Law Commons^™

Antitrust For Dominant Digital Platforms: An Alternative To The Monopoly Power Standard To Restore Competition, Jordan Ramsey

Senior Honors Theses

Antitrust law is meant to promote competition by prohibiting anticompetitive business practices such as mergers and acquisitions as well as exclusionary conduct. Judicial interpretation of antitrust law has allowed dominant digital platforms to undertake anticompetitive actions without prosecution. The Sherman Antitrust Act should be amended to remove the monopoly power standard that allows firms to engage in anticompetitive conduct as long as the conduct does not create or uphold monopoly power. The amendment would make anticompetitive conduct illegal regardless of monopoly power, as long as six proof requirements are met. This would result in lessened market concentration, which would benefit …

Selling Antitrust, Herbert J. Hovenkamp

All Faculty Scholarship

Antitrust enforcers and its other defenders have never done a good job of selling their field to the public. That is not entirely their fault. Antitrust is inherently technical, and a less engaging discipline to most people than, say, civil rights or criminal law. The more serious problem is that when the general press does talk about antitrust policy it naturally gravitates toward the fringes, both the far right and the far left. Extreme rhetoric makes for better press than the day-to-day operations of a technical enterprise. The extremes are often stated in overdramatized black-and-white terms that avoid the real …

President Biden's Executive Order On Competition: An Antitrust Analysis, Herbert J. Hovenkamp

All Faculty Scholarship

In July, 2021, President Biden signed a far ranging Executive Order directed to promoting competition in the American economy. This paper analyzes issues covered by the Order that are most likely to affect the scope and enforcement of antitrust law. The only passage that the Executive Order quoted from a Supreme Court antitrust decision captures its antitrust ideology well – that the Sherman Act:

rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time …

Antitrust Liability For False Advertising: A Response To Carrier & Tushnet, Susannah Gagnon, Herbert J. Hovenkamp

All Faculty Scholarship

This reply briefly considers when false advertising can give rise to antitrust liability. The biggest difference between tort and antitrust liability is that the latter requires harm to the market, which is critically dependent on actual consumer response. As a result, the biggest hurdle a private plaintiff faces in turning an act of false advertising into an antitrust offense is proof of causation – to what extent can a decline in purchase volume or other market rejection be specifically attributed to the defendant’s false claims? That requirement dooms the great majority of false advertising claims attacked as violations of the …

Regulating New Tech: Problems, Pathways, And People, Cary Coglianese

All Faculty Scholarship

New technologies bring with them many promises, but also a series of new problems. Even though these problems are new, they are not unlike the types of problems that regulators have long addressed in other contexts. The lessons from regulation in the past can thus guide regulatory efforts today. Regulators must focus on understanding the problems they seek to address and the causal pathways that lead to these problems. Then they must undertake efforts to shape the behavior of those in industry so that private sector managers focus on their technologies’ problems and take actions to interrupt the causal pathways. …

Antitrust And Platform Monopoly, Herbert J. Hovenkamp

All Faculty Scholarship

Are large digital platforms that deal directly with consumers “winner take all,” or natural monopoly, firms? That question is surprisingly complex and does not produce the same answer for every platform. The closer one looks at digital platforms the less they seem to be winner-take-all. As a result, competition can be made to work in most of them. Further, antitrust enforcement, with its accommodation of firm variety, is generally superior to any form of statutory regulation that generalizes over large numbers.

Assuming that an antitrust violation is found, what should be the remedy? Breaking up large firms subject to extensive …

Addressing The Divisions In Antitrust Policy, Herbert J. Hovenkamp

All Faculty Scholarship

This is the text of an interview conducted in writing by Professor A. Douglas Melamed, Stanford Law School.

Appreciating The Overlooked Contributions Of The New Harvard School, Christopher S. Yoo

All Faculty Scholarship

My colleague, Herbert Hovenkamp, is almost universally recognized as the most cited and the most authoritative US antitrust scholar. Among his many honors, his status as the senior author of the authoritative Areeda and Hovenkamp treatise makes him the unquestioned leader of the New Harvard School, which has long served as the bellwether for how courts are likely to resolve emerging issues in modern antitrust doctrine. Unfortunately, its defining tenets and its positions on emerging issues remain surprisingly obscure. My contribution to this festschrift explores the core commitments that distinguish the New Harvard School from other approaches to antitrust. It …

Vertical Mergers In A Model Of Upstream Monopoly And Incomplete Information, Serge Moresi, David Reitman, Steven C. Salop, Yianis Sarafidis

Georgetown Law Faculty Publications and Other Works

We examine the role of private information on the impact of vertical mergers. A vertical merger can improve the information that is available to an upstream monopolist because, after the merger, the monopolist can observe the cost of its downstream merger partner. In the pre-merger world, because the costs of the downstream firms are private information, the monopolist has incomplete information and cannot implement the monopoly outcome: The expected pre-merger equilibrium price of the downstream product is lower than the monopoly price. After a vertical merger, the equilibrium input price that is charged to the downstream rival can either increase …

Competitive Harm From Vertical Mergers, Herbert J. Hovenkamp

All Faculty Scholarship

The antitrust enforcement Agencies' 2020 Vertical Merger Guidelines introduce a nontechnical application of bargaining theory into the assessment of competitive effects from vertical acquisitions. The economics of such bargaining is complex and can produce skepticism among judges, who might regard its mathematics as overly technical, its game theory as excessively theoretical or speculative, or its assumptions as unrealistic.

However, we have been there before. The introduction of concentration indexes, particularly the HHI, in the Merger Guidelines was initially met with skepticism but gradually they were accepted as judges became more comfortable with them. The same thing very largely happened again …

A Case For Higher Corporate Tax Rates, Edward G. Fox, Zachary D. Liscow

Law & Economics Working Papers

In this report, Fox and Liscow argue that, while conventional wisdom holds that we should lower taxes on corporations because of international competition, two recent changes militate in favor of higher corporate taxes, which would close the deficit, fund social programs, and reduce inequality. First, changes in tax law have increasingly targeted the corporate tax at economic “rents,” the supersized returns that businesses receive when they enjoy advantages like market power. Because taxing rents is progressive and does little to harm economic activity, a higher rate is justified. Second, shifts in the American economy have allowed companies to earn more …

Justice Department's New Position On Patents, Standard Setting, And Injunctions, Herbert J. Hovenkamp

All Faculty Scholarship

A deep split in American innovation policy has arisen between new economy and old economy innovation. In a recent policy statement, the Antitrust Division of the Justice Department takes a position that tilts more toward the old economy. Its December, 2019, policy statement on remedies for Standard Essential Patents issued jointly with the U.S. Patent and Trademark Office and the National Institute of Standards and Technology reflects this movement.

The policy statement as a whole contains two noteworthy problems: one is a glaring omission, and the other is a mischaracterization of the scope of antitrust liability. Both positions are strongly …

What’S In Your Wallet (And What Should The Law Do About It?), Natasha Sarin

All Faculty Scholarship

In traditional markets, firms can charge prices that are significantly elevated relative to their costs only if there is a market failure. However, this is not true in a two-sided market (like Amazon, Uber, and Mastercard), where firms often subsidize one side of the market and generate revenue from the other. This means consideration of one side of the market in isolation is problematic. The Court embraced this view in Ohio v. American Express, requiring that anticompetitive harm on one side of a two-sided market be weighed against benefits on the other side.

Legal scholars denounce this decision, which, …

Frand And Antitrust, Herbert J. Hovenkamp

All Faculty Scholarship

This paper considers when a patentee’s violation of a FRAND commitment also violates the antitrust laws. It warns against two extremes. First, is thinking that any violation of a FRAND obligation is an antitrust violation as well. FRAND obligations are contractual, and most breaches of contract do not violate antitrust law. The other extreme is thinking that, because a FRAND violation is a breach of contract, it cannot also be an antitrust violation.

Every antitrust case must consider the market environment in which conduct is to be evaluated. SSOs operated by multiple firms are joint ventures. Antitrust’s role is to …

Anticompetitive Mergers In Labor Markets, Ioana Marinescu, Herbert J. Hovenkamp

All Faculty Scholarship

Mergers of competitors are conventionally challenged under the federal antitrust laws when they threaten to lessen competition in some product or service market in which the merging firms sell. Mergers can also injure competition in markets where the firms purchase. Although that principle is widely recognized, very few litigated cases have applied merger law to buyers. This article concerns an even more rarefied subset, and one that has barely been mentioned. Nevertheless, its implications are staggering. Some mergers may be unlawful because they injure competition in the labor market by enabling the post-merger firm anticompetitively to suppress wages or salaries. …

Intellectual Property And Competition, Herbert J. Hovenkamp

All Faculty Scholarship

A legal system that relies on private property rights to promote economic development must consider that profits can come from two different sources. First, both competition under constant technology and innovation promote economic growth by granting many of the returns to the successful developer. Competition and innovation both increase output, whether measured by quantity or quality. Second, however, profits can come from practices that reduce output, in some cases by reducing quantity, or in others by reducing innovation.

IP rights and competition policy were traditionally regarded as in conflict. IP rights create monopoly, which was thought to be inimical to …

No-Hire Provisions In Mcdonald's Franchise Agreements, An Antitrust Violations Or Evidence Of Joint Employer?, Andrele Brutus St. Val

Articles

As the archetypical franchisor and industry leader, McDonald’s has come under much public and legal scrutiny in recent years for its business practices and its effects on low-wage and unskilled employees. Its no hire provision—which is a term included in its franchise agreements with franchisees that bars franchisees from hiring each others employees—has been found by economist to suppress wages and stagnate growth. This provision is being challenged under antitrust law while its employment practices are being disputed under labor law. McDonald’s is defending its business practices by presenting two seemingly contradictory defenses. This article explores how McDonald’s position in …

Reasonable Patent Exhaustion, Herbert J. Hovenkamp

All Faculty Scholarship

A lengthy tug of war between the Supreme Court and the Federal Circuit Court of Appeals may have ended when the Supreme Court held that the sale of a patented article exhausts the patentee seller’s rights to enforce restrictions on that article through patent infringement suits. Further, reversing the Federal Circuit, the parties cannot bargain around this rule through the seller’s specification of conditions stated at the time of sale, no matter how clear. No inquiry need be made into the patentee’s market power, anticompetitive effects, or other types of harms, whether enforcement of the condition is socially costly or …

The Rule Of Reason, Herbert J. Hovenkamp

All Faculty Scholarship

Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up …

Progressive Antitrust, Herbert J. Hovenkamp

All Faculty Scholarship

Several American political candidates and administrations have both run and served under the “progressive” banner for more than a century, right through the 2016 election season. For the most part these have pursued interventionist antitrust policies, reflecting a belief that markets are fragile and in need of repair, that certain interest groups require greater protection, or in some cases that antitrust policy is an extended arm of regulation. This paper argues that most of this progressive antitrust policy was misconceived, including that reflected in the 2016 antitrust plank of the Democratic Party. The progressive state is best served by a …

Patent Pools And Related Technology Sharing, Erik Hovenkamp, Herbert J. Hovenkamp

All Faculty Scholarship

A patent "pool" is an arrangement under which patent holders in a common technology commit their patents to a single holder, who then licenses them out to the original patentees and perhaps also to outsiders. The payoffs include both revenue earned as a licensor, and technology acquired by pool members as licensees. Public effects can also be significant. For example, technology sharing of complementary patents can improve product quality and variety. In some information technology markets pools can prevent patents from becoming a costly obstacle to innovation by clearing channels of technology transfer. By contrast, a pool's aggregate output reduction …

Appraising Merger Efficiencies, Herbert J. Hovenkamp

All Faculty Scholarship

Mergers of business firms violate the antitrust laws when they threaten to lessen competition, which generally refers to a price increase resulting from a reduction in output. However, a merger that threatens competition may also enable the post-merger firm to reduce its costs or improve its product. Attitudes toward mergers are heavily driven by assumptions about efficiency gains. If mergers of competitors never produced efficiency gains but simply reduced the number of competitors, a strong presumption against them would be warranted. We tolerate most mergers because of a background, highly generalized belief that most or at least many produce cost …

Buying Monopoly: Antitrust Limits On Damages For Externally Acquired Patents, Erik N. Hovenkamp, Herbert J. Hovenkamp

All Faculty Scholarship

The “monopoly” authorized by the Patent Act refers to the exclusionary power of individual patents. That is not the same thing as the acquisition of individual patent rights into portfolios that dominate a market, something that the Patent Act never justifies and that the antitrust laws rightfully prohibit.

Most patent assignments are procompetitive and serve to promote the efficient commercialization of patented inventions. However, patent acquisitions may also be used to combine substitute patents from external patentees, giving the acquirer an unearned monopoly position in the relevant technology market. A producer requires only one of the substitutes, but by acquiring …

Antitrust Balancing, Herbert J. Hovenkamp

All Faculty Scholarship

Antitrust litigation often confronts situations where effects point in both directions. Judges sometimes describe the process of evaluating these factors as “balancing.” In its e-Books decision the Second Circuit believed that the need to balance is what justifies application of the rule of reason. In Microsoft the D.C. Circuit stated that “courts routinely apply a…balancing approach” under which “the plaintiff must demonstrate that the anticompetitive harm…outweighs the procompetitive benefit.” But then it decided the case without balancing anything.

The term “balancing” is a very poor label for what courts actually do in these cases. Balancing requires that two offsetting effects …

Antitrust And Information Technologies, Herbert J. Hovenkamp

All Faculty Scholarship

Technological change strongly affects the use of information to facilitate anticompetitive practices. The effects result mainly from digitization and the many products and processes that it enables. These technologies of information also account for a significant portion of the difficulties that antitrust law encounters when its addresses intellectual property rights. In addition, changes in the technologies of information affect the structures of certain products, in the process either increasing or decreasing the potential for competitive harm.

For example, digital technology affects the way firms exercise market power, but it also imposes serious measurement difficulties. The digital revolution has occurred in …

Telecommunications: Competition Policy In The Telecommunications Space, Gene Kimmelman, Maureen K. Ohlhausen, Michael O’Rielly, Christopher S. Yoo, Stephen F. Williams

All Faculty Scholarship

In today’s rapidly evolving telecommunications landscape, the development of new technologies and distribution platforms are driving innovation and growth at a breakneck speed across the Internet ecosystem. Broadband connectivity is increasingly important to our civil discourse, our economy, and our future. What is the proper role of government in facilitating robust investment and competition in this critical sector? When technology companies constantly have to reinvent themselves and adapt to survive – what role should government play? This panel of experts at the Federalist Society’s 2014 National Lawyers Convention discussed the current regulatory environment and how government policies – particularly regarding …

The Actavis Inference: Theory And Practice, Aaron S. Edlin, C. Scott Hemphill, Herbert J. Hovenkamp, Carl Shapiro

All Faculty Scholarship

In FTC v. Actavis, Inc., the Supreme Court considered "reverse payment" settlements of patent infringement litigation. In such a settlement, a patentee pays the alleged infringer to settle, and the alleged infringer agrees not to enter the market for a period of time. The Court held that a reverse payment settlement violates antitrust law if the patentee is paying to avoid competition. The core insight of Actavis is the Actavis Inference: a large and otherwise unexplained payment, combined with delayed entry, supports a reasonable inference of harm to consumers from lessened competition.

This paper is an effort to assist courts …

Promoting Innovation, Matthew Sag, Spencer Weber Waller

Faculty Articles

This Essay proceeds as follows. We briefly introduce the concept of creative destruction and its place in Schumpeter’s work in Part II. In Part III we explain why a truly Schumpeterian competition policy demands more than a laissez faire approach. We explain why the law must preserve opportunities and incentives for creative destruction at all stages of innovation and we review four key policy areas of antitrust law from this innovation-focused perspective: unilateral conduct cases (Part III.A), cases at the intersection of IP and antitrust (Part III.B), Sherman Act section 1 cases (Part III.C), and merger policy (Part III.D). In …

The Rule Of Reason And The Scope Of The Patent, Herbert J. Hovenkamp

All Faculty Scholarship

For a century and a half the Supreme Court has described perceived patent abuses as conduct that reaches "beyond the scope of the patent." That phrase, which evokes an image of boundary lines in real property, has been applied to both government and private activity and has many different meanings. It has been used offensively to conclude that certain patent uses are unlawful because they extend beyond the scope of the patent. It is also used defensively to characterize activities as lawful if they do not extend beyond the patent's scope. In the first half of the twentieth century the …

Antitrust And The Patent System: A Reexamination, Herbert J. Hovenkamp

All Faculty Scholarship

Since the federal antitrust laws were first passed they have cycled through extreme positions on the relationship between competition law and the patent system. Previous studies of antitrust and patents have generally assumed that patents are valid, discrete, and generally of high quality in the sense that they further innovation. As a result, increasing the returns to patenting increases the incentive to do socially valuable innovation. Further, if the returns to the patentee exceed the social losses caused by increased exclusion, the tradeoff is positive and antitrust should not interfere. If a patent does nothing to further innovation, however, then …