models, but also reveals that such horizontal shareholdings are omnipresent in our economy. I show that such horizontal shareholdings can help explain fundamental economic puzzles, including why corporate executives are rewarded for industry performance rather than just individual corporate performance, why corporations have not used recent high profits to expand output and employment, and why economic inequality has risen in recent decades. I also show that stock acquisitions that create anticompetitive horizontal shareholdings are illegal under current antitrust law, and I recommend antitrust enforcement actions to undo them and their adverse economic effects.

2. « Artificial Intelligence & Collusion: When Computers Inhibit Competition » by Ariel Ezrachi & Maurice E. Stucke, Oxford Legal Studies Research Paper No. 18/2015

The development of self-learning and independent computers has long captured our imagination. The HAL 9000 computer, in the 1968 film, 2001: A Space Odyssey, for example, assured, “I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.” Machine learning raises many challenging legal and ethical questions as to the relationship between man and machine, humans’ control — or lack of it — over machines, and accountability for machine activities. While these issues have long captivated our interest, few would envision the day when these developments (and the legal and ethical challenges raised by them) would become an antitrust issue. Sophisticated computers are central to the competitiveness of present and future markets. With the accelerating development of AI, they are set to change the competitive landscape and the nature of competitive restraints. As pricing mechanisms shift to computer pricing algorithms, so too will the types of collusion. We are shifting from the world where executives expressly collude in smoke-filled hotel rooms to a world where pricing algorithms continually monitor and adjust to each other’s prices and market data. Our paper addresses these developments and considers the application of competition law to an advanced ‘computerised trade environment.’ After discussing the way in which computerised technology is changing the competitive landscape, we explore four scenarios where AI can foster anticompetitive collusion and the legal and ethical challenges each scenario raises.

3. « Intel, Leveraging Rebates and the Goals of Article 102 TFEU » by Nicolas Petit

This paper reviews the 2014 Intel judgment of the General Court of the EU in relation to exclusivity rebates given by dominant firms. It distinguishes between the positive issue – ie the legal standard currently applicable to the assessment of dominant firms’ rebates – and the prospective discussion – ie the legal standard that should optimally apply to dominant firms rebates. On the positive debate, the paper argues that Intel affirms a modified per se prohibition rule against dominant firms’ exclusivity rebates. The scope of this standard is confined to leveraging rebates, and does not cover non-leveraging rebates, which must be analysed under the rule of reason. The paper also draws a distinction between exclusivity obligations and exclusivity options for which agencies and courts should undertake more economic analysis.

4. « Friedrich Hayek’s Contribution to Antitrust Law and Its Modern Application » by Thibault Schrepel, ICC Global Antitrust Review, pp. 199-216, 2014

Friedrich Hayek is one the most influential economists of his time. Yet, Hayek’s influence on antitrust judges and antitrust agencies is quite low compared to the one other economists have. This should change. The very rapid growth of high-technology markets tends to confirm Hayek’s views on competition, the reason why it is time to (re)consider his work. As of today, dynamic efficiencies are not fully considered in most antitrust analyses. Based on Hayek’s work, the essay proposes some concrete changes in our modern laws. They imply to consider every aspect of the concept of ‘innovation’ in all antitrust analyses, by taking position on standardization, predatory innovation, disruptive innovation and other major themes for our economies. Also, analysing Hayek’s thinking show us why antitrust laws should only apply with certitude and agencies should consider false positives with more consistency.

5. « Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly. » by Irina D. Manta & David S. Olson, 67 Alabama Law Review 135 (2015)

This Article argues that the evolution of software — and the looming age of the “Internet of Things” — will allow manufacturers to make use of consumer monitoring technologies and restrictive software licenses to price discriminate more perfectly. First, the increasing communication between software and its producers gives more opportunities to monitor consumer behavior and characteristics. Second, attaching restrictive copyright licenses to software — and to goods containing software — enables producers to restrict use and resale of their products. By combining monitoring and restrictive licensing, producers will have increasingly better ability and opportunities to price discriminate among their consumers.

6. « Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche » by Damien Geradin, 11 (2015) Journal of Competition Law & Economics

In June 2014, the GCEU confirmed the Decision of the European Commission that condemned Intel for breaching Article 102 TFEU by adopting exclusive rebates and “naked restrictions”. This judgement, in which the GCEU considered that in line with Hoffman-La Roche loyalty rebates should be quasi-per se illegal has been subject to many criticisms as not in line with the teachings of economics. This paper discusses the shortcomings of this judgment and argues that it is great time for the CJEU to abandon the application of its quasi-per se rule of illegality approach to exclusive dealing and loyalty rebates and replace it by a structured rule of reason. Such an approach would have many advantages and create greater coherence in the case-law of the CJEU on unilateral pricing conduct.

7. « No Mistake About It: The Important Role of Antitrust in the Era of Big Data » by Allen P. Grunes & Maurice E. Stucke, University of Tennessee Legal Studies Research Paper No. 269

Competition authorities in Europe (and to a lesser extent in other jurisdictions) are beginning to make data, its uses, and its implications for competition law, a key focus. Some, however, argue that competition law has a limited role to play in the era of big data. We respectfully disagree. Competition law will play an integral role to ensure that we capture the benefits of a data-driven economy while mitigating its associated risks. After outlining several implications of big data on competition policy, we address some of the myths about big data and competition law. These myths paint with a broad brush and tend to obscure the legitimate challenges big data presents to competition officials. Our article discusses why big data is not a passing antitrust fad and recommends some next steps for the competition agencies. First and foremost, it is necessary for the agencies to understand the tradeoffs in the big data era, and to ask the right questions and use the right tools.

8. « When Competition Fails to Optimise Quality: A Look at Search Engines » by Maurice E. Stucke & Ariel Ezrachi, Yale Journal of Law & Technology (2015)

The European Commission’s Statement of Objections forms the latest addition to the ongoing debate on the possible misuse of Google’s position in the search engine market. The scholarly debate, however, has largely been over the exclusionary effects of search degradation. Less attention has been attributed to the dimension of quality – whether and how a search engine, faced with rivals, could degrade quality on the free side. We set out to address this fundamental issue: With the proliferation of numerous web search engines and their free usage and availability, could any search engine degrade quality? We begin our analysis with a review of the network effects that may impact the relative power of a search engine. We next identify three necessary, but not sufficient, variables for quality degradation to occur in search results. With these three variables in mind, we consider instances when a search engine could degrade quality despite competition from rival engines.

9. « Ten Years of Commitment Decisions Under Article 9 of Regulation 1/2003: Too Much of a Good Thing? » by Wouter P. J. Wils, Concurrences Journal 6th International Conference ‘New frontiers of antitrust’

Article 9 of Regulation 1/2003 created a new mechanism, allowing the European Commission to close an investigation into a suspected infringement of the antitrust prohibitions contained in Articles 101 and 102 TFEU by making commitments offered by the companies concerned binding on those companies (« commitment decisions »). Leaving aside the area of cartels, for which commitment decisions are not available, more than half of the formal decisions adopted by the Commission in the ten years since the entry into force of Regulation 1/2003 have been commitment decisions. Several commentators have expressed concerns about the risk of excessive use of the instrument of commitment decisions. To what extent are these concerns justified?

10. « Post Danmark II, or the Quest for Administrability and Coherence in Article 102 TFEU » by LSE Legal Studies Working Paper No. 15/2015

The legal status of quantity rebates under Article 102 TFEU is unclear. In Post Danmark II, the ECJ has been asked to provide a substantive test to establish whether this practice amounts to an abuse of a dominant position. As the case law stands, two possible approaches can be followed. Quantity rebates can be assessed in accordance with the framework sketched by the Court in Michelin I, or they can be subject to the principles applying to other price-based strategies such as ‘margin squeeze’ abuses and selective price cuts. There are compelling reasons to follow the latter approach. The criteria set out in Michelin I were conceived for target rebates, which – unlike quantity-based schemes – are not presumptively legal under Article 102 TFEU. In addition, the said criteria are not administrable, in the sense that they do not make it possible to define in advance whether a given rebate scheme is lawful or unlawful. In practice, and in contradiction with the logic underlying Michelin I, it is sufficient for a competition authority or a claimant to identify some ‘loyalty-inducing’ features to establish an abuse. As such, they are not suitable for their application in disputes before national courts, or by national competition authorities.

Chart: Huawei v. ZTE (ECJ, 16 July 2015)

Dear readers,

Le Concurrentialiste is very pleased to present you our very first « understand a case by looking at a chart, » or something like that. The first case under the spotlight is Huawei v. ZTE (C‐170/13), which was settled by the European Court of justice on July 16, 2015. We focused our first chart on the process of negotiating FRAND terms as well as the granting of injunctions. Please note that the case involves other issues as well. Here is a link to it: link.

ZTE Huawei

Les fonds souverains de brevets : course à l’armement

Cet article est un résumé de celui paru au
Journal of World Economics,
« Towards a Global Patent Arms Race » (lien)

La version originale est disponible
via GenerationLibre (lien)

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Télécharger la version PDF à ce lien
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Les patent trolls(1) sont souvent présentés comme l’ultime fléau de la propriété intellectuelle. Oui mais voilà, depuis quelques mois, une tendance plus dévastatrice encore prend désormais vie au sein de nos gouvernements : la création de patent trolls publics. Ces entités, que nous qualifierons de fonds souverains de brevets, recréent tous les risques liés aux patent trolls privés en y ajoutant celui d’une course à l’armement entre États. C’est désormais à celui qui achètera le plus de brevets et qui se montrera le plus offensif !

Les fonds souverains de brevets sont pour l’heure majoritairement développés en Europe et en Asie. Le gouvernement chinois a créé le sien en 2014 et il le présente comme un outil prééminent de sa stratégie géopolitique. Taïwan, le Japon et la Corée sont également entrés dans le jeu. Dans le même temps, le gouvernement français est particulièrement actif, que ce soit au niveau national ou européen. Ce dernier a d’ores et déjà créé deux fonds souverains de brevets et il milite pour la création d’un fonds européen.

L’objectif affiché de l’ensemble de ces fonds souverains est de lutter contre d’autres fonds étrangers ainsi que d’initier des actions en justice dans le but de « défendre » les sociétés nationales. En réalité, ces fonds souverains sont nocifs pour l’innovation et le consommateur. Il est urgent d’engager une lutte multidimensionnelle contre ce nouveau monstre de la propriété intellectuelle.

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