Posted by D. Daniel Sokol
Ron Cass, Center for the Rule of Law, Cass & Associates, PC, Boston University School of Law explores Antitrust for High-Tech and Low: Regulation, Innovation, and Risk.
ABSTRACT: Severe limitations on antitrust enforcement officials’ knowledge and the potential impact of ill-advised investigations and prosecutions on markets suggest that officials should exercise extraordinary caution in enforcement of restraints on single-firm conduct. Although it is common to depict antitrust enforcement as protecting market competition while other forms of regulation are seen as intrusions (justifiable or not) into market operation, antitrust enforcement has characteristics and risks similar to other forms of regulation. Indeed, government antitrust enforcement can be especially problematic, as it requires discretionary selection among an extraordinary range of possible targets, imposes significant burdens on companies that are under investigation or subject to suit, invites efforts by individual firms to motivate officials to deploy resources against rivals, and can seriously disrupt competition among firms. Antitrust authorities need to exercise special care in making enforcement decisions respecting conduct of individual dominant firms in high-technology industries, where antitrust enforcers’ abilities to understand and predict industry evolution are most limited and where enforcement actions are most likely to rest on debatable predicates about the effects of specific conduct.
Critically, market boundaries that so often are taken for granted as setting the proper framework for evaluating effects of a leading firm’s conduct frequently fail to capture the most important sources of competition for the firm, which in many industries (including many high-technology industries with strong network effects) are dynamic and involve potential replacement of the technology that is associated with the government’s market definition. This has led to ill-advised enforcement initiatives which have dramatically burdened the target companies (even at the formal investigation stage) and has prejudiced market development without compensating benefits to consumers. Further, while network effects can establish or sustain dominance within a narrowly defined market, network effects also can have just the opposite effect: they can be the reason that a firm’s dominance comes to an end, as the success of a dominant firm is a spur to investment in competing technologies, including technologies that can replace the currently successful product or service.
At a time when companies publicly identified as potential antitrust enforcement targets include a very large number of leading high-technology firms (among them, Facebook, Apple, Google, IBM, AT&T, Microsoft, and Intel), it is important to look critically at prior enforcement efforts predicated on similar theories. This article examines government enforcement decisions respecting four prior targets and draws lessons for enforcement going forward
Featured News
Kenya’s Competition Authority Proposes Tougher Regulations on Big Tech
May 30, 2024 by
CPI
KKR Secures EU Antitrust Approval for $24 Billion Acquisition of Telecom Italia’s Fixed-Line Network
May 30, 2024 by
CPI
European Court Sides with Tech Giants in Italian Regulatory Dispute
May 30, 2024 by
CPI
US Steel and Nippon Steel Secure International Approvals for $14.9B Merger
May 30, 2024 by
CPI
EU Watchdog Mandates Boardroom Accountability for AI in Banks
May 30, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Merger Guidelines Retrospective
May 21, 2024 by
CPI
Mergers of Complements
May 21, 2024 by
CPI
Personality Traits, Private Equity, and Merger Analysis
May 21, 2024 by
CPI
The 2023 Merger Guidelines: Lessons in the Importance of Incipiency, Modern Economics, and Monopsony
May 21, 2024 by
CPI
The 2023 Merger Guidelines: Sharpening Merger Analysis
May 21, 2024 by
CPI