A PYMNTS Company

Holding Innovation to an Antitrust Standard

By  |  April 19, 2007
Holding Innovation to an Antitrust Standard

Richard Gilbert, Apr 19, 2007

Several antitrust cases have involved allegations of anticompetitive innovation or product design and some plaintiffs and antitrust scholars have argued that investment in research and development that excludes competition can have predatory effects similar to predatory pricing. This article analyzes several tests for predatory innovation, including the rule of reason based on total and consumer welfare and profit sacrifice tests. All of these tests are likely to produce false positives that chill incentives for beneficial investments in research and development. Most courts that have considered allegations of anticompetitive innovation, including the appellate court in U.S. v. Microsoft, have concluded that innovation is not anticompetitive if it has plausible efficiencies. This is close to a test of whether innovation is a sham. While a sham test may fail to identify innovations that harm competition, that risk is acceptable given the high cost of penalizing beneficial innovation.

    Get the Full Story

    Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.

    Subscribe to our daily newsletter, PYMNTS Today.

    By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions.

    Links to Full Content