Protecting Innovation: The Role of State Attorneys General in Antitrust Enforcement

Antitrust law was devised at the end of the 19th century. Since then, courts and regulators applying antitrust laws have developed a wide range of appallingly anticompetitive doctrines. Many of those doctrines tended to protect businesses from competitive forces, rather than the other way around. Nor were the stakes trivial: As Robert Bork insisted in his seminal work, the Antitrust Paradox (1978), many of these doctrines were "ultimately incompatible with the preservation of a liberal capitalist social order."In recent years, antitrust enforcement by state attorneys general has seen a dramatic rise. This raises several concerns: first, the potential of geographic bias that comes from state attorneys general protecting the interests of business or consumers in their states from competition; second, the potential for increased litigation and harsher penalties; and third, the duplicative nature of state antitrust enforcement, particularly in the context of parens patriae suits and pre-merger reviews. These concerns suggest that increased state involvement in antitrust enforcement could have significant negative consequences for competition and innovation. This danger is particularly acute in high-technology markets, where antitrust enforcement is already problematic in several ways. Consumers benefit from increased efficiency, but efficiency can increase market share, which in turn can trigger ill-advised antitrust enforcement. The complexity and rapid innovation of high-tech markets increase the danger of erroneous and damaging antitrust enforcement. These challenges are exacerbated by state involvement in antitrust. While we see a clear role for the states in enforcing antitrust law in local commerce, it is much more difficult to discern a role for the states in transactions that are in many cases not only national, but international. Instead, the involvement of the states in these markets is more likely to lead to an expansive regulatory regime that inhibits -- rather than enhances -- competition and innovation. This is particularly true in the case of e-commerce. This paper examines the role of states in antitrust enforcement and the impact this role can have on competition, particularly in high-tech markets. Part I provides a short summary of major antitrust laws. Part II looks at the different ways in which antitrust law is enforced. Part III provides a closer look at the role of the states in antitrust enforcement, focusing on Texas. Part IV sets forth a law-and-economics analysis of the main types of cases that are typically the subject of antitrust enforcement, with a special focus on the activity of state attorneys general. Part V provides a close look at antitrust enforcement in high-tech markets. Part VI makes recommendations for improvement.This paper argues for a continued effort to understand how markets work, and for revision of antitrust laws and judicial doctrines in light of those insights. We argue that the scope of state antitrust enforcement should be reduced, particularly with respect to interstate and high technology markets. Specifically, we recommend that states' ability to bring parens patriae suits under the federal antitrust laws should be repealed, and that state involvement in premerger review should be curtailed. We also find that where the federal government has settled an antitrust matter under investigation, continued state involvement makes little sense, and in fact may stifle product development, investment and innovation

Antitrust, Innovation, and Uncertain Property Rights: Some Practical Considerations

The intersection of antitrust and intellectual property circumscribes two century-long debates. The first pertains to questions about how antitrust law and intellectual property law interact, and the second pertains to questions about how parties can exploit property rights, including intellectual property rights, to exclude competitors. This iBrief finesses these questions and turns to practical considerations about how innovation and intellectual property can impinge antitrust enforcement. This iBrief develops two propositions. First, although collaborative research and development has often been and remains unwittingly misunderstood, what is understood about it is consistent with the long- standing observation that antitrust has rarely interfered with collaborative ventures. Second, shifting focus from “intellectual property rights” to “uncertain property rights” makes it easier to understand what innovation and intellectual property imply for enforcement processes. Both intellectual property and tangible assets imply the same processes, but the boundaries of intellectual properties may be uncertain and may, in turn, allow parties to game enforcement processes in ways that would not be feasible in antitrust matters that principally feature tangible assets. Even so, uncertain property rights might not frustrate enforcement processes as the antitrust authorities may yet be able to factor parties’ strategic behaviors into the design of antitrust remedies

Antitrust and Intellectual Property: Unresolved Issues at the Heart of the New Economy

The New Economy differs in degree rather than kind from the old economy. Part II of this discussion examines the key differences that define the New Economy. Part Ill turns to several implications of those differences as they pertain to antitrust enforcement. I argue that the differences do not justify sweeping generalizations that antitrust enforcement has no place in the New Economy, but do require antitrust enforcement to make adjustments and exercise sensitivity towards intellectual property issues on a case-by-case basis. The goal of a coherent overall competition policy, in deciding both what conduct to enforce against and what remedies to require, should be to achieve an appropriate balance between the complementary legal regimes of intellectual property and antitrust. Part IV examines several examples of recent antitrust enforcement decisions involving intellectual property. Without addressing the ultimate merits of individual decisions, I find that antitrust enforcement has generally evolved in recent years in a way that pays heed to the distinctive characteristics of the New Economy. These decisions demonstrate a concerted attempt to give reasonable, fact-specific consideration to both incentives and opportunities to innovate. Finally, to supplement the preceding review of substantive issues, Part V examines the institutional challenges posed to antitrust enforcement by the New Economy

Platforms, \u3ci\u3eAmerican Express\u3c/i\u3e, and the Problem of Complexity in Antitrust

I. Introduction II. The Great Generalization III. Antitrust Without Platform Theory ... A. Are Credit Cards Really a Boon to Society and Would Non-Platform Antitrust Wreck It? ... 1. Do Credit Cards Do Anything Special? ... 2. How a Platform Player Causes Harm on One Side ... B. Will the Cat Really Stay in the Credit Card Bag? IV. Conclusion: How Antitrust Complexity Devolves to Conservative Simplicit

Collusive networks in market sharing agreements in the presence of an antitrust authority

This paper studies how the presence of an antitrust authority affects market-sharing agreements made by firms in oligopolistic markets. These agreements prevent firms from entering each other´s market. The set of market-sharing agreements defines a collusive network, which is under suspicion by antitrust authorities. This paper shows that, from the firm´s point of view, the probability of being caught is endogenous and depends on the agreements each firm has signed. Stable collusive networks can be decomposed into a set of isolated firms and complete alliances of different sizes. While in the absence of the antitrust authority, a network is stable if its alliances are large enough, when the antitrust authority is considered, the network is stability depends on the network configuration as a whole. Antitrust laws may have a pro-competitive effect as they give Firms in large alliances more incentives to cut their agreements at once

International Antitrust Enforcement and Multi-Market Contact

This paper analyzes international antitrust enforcement when multinational firms operate in several markets with antitrust authorities in each market. We are concerned with how the sustainability of collusion in one local market is affected by the existence of collusion in other markets when they are linked by demand relationships. The interdependence of collusion sustainability across markets leads to potential externalities in antitrust enforcement across jurisdictions. As a result, cartel prosecution can have a domino effect with the desistance of one cartel triggering the internal break-up of the cartel in the adjacent market. We further find that the equilibrium in antitrust authorities’ enforcement decisions may exhibit non-linearity due to a free-rider problem as the global economy is more integrated. We also analyze the equilibrium antitrust enforcement and compare it with the globally optimal antitrust enforcement policy.collusion, antitrust enforcement, multi-market contact

Does Cyberspace Need Antitrust?

E-commerce may prove a double-edged sword for antitrust enforcement. While the internet massively increases the potential size of the relevant market for any antitrust investigation, thereby reducing the need for antitrust activity, it also opens firms up to protectionist uses of antitrust by foreign authorities using an economic effects rule for jurisdiction. An origin-based policy of regulation is recommended.internet, antitrust, extraterritoriality

Antitrust and Regulation

Since the passage of the Interstate Commerce Act (1897) and the Sherman Act (1890), regulation and antitrust have operated as competing mechanisms to control competition. Regulation produced cross-subsidies and favors to special interests, but specified prices and rules of mandatory dealing. Antitrust promoted competition without favoring special interests, but couldn't formulate rules for particular industries. The deregulation movement reflected the relative competencies of antitrust and regulation. Antitrust and regulation can also be viewed as complements in which regulation and antitrust assign control of competition to courts and regulatory agencies based on their relative strengths. Antitrust also can act as a constraint on what regulators can do. This paper uses the game-theoretic framework of political bargaining and the historical record of antitrust and regulation to establish and illustrate these points.

Challenges of the New Economy: Issues at the Intersection of Antitrust and Intellectual Property

There is wide agreement that the last decade or so has presented an unusually lively and challenging period for antitrust analysis. Among many reasons we can point to are deregulation and problems of transition to a free market (telecommunications and electricity production offer leading examples), developments in procedural cooperation and possible substantive convergence in response to the increasing globalization of competition and enforcement approaches, and priorities in addressing an unprecedented merger wave. An additional challenge involves the application of established antitrust principles to the growing high-tech sector of the economy. It is that application of antitrust law to the new economy, and particularly the relationship between antitrust and intellectual property, that I will address here

Does Antitrust Need to be Modernized?

In 2002, Congress established the Antitrust Modernization Commission to address whether the antitrust laws needed to be changed in light of globalization and rapid technological change. This paper addresses that question. Although the basic framework of the antitrust laws is suitable to deal with current economic conditions, the paper identifies several areas where antitrust can be improved. The paper first examines whether the proper criterion for antitrust should be total or consumer surplus. Then it identifies some key issues that need to be clarified and explains how they should be clarified. Those issues include market definition, merger policy and the treatment of efficiencies, the interaction of antitrust and intellectual property, exclusionary conduct, the right of indirect purchasers to sue, and the proper allocation of responsibility between regulation and antitrust.