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Patriot Ripple Effect

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EU Hearing €?Many Concerns’ About Potential Anticompetitive Issues With Apple Pay !!BETTER!!

Section 2 also proscribes "attempt[s] to monopolize."(8) Establishing attempted monop-olization requires proof "(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power."(9) It is "not necessary to show that success rewarded [the] attempt to monopolize;"(10) rather, "when that intent and the consequent dangerous probability exist, this statute, like many others and like the common law in some cases, directs itself against the dangerous probability as well as against the completed result."(11)

EU Hearing ‘Many Concerns’ About Potential Anticompetitive Issues With Apple Pay

Competition has long stood as the touchstone of the Sherman Act. "The law," the Supreme Court has emphasized, "directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself."(45) The Sherman Act rests on "a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services."(46) Section 2 stands as a vital safeguard of that competitive process. As Assistant Attorney General Thomas O. Barnett emphasized at the commencement of the hearings, "individual firms with . . . monopoly power can act anticompetitively and harm consumer welfare."(47) Firms with ill-gotten monopoly power can inflict on consumers higher prices, reduced output, and poorer quality goods or services.(48) Additionally, in certain circumstances, the existence of a monopoly can stymie innovation.(49) Section 2 enforcement saves consumers from these harms by deterring or eliminating exclusionary conduct that produces or preserves monopoly.

A number of panelists stated that section 2 is essential to preserving competition.(50) They noted that the threat of anticompetitive conduct is real, "far from an isolated event" in the words of one.(51) Section 2 enforcement has played a vital role in U.S. antitrust enforcement for a century.(52) From the seminal case against Standard Oil in 1911,(53) through litigation resulting in the break-up of AT&T,(54) to the present-day enforcement in high-technology industries with the Microsoft case,(55) government enforcement of section 2 has benefitted U.S. consumers. Private cases brought under section 2 by injured parties are also important to U.S. businesses and consumers. Equally important, the potential for significant injunctive relief and damages awards provides strong incentives for firms to refrain from engaging in the types of conduct prohibited by the statute.

Importantly, rules that are overinclusive or unclear will sacrifice those benefits not only in markets in which enforcers or courts impose liability erroneously, but in other markets as well. Firms with substantial market power typically attempt to structure their affairs so as to avoid either section 2 liability or even having to litigate a section 2 case because the costs associated with antitrust litigation can be extraordinarily large. These firms must base their business decisions on their understanding of the legal standards governing section 2, determining in advance whether a proposed course of action leaves their business open to antitrust liability or investigation and litigation. If the lines are in the wrong place, or if there is uncertainty about where those lines are, firms will pull their competitive punches unnecessarily, thereby depriving consumers of the benefits of their efforts.(81) The Supreme Court has consistently emphasized the potential dangers of overdeterrence. The Court's concern about overly inclusive or unclear legal standards may well be driven in significant part by the particularly strong chilling effect created by the specter of treble damages and class-action cases.(82) Many hearing panelists reiterated this concern.(83)

69. Section of Antitrust Law, supra note 2, at 241; see also United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001) (en banc) (per curiam) ("Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern: the means of illicit exclusion, like the means of legitimate competition, are myriad. The challenge for an antitrust court lies in stating a general rule for distinguishing between exclusionary acts, which reduce social welfare, and competitive acts, which increase it."); Antitrust Modernization Comm'n, Report and Recommendations 81 (2007), available at _recommendation/amc_final_report.pdf ("How to evaluate single-firm conduct under Section 2 poses among the most difficult questions in antitrust law."); Sherman Act Section 2 Joint Hearing: Loyalty Discounts Session Hr'g Tr. 110, Nov. 29, 2006 (Muris) (stating that "the scope and meaning of exclusionary behavior remains . . . very poorly defined"); July 18 Hr'g Tr., supra note 49, at 21 (Pitofsky) (identifying "the definition of exclusion under Section 2 . . . as about the toughest issue[] that an antitrust lawyer is required to face today"); June 20 Hr'g Tr., supra note 29, at 12 (Majoras) ("[I]t is difficult to distinguish between aggressive procompetitive unilateral conduct and anticompetitive unilateral conduct."); Susan A. Creighton et al., Cheap Exclusion, 72 Antitrust L.J. 975, 978 (2005) ("Much of the 'long, and often sorry, history of monopolization in the courts' has been devoted to attempting to provide an answer to the question at the center of the Supreme Court's formulation--that is, when is monopolizing conduct 'anticompetitive.'" (footnote omitted)); Timothy J. Muris, The FTC and the Law of Monopolization, 67 Antitrust L.J. 693, 695 (2000) ("Much of the monopolization case law struggles with the question of when conduct is, or is not, exclusionary."); Mark S. Popofsky, Defining Exclusionary Conduct: Section 2, the Rule of Reason, and the Unifying Principle Underlying Antitrust Rules, 73 Antitrust L.J. 435, 438 (2006) ("Over a century since the Sherman Act's passage, and some forty years since the Supreme Court held that Section 2 condemns the 'willful' acquisition or maintenance of monopoly power, great uncertainty persists as to the test for liability under Section 2 of the Sherman Act." (footnote omitted)).

71. June 20 Hr'g Tr., supra note 29, at 17 (Majoras); see also Sept. 26 Hr'g Tr., supra note 29, at 20 (Froeb) ("[M]echanisms with opposing effects usually appear in a single kind of behavior."); June 20 Hr'g Tr., supra note 29, at 29 (Barnett) ("The difficulty lies in cases . . . that have the potential for both beneficial cost reductions, innovation, development, integration, and at the same time potentially anticompetitive exclusion."); A. Douglas Melamed, Exclusionary Conduct Under the Antitrust Laws: Balancing, Sacrifice, and Refusals to Deal, 20 Berkeley Tech. L.J. 1247, 1249 (2005) ("In the vast majority of cases, exclusion is the result of conduct that has both efficiency properties and the tendency to exclude rivals.").

In view of their potential efficiencies, many economists believe that, in general, tying and bundling are more likely to be procompetitive than anticompetitive.(6) Analysis of the anticompetitive effects of tying and bundling by U.S. courts, by contrast, has evolved over time. Although courts long have expressed concern that tying or bundling might enable firms to use monopoly power in one market as leverage to curb competition, and thereby acquire monopoly power, in a second market,(7) judicial concern has eased as tying and bundling have become better understood. Once thought to be worthy of per se condemnation(8) without examination of any actual competitive effects, tying currently is deemed per se illegal under U.S. Supreme Court rulings only if specific conditions are met, including proof that the defendant has market power over the tying product.(9) Further, the Supreme Court has recently recognized that competitive markets and tying arrangements are not incompatible.(10) Indeed, some lower courts have required proof of likely or actual anticompetitive effects and efficiencies in tying cases.(11)

The Agencies, as a matter of sound economics, had chosen not to rely on such a presumption prior to Illinois Tool.(53) As the Antitrust-IP Guidelines explain, the Agencies "will not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner. Although the intellectual property right confers the power to exclude with respect to the specific product, process, or work in question, there will often be sufficient actual or potential close substitutes . . . to prevent the exercise of market power."(54) The Agencies therefore investigate the relevant market to determine whether the intellectual property at issue grants any market power in the economic sense. If such market power is found, the Agencies further investigate whether the business practice under scrutiny is likely to be anticompetitive on balance.

Panelists addressed several issues that attorneys confront when counseling clients with regard to intellectual property bundling. One panelist noted that, in addition to the courts' inconsistent treatment of cases involving intellectual property bundling, courts have also differed in ordinary tying cases as to whether: (1) a plaintiff must show harm to competition in the tied product market; and (2) a defendant's evidence of business justification is admissible.(55) "The result of this is when the client asks you about what the rules are governing bundling of intellectual property . . . you cannot give a clear answer. [Lawyers have to give] the cautious advice . . . please, don't do it; the risk [of litigation] is too great."(56)

Finally, one panelist argued that, although defendants in many cases could "devise ways of achieving the same efficiencies without tying,"(63) the per se rule creates "enormous cost in terms of firms without market power and with intellectual property rights trying to figure out the best way to exploit those rights," such as small firms trying to enter a market in which metering through tying may work best.(64) Another panelist suggested that "product combination decisions[,] like things that can be characterized as ties[,] ought to be presumptively lawful" and that the real problem with the per se rule against tying is that it is "potentially applicable to an enormous range of harmless commercial decisions which nevertheless tend to attract involvement with law enforcement and the civil justice system."(65) 350c69d7ab


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