Bay Area Antitrust v.1

Hanno Kaiser · UC Berkeley School of Law, Room 170 · Fall 2018

Fridays, 8 am (sharp!) – 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: Technology Antitrust: Framework and a Baseline Case August 24, 2018

Topics for discussion

• Why I changed the name of this course from "Silicon Valley Antitrust" to "Bay Area Antitrust": The rise of San Francisco and the East Bay
• A roadmap for this course
  • What to expect
  • Exam, grades, etc.
• The goal(s) of antitrust
• The legal framework: §1 of the Sherman Act; §2 of the Sherman Act; §7 of the Clayton Act; §5 of the FTC Act; Hart-Scott-Rodino ("HSR") Act
• First draft of the "antitrust superstructure"
  • Agreements in restraint of trade (mostly §1)
  • Abuse of a dominant position (mostly §2)
  • Merger control (mostly to avoid evasion of §1 and §2)
• Two modes of analysis: rule of reason and per se
  • Distributed antitrust enforcement in the U.S. (Private plaintiffs; DOJ & FTC; State Attorneys General)
• A look at an uncontroversial baseline: Criminal cartel conduct and per se illegality
  • Price fixing, market allocation, bid rigging
  • How cartels work: Creating artificial scarcity to get a bigger slice of a smaller (and more expensive) pie

Reading

• U.S. Antitrust laws (Super short version)
• U.S. v. Andreas, 216 F.3d 645 (7th Cir. 2000). Excerpt. Yes, The Informant is based on that case.
• Hanno Kaiser, Antitrust: Key Concepts (2018)

Optional

• Hanno Kaiser, U.S. Antitrust Cheat Sheet (2011)
• Scott Hammond, "Caught in the Act: Inside an International Cartel" (2005)
• Video footage from the Lysine cartel (YouTube)
• Berkeleyside, In Berkeley, a venerable grocery market comes under fire (2011)

Class 2: Disruptive Business Model or Illegal Cartel? August 31, 2018

Topics for discussion

• Wrapping up the U.S. v. Andreas case. Did crime pay? (In the U.S.? Abroad?)
• The rule of reason
• The ancillary restraints doctrine
• Vertical and horizontal agreements
• BMI: Old but certainly not cold. The basis of the modern ancillary restraints doctrine (1979)

Reading

• Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1 (1979). Excerpts

Optional

• Hanno Kaiser, How to read and brief a case (2014)

Class 3: The Sharing Economy and Algorithmic Collusion September 7, 2018

Topics for discussion

• Unlocking dormant asset value through much, much better coordination: Uber (cars), Airbnb (homes), etc.
• Pricing algorithms and collusion
  • Is joining a platform collusion? A closer look at the "agreement" prong.
  • What is not an algorithmic collusion case (e.g., organizing a cartel via encrypted messaging)
• The critical role of the (evolving) "no intracompany conspiracies" rule

Reading

• Meyer v. Kalanick, 174 F. Supp.3d 817 (S.D.N.Y. 2016). Excerpts
• U.K. Competition and Markets Authority (CMA), Online sellers price-fixing case study (November 2016)
• U.S. v. Topkins, Complaint (2015)

Optional

• Algorithms and Collusion – Note by the United States, OECD Materials (June 2017)
• OECD, Algorithms and Collusion: Competition Policy in the Digital Age (September 2017)
• Decision of the U.K. Competition and Markets Authority (CMA), Online Sales of Posters and Frames, Case 50223 (August 2016)

Class 4: Coordinating Ecosystems (Apple, Amazon, eBay, Spotify, etc.) (§1) September 14, 2018

Topics for discussion

• Vertical and horizontal agreements in the context of ecosystem competition (e.g., Google v. Amazon v. Apple)
• Apple: The U.S. v. Apple "eBooks" case (2015)
• Disruption via de novo entry as per se illegal antitrust violation?

Reading

• United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015). Excerpts

Optional

• Dan Wall & Hanno Kaiser, Brief of Economists as Amici Curiae in Support of Apple, Amicus Brief to the U.S. Supreme Court in re U.S. v. Apple Inc. (2015)
• Meyer v. Kalanick (2d Cir., August 17, 2017). Decision (The case was resolved on different grounds.)

Class 5: Abuse of Dominance, Part 1: Overview September 28, 2018

Topics for discussion

• The analytical framework for unilateral conduct cases
• We will cover special situations including aftermarkets, attention markets, and zero-price markets later (see below)

Reading

• Hanno Kaiser, Excerpt from Antitrust Law and Policy: An Introduction (2012). Focus on the discussion about the three exclusionary strategies (upstream foreclosure, downstream foreclosure, and tying/leveraging).

Class 6: Abuse of Dominance, Part 2: Dominance October 5, 2018

Topics for discussion

• Market definition in the ideal (SSNIP) and the real world (documents, customers, win/loss data)
• The critical role of barriers to entry, both old (expensive stuff) and new (network effects)
• The U.S. v. Microsoft case: Application barrier to entry, interoperability layers, and some background about one of the most important technology cases

Reading

• Hanno Kaiser, Market Definition in an Ideal World (SSNIP) (2014)
• United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Excerpts. Super high-level summary.

Class 7: Abuse of Dominance, Part 3: Abuse October 12, 2018

Topics for discussion

• What constitutes an abuse of a dominant position?
  • Exclusionary strategies (exclusion, leveraging)
  • Exploitative strategies (e.g., in the EC)
• Exclusive dealing
• Tying, bundling, leveraging
  • Two products
  • Tie (contract, technology, economic, "nudges")
  • Dominance (or, in the context of §1: market power) in the tying product market
  • (Foreclosure) effect in the tied product market
• Creation of strategic incompatibilities (predatory innovation)
  • "Embrace, extend, extinguish"

Reading

• United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). Finish reading the case. Excerpts. Super high-level summary.
• Hanno Kaiser, Microsoft Monopolization Offenses Chart (2008)
• Hanno Kaiser, Antitrust: Key Concepts (2018), Tying

Optional

• Windows Media Player: Microsoft v. European Commission, Judgment of the Court of First Instance (September 17, 2007). This is a long and rather tedious opinion. Read the excerpts from the Commission Decision posted on bSpace.

Class 8: The European Commission's Google Search Case October 19, 2018

Topics for discussion

• Background on the FTC and European Commission Search investigations
• How search engines work
• Multi-sided platforms: law and economics
• The two strategic moves that triggered Google's antitrust issues
  • Promoting Google's own content (universal search)
  • Demoting poor-quality websites and link farms (Panda)
  • Beyond the simple "more is always better" paradigm explored in U.S. v. Microsoft
• The (vexing) problem of antitrust remedies in technology cases

Reading

• European Commission: Google Search Fine (2017)
• European Commission, Factsheet: Commission fines Google €2.42 billion for abusing dominance as search engine (June 27, 2017)
• FTC, Statement of the Federal Trade Commission Regarding Google's Search Practices, In the Matter of Google Inc. (January 3, 2013)
• Hanno Kaiser, Remedies Design in EC v. MSFT (2013)

Optional

• European Commission: Summary of Commission Decision, Case AT.39740 — Google Search (Shopping), June 27, 2017
• European Commission: Commission Decision, Case AT.39740 — Google Search (Shopping), June 27, 2017
• Foundem, Presentation regarding Google's Auction Remedy (2018)

Class 9: The European Commission's Google Android Case October 26, 2018 · 8–9:50 am

Topics for discussion

• Background on the European Commission's Search and Android investigations
• How Android works, and how it relates to the Android Open Source Project (AOSP)
• Google's agreements with handset makers (OEM), per the Commission's press releases:
  • If you want any part of GMS, you must install all GMS apps/services ("All or nothing")
  • If you want Google's AOSP fork (aka "Google Android"), you must not distribute other AOSP forks ("Anti Fragmentation")
  • If you want a revenue share for queries sent to Google from your device, then you must not install other search engines ("Economic incentives")
• What are the (beneficial and detrimental) effects of these agreements on competitors, users, and developers?
• Possible cases against Google and the actual case that the Commission brought

Reading

• European Commission: Press Release. Commission fines Google €4.3 billion. July 18, 2018
• European Commission: Infographic: Google Applications July 18, 2018
• Google Blog Post: Complying with the EC's Android decision October 16, 2018

Class 10: Apple v. Pepper — Guest Speaker: Aaron Chiu October 26, 2018 · 1–2:50 pm

Topics for discussion

• Civil antitrust class action litigation
• One of the most important practical questions: "Who can sue?"
• Report from the front lines of a pending Supreme Court case

Reading

• Illinois Brick Co. v. Illinois et al., 431 U.S. 720 (1977)
• Apple v. Pepper, Apple's Merits Brief, August 10, 2018
• Apple v. Pepper, United States (Solicitor General) Amicus Brief, August 17, 2018
• Apple v. Pepper, Computer and Communications Industry Association Amicus Brief, August 17, 2018
• Apple v. Pepper, Respondents' Brief, September 24, 2018
• Apple v. Pepper, American Antitrust Institute Amicus Brief, October 1, 2018

Class 11: The German Federal Cartel Office's Facebook Investigation November 2, 2018

Topics for discussion

• The interplay between German and European antitrust law
• Exploitative abuses under German antitrust law
• Recent changes to the German antitrust laws (aka "lex Facebook")
• The FCO's theory of harm: Antitrust and data protection law/GDPR

Reading

• German Federal Cartel Office: Facebook Investigation (ongoing)
• German Federal Cartel Office: Background Information on the Facebook Investigation, December 19, 2017

Optional

• German Act Against Restraints of Competition (GWB). Read in particular Sections 18 and 19.

Class 12: Dominance 202: Aftermarkets November 9, 2018

Topics for discussion

• Single-brand aftermarkets and limiting principles
• What is the antitrust significance of two-step purchasing patterns ("First you choose a phone, then you choose among the apps available for the phone.")?
• Who gets what? Fairly and unfairly appropriating the gains from collaboration.
• "Closing an open system" v. "maintaining a closed system"

Reading

• Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992). Excerpts. Additional case notes.
• Blizzard Entertainment v. Ceiling Fan Software, et al., 41 F.Supp.2d 1227 (C.D. Cal. 2013). Excerpts.
• Hanno Kaiser, Are Closed Systems an Antitrust Problem?, Competition Policy International 91, Vol. 7, No. 1 (2011)

Optional

• Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. Cal. 2008). Excerpts.
• Datel Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974 (N.D. Cal. 2010). Excerpts.
• OECD, Competition Issues in Aftermarkets – Note from the United States (May 26, 2017)

Class 13: Multi-Sided Platforms after U.S. v. Amex (2018) and Attention/Zero-Price Markets November 29, 2018

Topics for discussion

• Transaction and attention platforms
• Market definition in multi-sided platforms: one market or multiple markets
• Does the "one market v. multiple markets" debate really matter?
• What should we make of eBooks in light of Amex?
• "Attention Brokers" and market power in attention markets
• Defining relevant product markets in the absence of price signals
  • SSNIP
  • QSSNIP
  • "Data" as "price"?

Reading

• Ohio et al. v. American Express, 585 U.S. ___ (2018). Please read the Thomas opinion. The Breyer dissent is optional.
• Tim Wu, Blind Spot: The Attention Economy and the Law (2018)

Optional

• Evans, Attention Rivalry among Online Platforms (2013)
• Newman, Antitrust in Zero-Price Markets: Foundations (2015)
• Newman, Antitrust in Zero-Price Markets: Applications (2015)

Class 14: Review: Putting It All Together December 3, 2018

Topics for review

• Agreements in restraint of trade
  • Agreements v. conscious parallelism
    • Vertical and horizontal agreements; upstream and downstream
• Modes of analysis: ROR (AE > PE) and per se categories
• Getting out of the per se box (ancillary restraints; lack of judicial experience)
• Unilateral conduct
  • Network effects as entry barriers
  • Single brand aftermarkets
  • Exclusive dealing (single product)
  • Tying (multiple products)
• Exam format: 3 hours, closed book
• Exam taking technique
  • Read the question; read the hypo
  • Upstream/downstream drawing; clearly identify the markets at issue
  • Outline the mandatory elements of the offense using "the grid"
    • Locate the "issues" within the structure of the outline
    • Write your answer, using the outline topics as headings
    • Claim → "because" → Evidence
  • Exhaust the hypothetical
    • Highlight every fact that you have used
    • Find a place for what's left over

Reading

• Hanno Kaiser, Exam Taking Strategies (2017)

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