Law Commons^™

Markets In Ip And Antitrust, Herbert J. Hovenkamp

All Faculty Scholarship

The purpose of market definition in antitrust law is to identify a grouping of sales such that a single firm who controlled them could maintain prices for a significant time at above the competitive level. The conceptions and procedures that go into “market definition” in antitrust can be quite different from those that go into market definition in IP law. When the issue of market definition appears in IP cases, it is mainly as a query about the range over which rivalry occurs. This rivalry may or may not have much to do with a firm’s ability to charge a …

Antitrust's "Jurisdictional" Reach Abroad, Herbert J. Hovenkamp

All Faculty Scholarship

In its Arbaugh decision the Supreme Court insisted that a federal statute’s limitation on reach be regarded as “jurisdictional” only if the legislature was clear that this is what it had in mind. The Foreign Trade Antitrust Improvement Act (FTAIA) presents a puzzle in this regard, because Congress seems to have been quite clear about what it had in mind; it simply failed to use the correct set of buzzwords in the statute itself, and well before Arbaugh assessed this requirement.

Even if the FTAIA is to be regarded as non-jurisdictional, the constitutional extraterritorial reach of the Sherman Act is …

Mergers, Market Dominance And The Lundbeck Case, Herbert J. Hovenkamp

All Faculty Scholarship

In Lundbeck the Eighth Circuit affirmed a district court’s judgment that a merger involving the only two drugs approved for treating a serious heart condition in infants was lawful. Although the drugs treated the same condition they were not bioequivalents. The Eighth Circuit approved the district court’s conclusion that they had not been shown to be in the same relevant market.

Most mergers that are subject to challenge under the antitrust laws occur in markets that exhibit some degree of product differentiation. The Lundbeck case illustrates some of the problems that can arise when courts apply ideas derived from models …

Arbitration And Antitrust: Navigating The Contours Of Mandatory Law, Charles H. Brower Ii

Law Faculty Research Publications

No abstract provided.

Rethinking Merger Efficiencies, Daniel A. Crane

Articles

The two leading merger systems-those of the United States and the European Union-treat the potential benefits and risks of mergers asymmetrically. Both systems require considerably greater proof of efficiencies than they do of potential harms if the efficiencies are to offset concerns over the accumulation or exercise of market power The implicit asymmetry principle has important systemic effects for merger control. It not only stands in the way of some socially desirable mergers but also may indirectly facilitate the clearance of some socially undesirable mergers. Neither system explicitly justifies this asymmetry, and none of the plausible justifications are normatively supportable. …

Search Neutrality As An Antitrust Principle, Daniel A. Crane

Law & Economics Working Papers

Google's perceived dominance in Internet search, and the perception that Google exploits this dominance to favor its own websites and service, has led to call for a mandatory legal requirement of "search neutrality." This essay argues that a general principle of search neutrality ignores the realities of Internet search and would stymie search innovation.

Tying Arrangements And Lawful Alternatives: Transaction Costs Considerations, Herbert J. Hovenkamp

All Faculty Scholarship

Tying arrangements often increase welfare by promoting product quality and protecting the supplier's goodwill in the tying product. When the tying product works effectively only with ancillary materials or accessories or services of a particular kind or quality, its supplier can assure the requisite quality of the ancillary product only by supplying that product itself. The cost savings defense and the defenses of quality control or good will are the most widely recognized and accepted tying defenses.

One characteristic of manufactured products is differentiation among the offerings of various brands. This in turn produces a need for more specialized provision …

Quasi Exclusive Dealing, Herbert J. Hovenkamp

All Faculty Scholarship

A firm's discounting policies over a single product raise concerns analogous to exclusive dealing in two situations. First, the firm may offer conditional discounts structured in such a way as to induce customers to take most of their requirements for a given product from the defendant. In addition, a firm may employ “slotting” fees or similar allowances paid by manufacturers to retailers, with the possible result that rivals have difficulty obtaining access to shelf space. Neither practice is literally "exclusive dealing," because neither involves a condition that the purchaser not deal in the goods of a rival, although they may …

Tying Noncompetitive Goods, Herbert J. Hovenkamp

All Faculty Scholarship

Many of the classic tying cases involved tied products that were common staples such as button fasteners, canned ink, dry ice, or salt. These products were sold in competitive markets, presumably at prices very close to cost. For most of them the most likely explanations for the tie were quality control or price discrimination, both with competitively benign results in the great majority of situations. When the tied good is sold in a noncompetitive market, however, an additional consumer welfare enhancing result is likely to obtain – namely, the elimination of double marginalization, which occurs when separate sellers of complementary …

A Preface To Neoclassical Legal Thought, Herbert J. Hovenkamp

All Faculty Scholarship

Most legal historians speak of the period following classical legal thought as “progressive legal thought.” That term creates an unwarranted bias in characterization, however, creating the impression that conservatives clung to an obsolete “classical” ideology, when in fact they were in many ways just as revisionist as the progressives legal thinkers whom they critiqued. The Progressives and New Deal thinkers whom we identify with progressive legal thought were nearly all neoclassical, or marginalist, in their economics, but it is hardly true that all marginalists were progressives. For example, the lawyers and policy makers in the corporate finance battles of the …

As Antitrust Case Ends, Microsoft Is Victorious In Defeat, Norman Hawker, Robert H. Lande

All Faculty Scholarship

As the final judgment in the celebrated Microsoft case ends, this piece very briefly assesses the impact of its remedy. When evaluated in terms of its most important goals, the remedy has proven to be a failure. Microsoft's monopoly power in the PC operating systems market is now as great as it was when the case was brought in 1998 or the remedy was ordered in 2002. The article also very briefly discusses the implications of this remedy for Google and AT&T.

Explaining The Importance Of Public Choice For Law, D. Daniel Sokol

UF Law Faculty Publications

The next generation of government officials, business leaders and members of civil society likely will draw from the current pool of law school students. These students often lack a foundation of the theoretical and analytical tools necessary to understand law's interplay with government. This highlights the importance of public choice analysis. By framing issues through a public choice lens, these students will learn the dynamics of effective decision-making within various institutional settings. Filling the void of how to explain the decision-making process of institutional actors in legal settings is Public Choice Concepts and Applications in Law by Maxwell Stearns and …

Antitrust Merger Efficiencies In The Shadow Of The Law, D. Daniel Sokol, James A. Fishkin

UF Law Faculty Publications

This Essay provides an overview of U.S. antitrust merger practice in addressing efficiencies both in terms of actual practice before the agencies and in scholarly work as a response to Jamie Henikoff Moffitt's Vanderbilt Law Review article Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis. Moffitt’s analysis could have benefited from a more thorough discussion of the Department of Justice and Federal Trade Commission’s (collectively, the “agencies”) analysis of efficiencies during investigations and the broader process of negotiations involving mergers. For instance, the article does not discuss the empirical work addressing when the agencies …

Rethinking Merger Efficiencies, Daniel A. Crane

Law & Economics Working Papers

The two leading merger systems—those of the United States and the European Union—treat the potential benefits and risks of mergers asymmetrically. Both systems require considerably greater proof of efficiencies than they do of potential harms if the efficiencies are to offset concerns over the accumulation or exercise of market power. The implicit asymmetry principle has important systemic effects for merger control. Not only does it stand in the way of some socially desirable mergers, but it may indirectly facilitate the clearance of some socially undesirable mergers. Neither system explicitly justifies this asymmetry and none of the plausible justifications is normatively …

Tying And The Rule Of Reason: Understanding Leverage, Foreclosure, And Price Discrimination, Herbert J. Hovenkamp

All Faculty Scholarship

Many tying arrangements are used by firms that do not have substantial market power in either of the two markets linked together by the tie. Their function must be something other than the enlargement or perpetuation of power. A few ties do involve fairly explicit exercises of market power, but they need not be used for a different purpose than the ties imposed by more competitive firms. This paper considers firms’ use of ties to exploit whatever power they already have over the tying product. The "leverage" theory sees ties as exploiting customers as a group via higher prices, whether …

A Primer On Antitrust Damages, Herbert J. Hovenkamp

All Faculty Scholarship

This paper considers the theory of antitrust damages and then discusses some simple models for proving them. Antitrust damages theory begins with the premise that many practices alleged to violate the antitrust laws cause no consumer harm. Others are inefficient and have few socially redeeming virtues. Still others may simultaneously increase both the efficiency of the participants and their market power. A perfectly designed antitrust policy would exonerate the first set of practices, condemn the second set, and condemn the third set only when the social cost of the restraint exceeds its social value or they produce net harm to …

Quantification Of Harm In Private Antitrust Actions In The United States, Herbert J. Hovenkamp

All Faculty Scholarship

This paper discusses the theory and experience of United States courts concerning the quantification of harm in antitrust cases. This treatment pertains to both the social cost of antitrust violations, and to the private damage mechanisms that United States antitrust law has developed. It is submitted for the Roundtable on the Quantification of Harm to Competition by National Courts and Competition Agencies, Organization for Economic Cooperation and Development (OECD), Feb., 2011.

In a typical year more than 90% of antitrust complaints filed in the United States are by private plaintiffs rather than the federal government. Further, when the individual states …

Antitrust And Patent Law Analysis Of Pharmaceutical Reverse Payment Settlements, Herbert J. Hovenkamp

All Faculty Scholarship

Patent settlements in which the patentee pays the alleged infringer to stay out of the market are largely a consequence of the Hatch-Waxman Act, which was designed to facilitate the entry of generic drugs by providing the first generic producer to challenge a pioneer drug patent with a 180 day period of exclusivity. This period can be extended by a settlement even if the generic is not producing, and in any event all subsequent generic firms are denied the 180 day exclusivity period, significantly reducing their incentive to enter.

The Circuit Courts of Appeal are split three ways over such …

Does The Packers And Stockyards Act Require Antitrust Harm?, Herbert J. Hovenkamp

All Faculty Scholarship

The Packers and Stockyards Act was enacted in 1921. Congress was plainly influenced by the 1919 publication of a Federal Trade Commission Report on the meatpacking industry. Consistent with the FTC’s jurisdiction and concerns, the Report dealt with deceptive and unfair practices as well as practices that were believed to violate the antitrust laws. The language of the PSA does much the same, mixing the two. Of its seven specific prohibitions, three contain antitrust-like provisions requiring a lessening of competition. Two others reach unfair and tort-like conduct without any requirement of harm to competition. The remaining two reach both anticompetitive …

Brief Of Amicus Curiae American Antitrust Institute In Support Of Appellants And Reversal Of The District Court's Decision, Federal Trade Commission And State Of Minnesota V. Lundbeck, Inc. Nos. 10-3548 And 10-3549, United States Court Of Appeals For The Eighth District (2011), Christopher L. Sagers, W. Joseph Bruckner, Richard M. Brunell

Law Faculty Briefs and Court Documents

The basis for the District Court’s ruling was its view that cross-price elasticity of demand was “very low” between the two drugs acquired by Lundbeck, and therefore that they could not be in the same relevant market.2 AAI urges reversal on three grounds. First, assuming arguendo that crossprice elasticity was low – even if it were zero – the court’s approach fundamentally misapprehended the law. A lack of price competition between two functionally interchangeable products does not preclude a determination that they are in the same relevant market. Second, regardless of “low” cross-price elasticity, the acquisition removed an actual or …

Reverse Settlements As Patent Invalidity Signals, Gregory Dolin

All Faculty Scholarship

Over the last decade a new type of settlements, commonly referred to as “reversed payment settlements” or simply “reverse settlements,” emerged in litigation over patents covering pharmaceutical products. What differentiates these new settlements from their traditional counterparts is that whereas traditionally, the alleged trespasser on someone else's rights pays the rights-holder to settle the litigation, in these new settlements it is the rights holder that pays the alleged trespasser. These settlements are a direct consequence of the various incentives provided by the Hatch-Waxman Act - an Act designed to increase competition between brand name and generic manufactures of pharmaceutical products. …

Comparative Deterrence From Private Enforcement And Criminal Enforcement Of The U.S. Antitrust Laws, Robert H. Lande, Joshua P. Davis

All Faculty Scholarship

This article shows that private enforcement of the U. S. antitrust laws-which usually is derided as essentially worthless-serves as a more important deterrent of anticompetitive behavior than the most esteemed antitrust program in the world, criminal enforcement by the Antitrust Division of the U.S. Department of Justice.

The debate over the value of private antitrust enforcement long has been heavy with self-serving assertions by powerful economic interests, but light on factual evidence. To help fill this void we have been conducting research for several years on a variety of empirical topics. This article develops and then explores the implications of …

Sector-Specific Competition Enforcement At The Fcc, Jonathan Baker

Articles in Law Reviews & Other Academic Journals

This comment explains how and why sector-specific enforcement by the Federal Communications Commission (FCC) complements generalist competition enforcement by the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC), to the benefit of competition in the communications industry. It illustrates ways in which a sector-specific agency such as the FCC can foster competition by comparing merger reviews by the FCC and DOJ in the wake of the 1996 Telecommunications Act.

Appropriate Liability Rules For Tying And Bundled Discounting, Thom Lambert

Faculty Publications

This article asserts a comprehensive response to Elhauge’s provocative arguments. With respect to tying, the article shows that governing Supreme Court precedent does not deem the non-foreclosure “power” effects of the practice to be anticompetitive and that those effects are unlikely to reduce social welfare in the long run, especially after accounting for dynamic efficiencies. With respect to bundled discounting, the article shows that Elhauge’s proposed liability rule is both inapposite to consumer harm and inadministrable and that both “linked” market foreclosure and a form of below-cost pricing are necessary for anticompetitive harm and should therefore be prerequisites to antitrust …

Dominant Search Engines: An Essential Cultural & Political Facility, Frank Pasquale

Faculty Scholarship

When American lawyers talk about "essential facilities," they are usually referring to antitrust doctrine that has required certain platforms to provide access on fair and nondiscriminatory terms to all comers. Some have recently characterized Google as an essential facility. Antitrust law may shape the search engine industry in positive ways. However, scholars and activists must move beyond the crabbed vocabulary of competition policy to develop a richer normative critique of search engine dominance.

In this chapter, I sketch a new concept of "essential cultural and political facility," which can help policymakers recognize and address situations where a bottleneck has become …

Competition And Regulation In The Insurance Sector: Reassessing The Mccarran-Ferguson Act, Susan Beth Farmer

Journal Articles

This article was presented at a symposium entitled “Public and Private: Are the Boundaries in Transition?” sponsored by the American Antitrust Institute on June 24, 2010. It proposes a different paradigm, which more precisely describes regulation and competition in the insurance sector. This relationship is the shifting boundary between state and federal regulation instead of a boundary between the public and private sectors. The McCarran-Ferguson Act was adopted to protect firms acting in the business of insurance from federal antitrust scrutiny, but its language and impact goes far beyond federal competition law. So broad is the exemption that the modern …

"Consumer Choice" Is Where We Are All Going - So Let's Go Together, Neil W. Averitt, Robert H. Lande, Paul Nihoul

All Faculty Scholarship

Globalisation of business makes it important for firms to predict how their behaviour is likely to be treated in the roughly 200 nations that have competition laws. In that context, a crucial question is: are we in a position to develop a common intellectual framework that would give coherence to policy statements made on specific competition related issues and, at the same time, be acceptable, broadly, in a variety of legal systems, not necessarily based on identical assumptions? We believe that the answer is “yes.” A concept is emerging as a possible source of unification for competition policies around the …

Standardization And Markets: Just Exactly Who Is The Government, And Why Should Antitrust Care?, Christopher L. Sagers

Law Faculty Articles and Essays

We take for granted that the basic choice in public policy is between allocation of resources by government bureaucracy, on the one hand, or allocation by markets, on the other. But that dichotomy is false, and at least under contemporary circumstances it is more accurate to describe the choice as between allocation by one kind of bureaucracy and allocation by a different kind of bureaucracy. This poses a problem for our antitrust policy, because it lacks any coherent guidance as to how to address those entities and transactions that are not governmental but are also not simply market-governed. This paper …

Why Copperweld Was Actually Kind Of Dumb: Sound, Fury, And The Once And Still Missing Antitrust Theory Of The Firm?, Chris Sagers

Law Faculty Articles and Essays

Since even before Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), it has been thought that antitrust needs some "theory of the firm" to inform its application of a "single-entity" defense in Sherman Act section 1 litigation. Not only is that sense mistaken, it is emblematic of the deep misdirection of contemporary antitrust. It shows just how far antitrust has forgotten that it is a law, a practical tool to implement policy choices made through our system of government. Much too much of the time, it seems to fancy itself rather an abstract policy seminar to be …

The Landscape Of Collective Management Schemes, Daniel J. Gervais

Vanderbilt Law School Faculty Publications

Collective management comes in many shapes and sizes. There is, however, an interesting definition proposed by WIPO: [T]he term “collective management” only refers to those forms of joint exercise of rights where there are truly “collectivized” aspects (such as tariffs, licensing conditions and distribution rules); where there is an organized community behind it; where the management is carried out on behalf of such a community; and where the organization serves collective objectives beyond merely carrying out the tasks of rights management . . . . In contrast, “rights clearance organizations” are those which perform joint exercise of rights without any …