Silicon Valley Antitrust

Hanno Kaiser · UC Berkeley School of Law, Room 10 · Spring 2012

Fridays, 8–9:50 am

This is an evolving syllabus. We will discuss key issues of technology antitrust using current cases and materials — stuff on this website will change during the course of the semester.

Class 1: Introduction: Google Search and Google+ January 13, 2012

On January 10, 2012, Google started integrating Google+ into the Google search engine. Is this connection between two services (search and social networking) an antitrust problem? This recent development will serve as the launching pad for our discussion of the "Google Antitrust Universe."

Topics for discussion

Monopolization and abuse of dominance
Enforcement models in the U.S. and in the EU
Can there be "monopoly power" if users are free to go elsewhere?
Does it matter that the product is free?
Multi-sided platforms: advertisers go to where the users are
Why "Silicon Valley Antitrust Law"? Is there a "New York Antitrust Law" as well?

Required reading

Hovenkamp, Antitrust (2011), pp. 129–157, or the capsule summary, pp. 16–21.
WSJ, Google Embeds Social Directly Into Search (But by Social, It Means Google+) (January 10, 2012)
Google, Competition Website
FairSearch, Google's Transformation from Gateway to Gatekeeper (2011)

Optional

Geoff Manne, Josh Wright, Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google (2010)
Ben Edelman, Google Tying Google Plus and Many More
BusinessMBA, Google by the numbers, Infographic (2011)

Class 2: The Microsoft Universe, Part 1 January 20, 2012

The Microsoft cases in the U.S. and the EC are among the most important precedents for high-technology antitrust. They address key questions of market definition, multi-sided platforms, product integration, offensive and defensive uses of monopoly power, and remedies. We will examine the Microsoft cases in depth and use them as the backdrop against which to examine more recent matters.

Topics for discussion

Market definition and market power
The first part of the U.S. v. Microsoft case: Market definition and market power

Required reading

Hanno Kaiser, Excerpt on Market Definition (2009). On bSpace.
U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read pages 45–58, i.e.: I. INTRODUCTION; A. Background; B. Overview; II. MONOPOLIZATION; A. Monopoly Power. Also print out the table of contents.

Optional

Elhauge, Geradin, Global Antitrust Law and Economics, pp. 248–256. (Excellent overview of Section 2 and Art. 102; highly recommended as a quick review of core concepts. Excerpts are posted on bSpace.)

Class 3: The Microsoft Universe, Part 2 January 27, 2012

Topics for discussion

The anticompetitive strategies playbook
- Combination
- Exclusion
- Leveraging
Indirect "defensive" strategies in multi-sided markets

Required reading

U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read pages 58–80, i.e.: II. MONOPOLIZATION […] B. Anticompetitive Conduct; C. Causation.
Hanno Kaiser, Microsoft Monopolization Offenses Chart (2008)

Optional

Doug Melamed, Dan Rubinfeld, U.S. v. Microsoft: Lessons Learned and Issues Raised, in: Antitrust Stories (2007)
Microsoft, Timeline of the Commission v. Microsoft case from 1998–2007
Hovenkamp, Antitrust, pp. 145–160 (examples of exclusionary conduct; attempted monopolization)

Class 4: The Microsoft Universe, Part 3 February 3, 2012

Topics for discussion

Tying in the U.S. and in the EU
Microsoft 10 years later: Who won?
U.S. v. Microsoft as a roadmap to the FTC's investigation of Google? Similarities and differences.

Required reading

U.S. v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Read pages 84–98.
Guidelines on Vertical Restraints (2010/C 130/01); Read paras. 214–222 ("tying")
Case T-201/04, Microsoft Corp. v. Commission, CFI 2007. Brief summary of the proceedings and implementation. Read the excerpts on bSpace (tying claim).

Optional

Elhauge, Geradin, Global Antitrust Law (2009), pp. 39–54 (differences between the U.S. and EC system of antitrust enforcement). See the excerpt on bSpace.
"Default defenders" and "choice screens"

Class 5: High-tech labor markets: No-"cold call" agreements? February 10, 2012

Employee-plaintiffs claim that their employers agreed not to cold-call each others' employees. Sensible self-regulation or unlawful horizontal coordination?

Topics for discussion

The Silicon Valley labor market
- "Non-compete agreements v. non-solicitation agreements"; Silicon Valley v. Silicon Alley
- Immigration patterns and innovation
Review of horizontal agreements in the U.S. and in the EU
- Per se and rule of reason analysis
- Naked restraints
- Ancillary restraints

Required reading

Hovenkamp, Antitrust (2011), pp. 95–104, 122–126.
U.S. v. Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar (2011)

Optional

In re High-Tech Employee Antitrust Litigation, Defendants' Motion to Dismiss (2011) (on bSpace)
In re High-Tech Employee Antitrust Litigation, Plaintiffs' Opposition to Defendants' Motion to Dismiss (2011) (on bSpace)

Class 6: The law of "predatory innovation": Showdown in the CPU industry: FTC and EC v. Intel February 17, 2012

(1) Did Intel abuse its dominant position in the x86 CPU market by using various business tactics and technological design choices aimed at (i) defending its CPU monopoly and (ii) extending its CPU monopoly into the GPU market?

(2) A builds disk drives for B's mainframes. B changes the interface. A's disk drives are obsolete. Innovation or predation?

(3) A builds audio chips for smartphones. B builds graphics processors. B includes audio functionality into its new graphics processor. A's business tanks. Efficient integration or anticompetitive foreclosure?

(4) B sells audio, graphics, and sensor modules. A sells audio modules only. B gives its customers a 25% across the board rebate if they buy all three components from B. A can't match the discount on audio modules alone. Good deal for the buyer or below-cost bundled pricing?

Required reading

FTC, In re Intel complaint (2009)
Allied Orthopedic v. Tyco Healthcare, 592 F.3d 991 (9th Cir. 2010). Read the excerpt and discussion in Herbert Hovenkamp, Innovation and Competition Policy: Cases and Materials (2011), Chapter 8, pp. 36–47.

Optional

Michael Carrier, Innovation for the 21st Century (2009); read the excerpt from the 1st chapter on bSpace
FTC, In re Intel, Analysis of Proposed Consent Order To Aid Public Comment (2010)
FTC, In re Intel, decision and order (2010)
EC Decision, COMP/37.990 Intel (Warning! 518 pages.)
Apple iPod iTunes Antitrust Litigation, No. C 05-00037 JW, 2011 WL 2690511 (N.D. Cal. May 19, 2011)
John M. Newman, Anticompetitive Product Design in the New Economy (2012)

Class 7: Abuse of standard-essential patents February 24, 2012

Topics for discussion

A makes FRAND promises to an SSO. The technology covered by A's patents gets included in the standard. Later, A refuses to grant FRAND licenses to its downstream competitors. Monopolization?
How standard setting works
Three strategies to subvert standard setting
- Bias
- Hold up
- Gatekeeping
Remedies

Required reading

Optional

Class 8: Patent portfolio acquisitions March 2, 2012

Topics for discussion

Patents and patent portfolios
Section 7 and the "substantial lessening of competition" test
Horizontal and vertical aspects of patent portfolio acquisitions

Required reading

European Commission, Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2008/C 265/07
DOJ, Decision to approve Google's acquisition of Motorola (February 12, 2012)
EC, Approval of Google's acquisition of Motorola (February 13, 2012)
Reuters, Mobile Patent Suits

Classes 9 and 10: Open v. closed systems (Part 1 & 2) March 16, 2012

(1) "Open systems win." Jonathan Rosenberg, Google.

(2) "Open systems [are] good for making others lose." John Prentice, Gartner.

(3) "Closed systems are prima facie suspect, while open systems can never be an antitrust problem." Useful antitrust rule or analytical fallacy?

(4) A sells games for B's gaming console. B starts requiring pre-approval of the game concept and final approval of the finished game as a condition for a license to B's console. Sensible quality control measure or monopolization of the aftermarket for B-console games?

Topics for discussion

The "political philosophy" of open systems
The economics of platforms
- The players: system sponsors, users, contributors
- Platforms as "managed economies"
- "More is not always better": How platform rules emerge.
Single platform aftermarkets
Examples: Gaming platforms (XBOX, PS3, Wii), mobile (Android, iOS, Blackberry, Windows), online stores (eBay, Amazon)

Required reading

Optional

Newcal Industries v. Ikon Office Solution, 513 F.3d 1038 (9th Cir. 2008)
Jonathan Rosenberg, The Meaning of Open
Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne, Opening Platforms: How, When and Why? (2008)
David S. Evans, Andrei Hagiu and Richard Schmalensee, Invisible Engines (2006)
Cory Doctorow, Curated Computing is No Substitute for the Personal and Handmade (2010)
Cory Doctorow, Lockdown, The coming war on general-purpose computing
eBay International AG — Notification — N93365 (Australian Competition & Consumer Commission) (2008)

Class 11: Mergers: Differentiated and future products, Part 1 March 23, 2012

A acquires B. Some customers say that B's pipeline products would likely be a good alternative to A's products, but B's products are more likely to make it to market if they are supported by A's R&D and distribution infrastructure. Efficient merger to ensure that new products come to market more quickly and with greater certainty or substantial lessening of future competition?

Topics for discussion

Agency practice v. court decisions; the impact of the HSR Act on merger jurisprudence
Structural presumptions in horizontal merger cases
Coordinated theories of harm
Unilateral theories of harm