Law Commons^™

Teece's Competing Through Innovation, Herbert J. Hovenkamp

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This essay reviews David J. Teece's book, Competing Through Innovation: Technological Strategies and Antitrust Policies (2013).

Actavis And Error Costs: A Reply To Critics, Aaron S. Edlin, C. Scott Hemphill, Herbert J. Hovenkamp, Carl Shapiro

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The Supreme Court’s opinion in Federal Trade Commission v. Actavis, Inc. provided fundamental guidance about how courts should handle antitrust challenges to reverse payment patent settlements. In our previous article, Activating Actavis, we identified and operationalized the essential features of the Court’s analysis. Our analysis has been challenged by four economists, who argue that our approach might condemn procompetitive settlements.

As we explain in this reply, such settlements are feasible, however, only under special circumstances. Moreover, even where feasible, the parties would not actually choose such a settlement in equilibrium. These considerations, and others discussed in the reply, serve to …

Antitrust And The Close Look: Transaction Cost Economics In Competition Policy, Herbert J. Hovenkamp

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This paper briefly examines the contributions of Transaction Cost Economics (TCE) to antitrust analysis, focusing on vertical integration and its contractual substitutes, mainly, minimum and maximum resale price maintenance, vertical nonprice restraints, tying, bundled discounts and exclusive dealing and related exclusionary contracts.

TCE generally assumes that business firms organize their activities so as to maximize their value, which they can do both by economizing and also by obtaining higher prices. Sensible antitrust policy recognizes that both advantageous contracting and monopoly can be profitable to a firm, and it can be expected to pursue both when they are available. Nevertheless, the …

Implementing Antitrust's Welfare Goals, Herbert J. Hovenkamp

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United States antitrust policy is said to promote some version of economic welfare. Antitrust promotes allocative efficiency by ensuring that markets are as competitive as they can practicably be, and that firms do not face unreasonable roadblocks to attaining productive efficiency, which refers to both cost minimization and innovation. One important welfare debate is whether antitrust should adopt a “consumer welfare” principle rather than a more general “total welfare” principle.

The simple version of the consumer welfare test is not a balancing test. If consumers are harmed by reduced output or higher prices resulting from the exercise of market power, …

Harm To Competition Under The 2010 Horizontal Merger Guidelines, Herbert J. Hovenkamp

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In August, 2010, the Antitrust Division and the Federal Trade Commission issued new Guidelines for assessing the competitive effects of horizontal mergers under the antitrust laws. These Guidelines were long awaited not merely because of the lengthy interval between them and previous Guidelines but also because enforcement policy had drifted far from the standards articulated in the previous Guidelines. The 2010 Guidelines are distinctive mainly for two things. One is briefer and less detailed treatment of market delineation. The other is an expanded set of theories of harm that justify preventing mergers or reversing mergers that have already occurred.

The …

Merger Policy And The 2010 Merger Guidelines, Herbert J. Hovenkamp

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New Horizontal Merger Guidelines were issued jointly by the Antitrust Division and the Federal Trade Commission in August, 2010, replacing Guidelines issued in 1992 that no longer reflected either the law or government enforcement policy. The new Guidelines are a striking improvement. They are less technocratic, accommodating a greater and more realistic variety of theories about why mergers of competitors can be anticompetitive and, accordingly, a greater variety of methodologies for assessing them.

The unifying theme of the Horizontal Merger Guidelines is to prevent the enhancement of market power that might result from mergers. The 2010 Guidelines state that “[a] …

Robert Bork And Vertical Integration: Leverage, Foreclosure, And Efficiency, Herbert J. Hovenkamp

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Robert H. Bork wrote his fist article about vertical integration and antitrust policy in 1954, a year after he graduated from the University of Chicago Law School. He noted a recent increase in antitrust attacks on vertical integration and disagreed with those who believed that these attacks were a novelty. At the time, judicial hostility toward vertical integration was rampant. But Bork overstated his case about the period prior to the 1930s. Through the 1920s judicial attitudes toward vertical integration were more benign than Bork suggested. This position was largely consistent with the pre-Depression economics literature, which emphasized production cost …

Consumer Welfare In Competition And Intellectual Property Law, Herbert J. Hovenkamp

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Whether antitrust policy should pursue a goal of "general welfare" or "consumer welfare" has been debated for decades. The academic debate is much more varied than the case law, however, which has consistently adopted consumer welfare as a goal, almost never condemning a practice found to produce an actual output reduction or price increase simply because productive efficiency gains accruing to producers exceeded consumer losses.

While some practices such as mergers might produce greater gains in productive efficiency than losses in consumer welfare, identifying such situations would be extraordinarily difficult. First, these efficiencies would have to be "transaction specific," meaning …

Technological Determinism And Its Discontents, Christopher S. Yoo

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This book review takes a critical review of the claim advanced by Susan Crawford in Captive Audience that the merger between Comcast and NBC Universal would harm consumers and that policymakers should instead promote common carriage regulation and subsidize municipal symmetrical gigabit fiber-to-the-home (FTTH). First it evaluates the extent to which next-generation digital subscriber lines (DSL) and wireless broadband technologies can serve as effective substitutes for cable modem service, identifying FCC data showing that the market has become increasingly competitive and likely to continue to do so. Furthermore, the market is not structured in a way that would permit the …